Electricity prices will stay firm, even with oil prices in free fall

Photo by: TRACEY SHELTON

The headquarters of of Electricite du Cambodge in Phnom Penh. The authority says that it is already losing money on power sales.

PHNOM Penh's sky-high electrical bills are not set to fall anytime soon, according to a government minister.

 Suy Sem, minister of industry, mines and energy, said prices will not drop until additional power sources are found and that the state-owned Electricite du Cambodge is already charging below-cost tariffs.

Ministry figures say Phnom Penh demands about 250 megawatts (MW) per day, but is only supplied 200 MW. The power deficit is only expected to worsen as new building projects come online.

The authority said it is already selling below cost and cannot afford further cuts.

"The true cost of production is 800 riel [US$0.20] per Kwh."

"We have already benefited from cheap electricity since oil fell from $140 per barrel, and we cannot lower prices until hydropower comes online," said Suy Sem. Hydropower projects are scheduled to begin operation in 2011.

Phnom Penh electricity prices are divided into categories: 390 riel, 610 riel and 720 riel per kilowatt hour.

Cambodia has no national power grid, and all the capital's electricity is supplied by small diesel power plants or private generators. Electricity costs are about four times that of Thailand - a major impediment to local business competitiveness.

A number of projects are in the works to meet national power needs, including building high-voltage transmission lines to Vietnam and increasing local generating capacity.

"Electricity makes up about 30 percent of production costs, so we cannot compete with foreign countries," said Yim Sovann from the Sam Rainsy Party. "The electricity deficit is worsened by senior government officials consuming electricity without paying," he said.

With oil prices at a fraction of their rate in June 2008, parliamentarians asked the government to cut prices, citing the  $25 million annual government subsidy to Electricite du Cambodge.

Chhit Sam Ath, executive director of NGO Forum on cambodia, urged the government to adjust prices to reflect cheaper diesel.

"Cutting the tariff rate will help the economy and some of the country's most important sectors," he said.