4 days ago
Laos to renegotiate power purchase deals in bid to cut bills for home-owners
FILE PHOTO: Aerial photo taken on July 31, 2020 shows the construction site of the Nam Theun 1 hydropower project in Borikhamxay Province, Laos. A group of Chinese builders have been working day and night in the vast Lancang-Mekong River Basin in Laos. Laos plans to renegotiate power purchase agreements with hydropower plant developers that sell power to the state for countrywide distribution. - Sinohydro 3/Hangout via Xinhua
VIENTIANE: The government plans to renegotiate power purchase agreements with hydropower plant developers that sell power to the state for countrywide distribution, with the aim of reducing soaring electricity bills and easing the burden of domestic consumers.
The cabinet endorsed the plan at a meeting last week with provincial governors and key state agencies, and the meeting agreed to push for a cut in electricity purchasing rates.
Currently, Électricité du Laos (EDL), the state enterprise that oversees domestic power distribution, purchases electricity at an average cost of 6.2 US cents per kilowatt-hour (kWh) — equivalent to 1,260 kip — but sells it to households for an average of three cents (approximately 647 kip/kWh). This pricing disparity means the government provides substantial subsidies.
According to a plan obtained by the Vientiane Times, EDL is preparing to renegotiate its contracts with power producers in the hope of securing lower purchasing prices, with the aim of reducing electricity rates and easing the financial burden on consumers.
Power bills rose sharply after the government introduced a new tiered pricing system in February for the years 2025-2029. As a result, the cost of electricity for households consuming 0-25 kWh per month jumped from 355 kip in January (before the price hike) to 679 kip per kWh in July — a 91.27 per cent increase. Higher energy consumption incurs higher rates.
If left unchanged, the rates are set to rise further. By 2029, households using 0-25 kWh per month will pay 911 kip per kWh, while those consuming over 1,500 kWh will face charges of up to 2,223 kip per kWh.
The adjustment is part of the government's broader effort to reform EDL, which has been operating at a loss for many years and has accumulated substantial debt. EDL attributes its financial woes to massive investment in the expansion of infrastructure including power grids to rural areas — an essential but unprofitable undertaking - to ensure more people have access to power.
The dramatic rise in electricity bills has sparked public complaints, with this concern dominating debate during the recent 9th Ordinary Session of the National Assembly.
While the government defended the price adjustment as necessary for EDL's financial health, lawmakers called for the government to reconsider, warning of the economic strain on households and businesses already grappling with high-level inflation and soaring living costs for years.
The government's spokesperson Sonexay Sitphaxay told reporters that last week's meeting adopted proposed solutions.
'The meeting agreed in principle to approve a report on the review of electricity price adjustments and proposed solutions,' he said, referring to the report presented and discussed at the meeting.
He specified the renegotiation of power purchasing contracts as a key measure.
EDL's statistics suggest that its subsidy extends beyond the basic power purchase price. The full cost structure of electricity — known as the base electricity tariff — includes four main components: power purchase costs (both domestic and imported), system power loss, operation and maintenance expenses, and exchange rate/inflation adjustments due to dollar-based purchases.
Altogether, the average base tariff reaches 7.29 US cents (1,567 kip) per kWh, while the average household retail rate remains at just three cents (647 kip) per kWh.
In addition to contract renegotiations, the government pledged to modernise electricity metering and payment systems to improve transparency and reduce billing errors, which have also triggered public complaints in previous cases. - Vientiane Times/ANN
