Power Prices May Spare Biz, Officials Say

The planned hike in prices for electricity in Phnom Penh and five provinces, which was announced by the Electricity Authority of Cambodia on Monday, will not affect certain industries and private companies, officials said yesterday.

“Trade and industrial sectors will gain more benefit than others under the new electricity prices,” Ty Norin, director at the Electricity Authority of Cambodia, said yesterday.

Factories, particularly those producing garments, will start from next month to receive cheaper electricity from Vietnam, which is providing 100 megawatts of energy to Phnom Penh, Mr Norin said.

News of cheaper power for factories follows the unveiling on Monday of draft EAC prices for 2010, which stated that businesses would see small rises in energy costs–ranging from about 120 riel per kilowatt-hour for small businesses to 80 riel for the larger enterprises.

“Before the electricity price in the trade and industrial sectors depended on the fuel price [for oil] we purchased from outside countries and didn’t include the electricity imported from Vietnam,” said an official at the state-owned utility Electricite du Cambodge.

The prices in these sectors “will go down I believe as electricity from Vietnam has reduced fuel use [purchased internationally] by about forty percent,” said the official who spoke on condition of anonymity because he was not authorized to speak to the media.

He reaffirmed, however, that households in Phnom Penh using under 50 kilowatt-hours a month would indeed see their power bills increase in size substantially.

Government officials said on Tuesday that the power price hike was necessary in order to boost government tax revenues as a result of large amounts of government spending last year to mitigate the affects of the global economic crisis.

“The government has lost a lot of money for a long time because of the [old] price” of electricity, said the EdC official, admitting that the decision to increase the price of power would not help improve the living standards of the poor.

EdC Director Keo Ratanak declined to comment on the reported reprieve for big businesses in the new pricing schedule, telling a reporter that he should wait until Feb 3, when detailed confirmation on pricing will be made public.

The government has been subsidizing value added tax charges on electricity for the last five years in order to keep prices down and has said it spent $36 million in subsidies to keep selling electricity at a low price between 2007 and 2009.

The new prices are the result of adding a 10 percent VAT charge to the price of electricity.

Ken Loo, secretary-general of the Garment Manufacturer’s Association in Cambodia, said yesterday that the effects of the government’s new prices on electricity on the garment industry was still unknown as pricing was heavily dependent on the amount of energy consumption of a particular factory.

“It is always bad to increase the cost of doing business, especially in this [economic] environment,” Mr Loo said.

“We have to look and see if it justified or not. The cost of production has gone up but the government has got to weigh that against the effects of the economic recession,” he said.

According to the UN Development Program, Cambodia has one of the highest electricity rates in the region at about $0.16 per kilowatt-hour, which is almost twice that of the price of electricity in Vietnam and Thailand. The planned VAT charge will increase that rate again.

“Currently one of the greatest constraints on Cambodia’s economic competitiveness is the high electricity costs. However, by raising the costs of electricity, the government may stand to lose more than it gains as foreign investors may be deterred,” UNDP economist Sovannara Lim wrote yesterday in an e-mail.

Rogier van Mansvelt, an independent energy expert, said companies that use a large amount of electricity, like restaurants and bars, would fare badly under the new pricing scheme, adding that the planned rise in prices was an opportunity for energy saving techniques to really come into effect in Cambodia.

In order to offset any increase, Mr Mansvelt said electricity users should try simple energy saving measures like turning off electric appliances when they are not in use.

Despite the additional energy being imported from Vietnam, Mr Mansvelt said that production costs of power were still alarmingly high in Cambodia, mainly because of the extensive use of fuel oil in power generators.

“Unlike Vietnam, we don’t have gas plants, large-scale coal plants and hydropower dams yet,” he said.


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