Republic of the Union of Myanmar Electricity Sector Financial and Regulatory Issues 18 May 2016 by Myanmar Energy Team The World Bank

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

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 sales in 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%

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

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

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

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

Annex

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

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

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

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

Q & A