Energy Sector Management in Thailand

           The energy sector in Thailand is managed by the National Energy Policy Council (NEPC), the central authoritative body for the establishment of the national energy policies.  It has been established under the National Energy Policy Council Act, B.E. 2535 (1992), with the Energy Policy and Planning Office (EPPO) acting as the Secretariat.  To enhance efficient energy sector management, the Committee on Energy Policy Administration (CEPA) has been established to assist with the work of the NEPC.  Additionally, the NEPC is responsible for the promotion of energy conservation and the management of the Energy Conservation Promotion Fund as per the Energy Conservation Promotion Act, B.E. 2535 (1992).

 The Organizational Structure of Thailand’s Energy Sector

          In October 2002, pursuant to the Act on Organization of Ministries, Sub-Ministries and Departments (2002), the Ministry of Energy was established.  Various energy-related agencies that used to be scattered under the auspices of different ministries have been transferred to be under the Ministry of Energy so that the energy management and the planning and development of national energy programs, including regulation, will be more streamlined.

The Departments under the Ministry of Energy and their responsibilities are as follows:

 1.  Office of the Minister

     Responsible for and support the Minister of Energy’s political missions in coordination with the cabinet, the Parliament and the general public; and coordinate the responses to queries, clarification on motions, bills and other political-related issues.

 2.  Office of the Permanent Secretary

     Establish strategies and translate policies of the Ministry into action plans; allocate the resources and manage the manpower to achieve the targets and missions of the Ministry; and coordinate international energy cooperation.

 3.  Department of Mineral Fuels (DMF)

    Promote and accelerate energy procurement via facilitating energy resource exploration and development both in Thailand and abroad.  Regulate energy business via concession granting for exploration and production of mineral fuels.

 4.  Department of Energy Business (DOEB)

    Regulate the energy quality and safety standards, including impacts on the environment and security, and improve the standards to protect consumers’ benefit.

 5.  Department of Alternative Energy Development and Efficiency (DEDP)

    Promote efficient use of energy, monitor energy conservation activities and explore alternative energy sources, as well as disseminate energy-related technologies.

 6.  Energy Policy and Planning Office (EPPO)

     Recommend national energy policies and planning; establish energy conservation measures and framework for budget allocation for energy conservation promotion; establish preventive and solution measures against oil shortage; and coordinate and assess the outcome of policy implementation.

  The State Enterprise under the Ministry of Energy comprises:

 - Electricity Generating Authority of Thailand (EGAT)

    Note: The Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA) under the Ministry of Interior will be transferred to the Ministry of Energy in two years (as from October 2002).

           In addition, there are two Autonomous Public Companies under the Ministry of Energy, namely:

1.  PTT Public Company Limited (PTT)

2.  Bangchak Petroleum Public Company Limited (BCP)

          The implementation of energy policies, however, intensively involves both directly and indirectly other government agencies and the private sector.  Such agencies include:

 ·      Ministry of Industry: the Department of Mineral Resources and the Thai Industrial Standards Institute.

 ·      Ministry of Commerce: the Department of Commercial Registration, the Department of Internal Trade, the Department of Foreign Trade and the Department of Business Development.

 ·      Ministry of Defence: the Defence Energy Department and the Royal Thai Navy.

 ·      Ministry of Finance: the Customs Department, the Excise Department, the Revenue Department, the Comptroller-General’s Department and the Fiscal Policy Office.

 ·      Office of the Prime Minister: the Office of the National Economic and Social Development Board (NESDB), the Office of the Consumer Protection Board, the Office of the Council of State and the Royal Thai Police.

 ·      Ministry of Transport: the Department of Land Transport and the Department of Highways

 ·      Ministry of Foreign Affairs: the Department of Treaties and Legal Affairs.

 ·      Private Sector Organizations and Institutions: These will include academic and research institutions, oil corporations, electricity and energy producers, energy importers and exporters, and private enterprises related to energy and energy consumption.

 Regulation of the Energy Industry

           The implementation of the liberalization and privatization plan of the energy sector in Thailand is underway.  Simultaneously, the regulatory framework for the energy sector is being reformed to clearly distinguish the role of the National Energy Policy Council (NEPC), the energy policy-making authority, from the regulatory duties.  The National Energy Regulatory Commission (NERC), an independent regulatory agency under the Ministry of Energy, and a transparent regulatory framework for the energy sector will be established under the new Energy Industry Act.  The regulatory duties currently under the responsibilities of various departments of the Ministry of Energy will be transferred to the NERC.  Currently, the Energy Industry Bill is under review by the Office of the Council of State; it is expected to be in force by the end of 2003.

           The NERC is to regulate the electricity and gas supply industry, including other energy-related activities as designated by relevant royal decrees.  To this effect, the Commission shall be responsible for, among others, license issuance for energy industry operation, regulation of tariff, standards and service quality, promotion of competition and prevention of abusive use of monopoly power, and protection of energy consumers, including addressing consumers’ complaints.

 Coal

 Coal Reserves

          With participation of the private sector in coal mining since early 1980s, coal has played significant role as an alternative source of energy for decades in Thailand.  Through the Mineral Act, mining practices are regulated and supervised by the Department of Mineral Resources (DMR), Ministry of Industry.

           The majority of coal found in Thailand has low calorific value and is ranked as either lignite or sub-bituminous.  The output is all used domestically mainly as fuel in electricity generation.  As at the end of 2001, Thailand’s coal reserve was estimated at 1,354 million tons.  The largest reserve of 1,211 million tons is located at the Mae Moh basin belonging to the Electricity Generating Authority of Thailand (EGAT), a state enterprise under the Ministry of Energy.  The cumulative coal production at the end of 2001 was 264.8 million tons.

 Mining Leases

          Coal mining leases in Thailand has been applied according to the Mineral Act.  As at the end of 2001, there are altogether 25 coal concessionaires, holding 146 tracts throughout Thailand.  A minimal block of 300 rais (120 acres) will be awarded per mining tract.  Of these, more than half located in northern Thailand, such as, Lampang, Lamphun, Chiang Mai, Phayao and Tak provinces.  Most of coal acreage belong to EGAT.  Currently, 12 coal mines are operational; 10 of which are in northern Thailand and one each in the central and southern regions.

 Coal Production

          History of coal production in Thailand dated back to 1955, when the open-pit coal mine in Mae Moh basin started producing at an initial rate of 22,118 tons per year.  Coal output steadily increased every year, with the highest record of 22.13 million tons in 1997.

           The output of coal depends upon the market demand.  Following the1997 economic crisis, coal production in 2000 dropped to 17.78 million tons.  However, the production in 2001 increased by approximately 10.2% to 19.60 million tons.  Apart from EGAT, there are 12 private coal operators in Thailand.  However, only three operators – EGAT and two private coal operators, i.e. Ban Pu and Lanna Lignite -- are major coal producers, altogether representing over 90% of the total production for years.  In 2001, EGAT excavated 78.8% of the whole output from Mae Moh basin.  Ban Pu and Lanna Lignite are major private coal companies, holding shares of 13.4% and 5% respectively.

 Imported Coal

          Since domestic coal has low calorific value, Thailand has to import coal every year to fulfill industry needs, particularly bituminous coal for cement industry.  In 2001, the volume of imported coal was about 4.9 million tons (18.2% higher than that in 2000).  Thailand imported coal from Indonesia, Vietnam, Myanmar, Laos, China and Australia.

 Thailand’s Lignite/Coal Supply and Demand in 2001

 Coal Utilization

          Utilization of domestic coal decreased in 1999 and 2000 due to the impact of the 1997 economic crisis.  However, in 2001, the consumption increased by 13.6%, i.e. from 17.55 million tons in 2000 to 19.9 million tons.  The largest portion, 79%, was used for power generation at EGAT’s Mae Moh power plant.  Next to it was for cement manufacturing (14%); the rest was used as fuels in other industries, such as paper mill, fiber factory, and tobacco curing.

           Combined with the imported coal, the country’s total coal consumption in 2001 was about 24 million tons.

 Coal Pricing

          In general, coal pricing in Thailand is restricted mainly to heating value.  The most acceptable heating value is at 5,000 kcal/kg.  At present domestic coal is purchased at 500 baht/ton at mine mouth.  Coal buyers will pay bonus for additional heating value.  On the contrary, coal sellers must pay penalty in case of excessive emission of ash and sulphur content.  Transportation cost of domestic coal is estimated about 340 baht/ton.

           For coal import, both long-term contracts and spot-lot are applicable.  Long-term contracts provide quality reliability and supply security.  Referring to JBP (Japanese benchmark price), the cost can be as high as 28.75 US$/ton for 6,700 Kcal/kg coal at loading point.  Mostly used for Thailand, the spot-lot is advantageous in demand fluctuation but weakly versus JBP.  High calorific coal (6400-6600 kcal/kg) costs about 30 US$/ton and 22 US$/ton for medium calorific one (6000 Kcal/kg) at discharge port.

 Oil: Overview

           The first-ever oil field in Thailand was found in Fang, Chiang Mai province in the north of the country.  The Defence Energy Department, Ministry of Defence, has been operating Fang oil field since 1963.  On 26 March 1971 the first Petroleum Act was promulgated, and the first round of petroleum concession bidding was announced on 13 September 1971, resulting in the awarding of 9 concessions, altogether 22 blocks.  Up to 2001, 57 concessions with 92 blocks were already issued, but only 25 concessions with 32 blocks were still held.

           Crude oil production by concessionaires started up in 1982.  The aggregate sale volume at the end of 2001 was 177 million barrels (MMbbl).  Domestic oil development has greatly reduced Thailand’s dependency on energy imports, from 98% of the country demand in 1980 to 63% in 2001.  As of 31 December 2001, crude oil reserves were estimated at 806 MMbbl, of which 325 MMbbl are proven reserves.  Of the total reserves, 219 MMbbl are onshore reserves, mainly at Sirikit Oil Field in Kamphaeng Phet province, and 587 MMbbl are offshore reserves in the Gulf of Thailand in such fields as Benchamas and Tantawan.

           The oil industry in Thailand is dominated by PTT, formerly the Petroleum Authority of Thailand.  PTT Exploration and Production (PTTEP) is the main upstream subsidiary of PTT.  Thai Oil, the country’s largest refiner, is also managed by PTT.  In October 2001, PTT underwent a partial privatization, with about 30% of its equity sold in the Stock Exchange of Thailand (SET).

 Oil: Exploration

           For oil exploration, the Defence Energy Department’s Fang Oil Field has been in operation since 1963.  Its current production is about 1.2 thousand barrels per day (KBD).  With the discovery of crude oil at Sirikit Field in the central plain in early 1980’s, Thai Shell Exploration and Production Co., Ltd. has been producing crude oil at a rate of 21 KBD.

           As of September 2001, the number of petroleum concessions in Thailand has reached 25 concessions and 32 blocks, locating onshore (7 concessions/7blocks), in the Gulf of Thailand (17 concessions/24 blocks), and Andaman Sea (1 concession/1 block).  This involves overall concession areas of exploration, production and reserves of 76,639.9 km², 5,264.8 km², and 11,763.5 km² respectively.  Among the private companies, Thai Shell Exploration and Production Co., Ltd. has the biggest share of oil exploration and production.  The Department of Mineral Resources (DMR) of the Ministry of Industry is in charge of petroleum exploration by granting concession rights in petroleum exploration and production to private companies.

           In 2001, the total crude oil production rate was 62 KBD, of which 29 KBD came from Benchamas Oil Field in the Gulf of Thailand (47% of the domestic production) and 21 KBD from Sirikit Oil Field (34% of the domestic production).

 Crude Oil Production in 2001 (by Resource)

Note: * Unocal comprises the following fields: Plamuk, Kaphong, Surat and Yala

 Petroleum Producing Fields in 2001

 Oil Import

          Compared with the domestic demand, the production of crude oil from indigenous resources was very low; therefore, there was a need to import crude oil at a high rate of 90% of the total crude oil demand.  In 2001, the total import crude oil was 712 KBD, an increase by 5.5% from 2000 due to the increasing demand.

          Oil import to Thailand mainly comes from the Middle East, sharing 77% of the total oil import.  Oil exporting countries in Southeast Asia, especially Malaysia and Brunei, have recently become important oil suppliers for Thailand.

 Thailand’s Oil Import in 2001

 Oil Refining

          As for the oil refining industry, there are currently eight oil refineries in Thailand, with a total capacity of 994.5 thousand barrels per day (KBD) in 2001.  They are: the TPI Refinery, Thai Oil Company (49% of which is owned by PTT), Esso Refinery, Rayong Refinery Co., Ltd., Star Petroleum Refinery Co., Ltd., Bangchak Petroleum Public Co., Ltd. (BCP), Rayong Purifier, and Fang Refinery.

 Thailand’s Oil Refining Capacity in 2001

Unit: Thousand Barrels per Day (KBD)

           In 2001, the total petroleum products from refineries comprised diesel (43%), gasoline (21%), fuel oil (17%), jet fuel (11%), LPG (7%) and kerosene (1%).

 Oil: Market and Price Structure

           Thailand’s petroleum market is dominated by five major oil companies.  Listed in descending order of market shares, they are:

         Altogether they hold about 75% of the petroleum product market.  These major oil companies also own retail service stations located in all regions of the country.  Besides, a large number of jobbers (wholesalers), transporters, retail dealers and major consumers also play an important role in the oil business in Thailand.

           In the past, the government tightly controlled oil pricing at all transaction stages.  Ex-refinery and import prices were determined by the government based on Singapore posting and spot prices.  The government also set the marketing margin and retail prices, which rarely changed since the marketing margin and retail price adjustment was a politically sensitive issue.  Excise and municipal taxes were imposed on a specific basis (Baht/litre).  The Oil Fund levy/subsidy acted as stabilizer of retail prices.  Prices of imported oil were also controlled in the same manner.

Retail Price = Ex-Refinery/Import Price + Oil Fund + Taxes + Marketing Margin

           The oil market in Thailand has been fully deregulated since 19 August 1991.  The current oil pricing system allows prices to fluctuate according to the changing market forces and state of competition.  The government abolished determination of ex-refinery/import and wholesale prices.  Refineries would announce their ex-refinery prices sold to oil traders and those sold to small customers.  An import levy was imposed to protect domestic refineries.  This was later followed by changes in oil reserve regulations to further increase protection.

           With the government deregulation of the oil market, other oil companies have entered the Thai petroleum market, which helps intensify the domestic competition.  These include Mobil Oil Thailand Ltd., BP Oil (Thailand) Ltd., Kuwait Petroleum (Thailand) Ltd., and Conoco (Thailand) Ltd.  Oil price control was repealed in August 1991, except for liquefied petroleum gas (LPG).

           Presently, the oil pricing should, in principle, be fully deregulated, but certain monitoring is still necessary.  For example, oil traders are still encouraged to determine prices at their service stations.  The government, via the Energy Policy and Planning Office (EPPO) of the Ministry of Energy, still issues “transport cost account” as guidelines for oil companies to determine prices in each district.  EPPO and the Internal Trade Department, Ministry of Commerce, closely monitor prices and market conditions.  Warning will be issued from time to time for oil traders to reduce the marketing margin.

 Price Structure of Petroleum Products in Bangkok

(2 March 2003: Exchange Rate: 42.79 Baht/US$)

Unit: Baht/litre

           There have been apparent changes after the oil market deregulation.  Initially the marketing margin was more than doubled but the refining margin declined substantially.  The numbers of oil traders and service stations have considerably increased; hence the number of districts with no service stations have declined.  With more players in the market, service quality has significantly improved, and this has greatly facilitated improvement of oil quality for environmental protection.  In addition, remote areas are served by a new breed of small-scale service stations.  Domestic refining capacity rises substantially and surplus capacity began to emerge in 1996.

           Since 1999, there has been intense competition in the oil market due to surplus refining capacity, large number of traders and service stations and consumers’ sensitivity to price differentials.  Surplus refining capacity in gasoline and diesel has exerted pressure on the ex-refinery price to shift from “FOB Singapore + Transport Cost” to “FOB Singapore – Transport Cost.”  Brand loyalty is disappearing rapidly as consumers regard oil sold by all traders as the same commodity; instead, price becomes the most influential factor for consumers’ choice, followed by service quality.  Accordingly, there has been further improvement in service quality and promotion programs by oil companies.  Unprofitable service stations have been closing down.

 Market Shares and Number of Gas Stations

 Natural Gas and Condensate

           In Thailand, natural gas was first developed from Erawan gas field in 1981.  About 94% of natural gas and condensate are found offshore in the Gulf of Thailand in the Unocal concession and Bongkot field of PTTEP.  As of 31 December 2001, their proven reserves, comprising 37 fields offshore and 6 fields onshore, were estimated at 13,340.83 billion cubic feet (bcf) of natural gas and 257.46 million barrels (MMbbl) of condensate.

           In 2001, natural gas production in Thailand amounted to 1,900 million cubic feet per day (MMscfd) by five operating companies, namely Unocal Thailand Ltd., PTTEP Public Company Ltd., Chevron Offshore (Thailand) Ltd., Esso Exploration and Production Khorat Inc., and Thai Shell Exploration and Production Co., Ltd.  The largest natural gas field is Bongkot, with a production of 584 MMscfd (31% of the total production in 2001).  The largest natural gas producer, Unocal, produced 1,029 MMscfd of natural gas and 35,524 barrels of condensate per day (bcd).

 Natural Gas Production in 2001

Unit: MMscfd

           With insufficient domestic supply to meet the increasing demand, Thailand has explored joint petroleum resource development with neighboring countries.  The PTTEP has made investment in Myanmar.  Natural gas import from Yadana field commenced with a volume of 2 MMscfd in 1998 and substantially increased to 128 MMscfd in 2000 when the natural gas-fired Ratchaburi Power Plant in Thailand commenced operation in October 2000.  Another 36 MMscfd was imported from the Yetagun gas field of Myanmar later the year.  In 2001, the natural gas import from Myanmar reached 496 MMscfd.  Additionally, a Joint Development Authority has been established with Malaysia to develop natural gas resources in the Thailand-Malaysia Joint Development Area (JDA), an area in the Gulf of Thailand claimed by both Thailand and Malaysia.

           Since Thailand has a policy to promote the use of natural gas instead of fuel oil in electricity generation as well as in the industrial and transport sectors, all produced natural gas is used domestically.  In 2001, 78.4% of the total gas supply was used for power generation and the remaining 23.9 was used as fuel in the industrial sector and others.

          So far, PTT has been the sole purchaser, supplier and transporter of natural gas.  To introduce greater competition into the natural gas supply industry, PTT was corporatized in October 2001.  In the future, PTT Transmission Co., Ltd. and PTT Distribution Co., Ltd. will be formed as separate legal entities with PTT retaining 100% ownership.  The transportation of natural gas, like the transmission and distribution of electricity, is naturally monopolistic and hence the pipeline tariff will be subject to regulation, generally using cost of service basis.

           As of 30 June 2001, Thailand had a pipeline transmission network of approximately 2,390 kilometers, of which 1,359 kilometers are offshore and 1,031 kilometers onshore, with a total capacity of about 3,170 MMscfd.  The onshore pipeline in western Thailand receives gas from the Yadana and Yetagun fields to Ratchaburi power plant whereas the onshore pipeline in eastern Thailand provides gas to industrial estates and power producers in the eastern and central regions of Thailand.  On 25 September 2001, the government approved PTT’s Gas Pipeline Master Plan No. 3 (2002-2010), comprising six pipeline construction projects and two gas compressor construction/installation projects to increase natural gas transmission capacity.  According to the Master Plan, the pipeline transmission network capacity will increase by 7,523 MMscfd.

           With regard to the price structure, natural gas producer prices are based on negotiation between PTT and the producers.  The price formula is related to five parameters: the wholesale price index (25-30%), the price of medium-fuel oil (Mfo) ex-Singapore (15-40%), the US index of export prices (20-30%), the US producer price index for oil field machinery and tools (20-25%), and the exchange rate of Thai Baht vs US dollar.  Consumer price is based on the producer prices plus marketing margin and transmission tariffs.

 Liquefied Petroleum Gas (LPG)

           In 2001, the total LPG production was about 3.2 million tons, 76% of which was for domestic consumption and the remaining 24% was exported.  PTT gas separation plant was the largest producer.  The shares of LPG consumption for cooking, industry and automobiles and as feedstock were 60%, 14%, 10% and 16%, respectively.

LPG Demand-Supply Balance in 2001

           At the retail level, there are seven major LPG traders, with PTT holding the largest market share.

Market Shares of Major LPG Traders in Thailand

Unit: %

           In the past, LPG prices were controlled in the same way as other oil products.  Ex-refinery/import prices were initially determined by CIF price of Singapore posting and/or contracted price of Saudi Arabia.  Once Thailand became a net exporter of LPG, prices were based (sometimes) on export parity.  Oil Fund levy was used to stabilize retail prices.  In 1986 the “uniform pricing” system was introduced; wholesale prices at PTT’s 5 depots throughout the country were the same through subsidization from the Oil Fund for “storage cost” at the depots and “transport cost” from Sriracha (site of PTT’s main LPG terminal).  Prices at other locations were marked up by transport cost from nearest major distribution centres.

           Before 1991, subsidy levels were different for different uses of LPG in order to help low-income consumers in the household and automobile/industrial sectors.  This had led to illegal practices in the LPG business, e.g. illegal transfer of LPG from small cylinders (13-15 kg) to large cylinders (48-50 kg) and automotive uses causing fire hazard.  Therefore, the different subsidies were later replaced by the same subsidy irrespective of use, and the retail price control for automotive and industrial LPG was lifted in 1991.  However, heavy subsidies from the Oil Fund led to increasing levy on gasoline and diesel, thereby further creating price distortion.

           Currently, the LPG market in Thailand is being reformed with a view to achieving a fully competitive market, in terms of both quantity and pricing.  In recent years, the government has gradually reduced uniform pricing with an aim to finally abolish it and create competition instead.  The marketing margin, which was kept constant for many years in the past, has increased.  Subsidy by the Oil Fund has been reduced by adjusting retail prices, and subsidy of “storage cost” for LPG terminal has been abolished.  The existing LPG pricing system in Thailand is “semi-floated,” that is, only the wholesale prices are regulated.  Retail LPG prices have been floated since 1 November 2001. 

           However, the government has a policy to fully deregulate LPG prices.  During the transition period, several measures have been undertaken to improve the LPG trading system and safety standards.  These measures include elimination of illegal LPG filling; LPG traders have been required to be responsible for LPG filling and LPG cylinders under their respective trademarks since 2001.  Another measure is to remove from the market all illegal LPG cylinders and “white cylinders” (cylinders that do not belong to LPG traders and hence have not undergone regular maintenance); the implementation of this measure was completed at the end of 2002.  During 2003, LPG traders will be required to speed up the maintenance of LPG cylinders under their respective trademarks.  In addition, stringent surveillance will be administered to ensure that LPG traders strictly abide by relevant regulations.

           It is expected by the year 2006 the LPG market in Thailand will be fully deregulated and will be operated with internationally accepted standards of trading system and safety.

 LPG Traders, Filling Plants and Retail Shops

 Power: Overview

       The electricity supply industry (ESI) is a major public utility of the country.  As of December 2002, Thailand’s installed electricity generating capacity was 24,301 MW.  Until recently, the public sector, via the following three concerned state-owned enterprises, had been the only operator of the industry:

·       Electricity Generating Authority of Thailand (EGAT) – the power producer and supplier, selling electricity via high-voltage transmission lines to the Metropolitan Electricity Authority and the Provincial Electricity Authority.

·       Metropolitan Electricity Authority (MEA) – the power distributor for consumers in Bangkok, Nonthaburi and Samut Prakarn provinces.

·       Provincial Electricity Authority (PEA) – the power distributor for consumers in the remaining areas of the country.

       Following the above boundaries of responsibility, consumers in the MEA service areas have to buy electricity only from the MEA.  Similarly, those in the PEA service areas have to buy electricity only from the PEA.  Therefore, it can be summarized that the current electricity supply and service systems are operated in quite a monopolistic manner.

      The plan for restructuring and privatization of the electricity supply industry, which is now being implemented, aims at promoting more competition in the industry and, simultaneously, mobilizing the private sector investment and shareholding in the ESI.  The underlying principle is to deregulate the industry wherever possible to encourage competition.  For certain natural monopoly businesses, like power transmission and distribution lines for which investment in construction of new lines or poling would duplicate the existing ones and hence would not be cost-effective, they will be subject to strict regulation with a view to protecting consumers’ benefits.

Power: Generation

          From the mentioned ESI structure, it can be said that almost all generation activities are handled by EGAT.  However, the government has opened access for the private sector to participate in the generation business in the form of Small Power Producers (SPPs) and Independent Power Producers (IPPs).  Both SPPs and IPPs will generate electricity and sell to EGAT, who will further sell the electricity to the MEA and PEA.

          A Small Power Producer (SPP) means a power project that produces electricity using the co-generation (thermal and electricity) system or using renewable energy, such as waste or residues from agricultural activities, garbage, biogas, solar energy, as fuel, which will contribute to more efficient use of domestic energy resources.

          An Independent Power Producer (IPP) is a power producer in the private sector, with a large generating capacity, using commercial energy (excluding nuclear) as fuel, such as natural gas, coal (both indigenous and imported) and orimulsion.

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