Prime Minister Hun Sen has called on his government to review electricity pricing for industrial consumption in a bid to increase Cambodia’s attractiveness as an investment destination.
Speaking at the opening of the International Investment Conference 2014 held yesterday in Phnom Penh, the prime minister said Cambodia’s electricity supply had reached a turning point in 2014, with several major development projects – including hydro- and coal-fuelled power plants – beginning operations this year.
“To meet electricity demand for the expansion of the industrial sector and to ensure Cambodia’s investment attractiveness, I would like to instruct the Ministry of Mine and Energy, Cambodia Electricity Authority and Electricité du Cambodge and the Ministry of Economy and Finance to work together to access the possibility of revising electricity tariffs for industrial consumption during nighttime, large commercial customers and prioritised zones,” he said.
Hun Sen said the commencement of new power-producing facilities had led to a surplus of about 246 megawatts during the rainy season. This was yet to be fully tapped, however, due to a shortage of transmission infrastructure.
Hun Sen remained confident that despite still relatively high electricity costs compared with neighbouring countries, progress was being made to increase Cambodia’s competitiveness in attracting foreign investment.
“From now to 2018, electricity tariffs will not increase, but will gradually decrease,” he pledged.
Teng Sokhomal, director of Tariff and Monitoring Licensee’s Account Department, told the Post yesterday that work to reprice electricity for large-scale enterprises was already under way with the announcement of new tariffs for industrial, commercial and agricultural use set by the Electricity Authority of Cambodia in late August.
“There is unused power at night that is wasted. The new tariffs will encourage industries to use more electricity at night to reduce power shortages during peak times,” he said yesterday.
The new pricing structure offers a cheaper rate for night time use, but varies depending on the source of energy.
It ranges from 13.90 to 19.00 cents per kilowatt hour (kWh), from 7am to 9pm, to between 9.50 and 15 cents per kWh between the hours of 9pm and 7am.
Companies can weigh up the advantage of the new rates to the standard 24-hour prices which ranges from between 12.90 and 18.18 cents per kWh.
Depending on their location, a business can access energy from one of four different sources within the national supply which will determine their rate of pay.
“For those who think they can take advantage from this tariff by operating a night shift can do it, while at the same time it reduces unused electricity waste,” Sokhomal he told the Post.
Large energy-consuming businesses, such as factories and even large hotels, can apply for the new tariffs with the state-owned Electricite du Cambodge, Sokomal added.
Further incentives could well come in the future he said.
Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia, welcomed greater choices for power pricing.
“It is good news for those who are affected. It also gives more flexibility because they are now trying to introduce night tariffs which are lower than the day tariffs, so this might encourage factories to consider opening a second shift or a night shift,” Loo said.
“For factories that are already running a night shift, they will see lower electricity cost. For factories that are currently considering running a night shift, the new tariff will be something to consider as it will help to lower, or subsidise the labor wage working the night shift,” he added.
Last year, Cambodia produced about 2,050 million kilo watts of power and imported around 2,300 million kilo watts to support its energy needs.
Hiroshi Suzuki, Chief Economist Business Research Institute for Cambodia (BRIC), said if successful, effective energy pricing will encourage further investment.
“Expensive electricity is one of the biggest bottlenecks for Cambodia to attract foreign direct investment,” he said “If the government is successful, it would be highly effective to attract [foreign direct investment,” he added.