Enhancing Financial Sustainability in Myanmar's Electricity Sector

1. Republic of the Union of MyanmarElectricity Sector Financial and Regulatory Issues18 May 2016byMyanmar Energy TeamThe World Bank

2. An Overview of Myanmar Power Sector • Institutions: • Ministry of Electricity and Energy • Policies and planning • Regulatory roles • Transmission and system control • Enterprises & Corporations • Electric Power Generation Enterprise • Distribution functions: ESE, MESC, YESC • Fuel suppliers: MOGE, MPPE • Private sector participants • Private power producers (14 operating) • Private contractors/concessionair for distribution

3. An Overview of Myanmar Power Sector (cont.) • Recent Statistics: • Installed grid generation capacity ~ 4,900 MW • Hydropower ~ 3,100 MW (1,100 MW private) • Gas-fired ~ 1,600 MW (900MW operating; 622 MW private) • Coal ~ 120 MW • Installed off-grid generation capacity ~ 135 MW • Peak demand ~ 2,500 MW (February 2016) • Final electricity salesin FY2014/15 • ESE & MESC ~ 6,333 million kWh (averaged 70 kyats) • YESC ~ 4,922 million kWh (averaged 79 kyats) • Electricity loss in FY 2014/15 • Transmission loss ~ 3.3% • Distribution loss ~ 15 – 18%

4. An Overview of Myanmar Power Sector (cont.) • Electricity Tariffs: • Wide range 35 – 150 kyats/kWh • Uniform tariffs across the country and time of services • “Domestic tariffs” – largely residential customers 35-50 kyats/kWh • Non-residential customers 75-150 kyats/kWh. No demand charge • FY 14/15 financial loss ~ 5.3 kyats/kWh of final sales • Preliminary FY 15/16 loss ~ 22 kyats/kWh of final sales or over [240] billion kyats

5. Key Sector Financial Issues: Revenue side: • Overall electricity tariffs below the cost of supply Cost side: • Growing demand for electricity…more sales mean more losses • Increase in natural gas cost due to currency depreciation • Expanding investment to meet growing demand and electrification Debt management: • Growing debt financing Contractual obligations: • More contracts with private sector, requiring management of explicit and contingent obligations

6. Options for financial sustainability and regulatory policies: Short-term • Purchase more electricity from existing hydro IPPs and neighboring countries • Prepare for electricity tariff changes to reflect the cost of supply and to encourage demand-side efficiency • Public relations outreach on policy changes, including tariffs • Provide transparent subsidies to MOEE/electric enterprises from the State budget. • Establish dedicated power sector regulatory function

7. Options for financial sustainability and regulatory policies: Longer-term • Integrated energy planning & pricing • Continued generation, transmission & distribution efficiency improvement • Demand side management • Scale-up renewable energy sources (e.g. solar, biomass and wind) at the grid and users levels • Targeted subsidies for vulnerable consumers • Allow electric enterprises to retain profit for investment • Prudent debt management

8. Annex

9. Energy Sector Regulatory Arrangement in S.E. Asia Source: Economic Research Institute for ASEAN and East Asia

10. Example: Thailand Electricity Tariff Structure Base Residential Tariffs • Cut off at 150 kWh/month • Energy charge only (no demand charge) • 7-13 US cents/kWh • < 150 kWh “limited cross-subsidies” for 30 kWh…still cover variable cost • > 150 kWh tariffs fully cover cost. Vary profits. • TOU 7-17 US cents/kWh

11. Example: Thailand Electricity Tariff Structure (cont.) Demand > 1000 kW Large Users Tariffs • Time of Day structure • Encourage demand shift to partial peak and off peak • Same energy charge rates as Medium Users (30-1000 kW)

12. Example: Thailand Electricity Tariff Structure (cont.) Demand > 1000 kW Large Users Tariffs • TOU energy charge 7-12 cents, depends on kV • Zero off-peak demand charge • Vary demand charge by voltage level

13. Q & A