Electricity is one of the largest government expenses and the regime is facing a huge budget hole unless it can coerce users to pay up – which many have no intention of doing.
By FRONTIER
On April 22, Ma Lwin Lwin Myint received an electricity bill of K10,585 for March. Despite the modest amount charged, she’s determined not to pay it.
“I’ve decided I won’t pay any tax to the dictators, and that includes electricity. If police and soldiers ask me, I’ll just tell them I don’t have any money. I don’t care if they cut off the power to my house,” the resident of Yangon’s North Dagon Township told Frontier. “Most people in my ward who I’ve spoken to say they’re not going to pay either.”
This normally unremarkable event – the distribution of power bills – marks the latest test for a junta intent on consolidating its control. Ranged against it is a broad swath of the public that is determined not to put a single kyat into military hands.
The stakes are high for the regime. Electricity generation costs have been rising rapidly in recent years, and are one of the largest expenses in the national budget. With receipts from key sources of revenue, such as natural gas and taxes, likely to decline this year, failure to recover electricity costs will blow out the budget even further – possibly by billions of dollars.
Hiring and firing
In the wake of the February 1 military coup, the Ministry of Electricity and Energy has had among the highest levels of participation in the Civil Disobedience Movement, with up to 80 percent of staff refusing to work.
The CDM has been particularly strong at township electricity supply offices, which are responsible for checking meters, issuing bills and accepting payments. For months after the coup, electricity staff were a rare sight on the streets of Yangon and other cities, except when they were out fixing downed power lines and faulty equipment.
“Nearly everyone I work with joined the CDM,” said one staffer from the Yangon Electricity Supply Corporation, which distributes power to homes and businesses in the country’s largest city. “Many township offices haven’t been able to distribute bills to homes simply because they have no staff.”
The officer – who in normal times would go from house to house, noting how much power they had used for the month – said he joined the CDM because he didn’t want to help raise revenue for the junta.
“We are ready to serve the people, though. If the electricity goes out because of a system breakdown or another kind of fault, we’re ready to work,” he said.
Although CDM rates in the ministry have declined, with some staff returning to work, Frontier understands that many township-level electricity staff remained on strike through to the end of April.
But with costs from electricity generation mounting – even with depressed demand from a flatlining economy – the regime has moved to get bill collection back up and running, and to punish staff who still refused to cooperate.
One tally shows that to May 5, a total of 3,712 staff – including 240 described as “upper level” – from eight of the ministry’s departments and enterprises were dismissed for participating in the CDM, mostly during April.
Enterprises responsible for generating revenue from electricity sales accounted for two-thirds of the firings; 285 staff from the YESC lost their jobs, along with 841 from the Mandalay Electricity Supply Corporation and 1,330 from the Electricity Supply Enterprise, which supplies power in other parts of the country.
Although Frontier was unable to confirm the veracity of the entire list, the numbers and dates for urban Mandalay are correct, suggesting the list is likely to be accurate.
The ministry has moved quickly to replace fired staff, and since the Thingyan holiday, which ended on April 19, bills have been distributed in some areas.
The striking YESC official, who has not yet been dismissed, said new staff were brought in in some townships to check meters, distribute bills and receive payments.
“I understand that it’s mainly in townships under martial law,” he said. “The old staff like me are not working – the people doing this are new staff.”
Electricity worker Ko Thura (not his real name) joined the CDM on February 8. Nearly all his colleagues in the MESC office in Mandalay’s Chan Aye Thar Zan Township went on strike too – only four of the 97 staff remained at work.
Like his counterpart in Yangon, Thura said his goal was to cut off revenue to the regime. But in an interview with Frontier back in March, he expressed concern about how long he and his colleagues could remain on strike.
“We’re not accepting a salary from the junta and we don’t have much in savings to cover our living costs,” he said. “I don’t know how long we can survive like this. So far though we haven’t received any money from CDM support groups but I hope we can get some soon.”
In the absence of support from civil society groups, Thura began selling vegetables to make ends meet. On April 28, he was among 168 MESC staff who lost their jobs, and received a formal termination letter on May 10. After 14 years’ service, Thura was given just nine days to vacate his state-provided housing – but he insisted he had no regrets.
“From the moment I joined the CDM I knew I would be fired eventually. I’ve already been preparing to move to my relative’s house, and I’ll find a new job,” he said. “But once the revolution is successful, I’ll go back to my old department.”
A looming struggle
At the end of April, residents in Yangon’s outer western Hlaing Tharyar Township, which has been under martial law since mid-March, received their first bills since the coup.
Ko Aung Thu, who lives in the Shwe Lin Ban area of the highly industrialised township, said he had received a bill for January but had no intention of paying.
“They killed people right here, in this township,” he said, referring to the security forces’ massacre of more than 50 people on March 14. “Why should I pay money to a bunch of murderers? I won’t pay any taxes. If we pay taxes, we’re just supporting murderers.”
Although they haven’t yet received bills, some residents and business owners in other parts of the country say they too won’t be paying up.
Ko Naing Tun from Nyaung-U Township in Mandalay Region said that he heard the government had hired casual staff to distribute bills elsewhere, but was yet to receive anything himself. As in other areas, he said that CDM rates in the Nyaung-U power supply office were high. “I expect we’ll get bills soon but I’ve already decided to not pay,” he said.
A hotel owner in nearby Bagan said he wouldn’t pay either and he expected many others would also refuse.
“I just heard today about how the state lottery isn’t able to run because so few people bought tickets. I think most people won’t pay their electricity bills, either,” he said. “We won’t support the dictator … the income from electricity charges is huge and they won’t be able to survive without that money.”
Another business owner, from Magway Township, said he planned to pay because he couldn’t afford to have his electricity cut off. He’s only received a bill for February, though, and when he went to pay it, there were no staff in the office to accept the money because most had joined the CDM.
For the regime, the re-staffing of electricity offices is only one half of the problem. As civil disobedience shifts from ministry workers to the power-using public, the regime is likely to face an epic struggle to get people to pay up.
So far, it seems to have avoided taking up the issue. It’s the users’ responsibility to pay their bill – either in person or online – by the deadline, and in normal times the supply offices are quick to turn off the power when payments are late.
Although both Aung Thu and Lwin Lwin Myint were supposed to pay their bills more than two weeks ago, they said they are yet to hear anything from the authorities, and their power remains on.
On May 14, state media publishing a “request to the public” explaining that “revenue from the electricity fees of people is used to generate stable and reliable electricity from the state-owned power stations and purchase from the private power stations”. It urged people to pay their bills by the due date, but also warned that those who fail to do so face having their electricity cut.
Thura, who was recently fired from the Chan Aye Thar Zan electricity office, said the junta would face a huge dilemma if most users refused to pay their bills. He said residents should discuss the issue with their neighbours and collectively agree on a boycott.
“They just don’t have the manpower to cut power to a lot of people at the same time,” he said. “If every ward [collectively boycotts paying], the ministry is going to be in a lot of trouble.”
Power bills mounting
Cutting power to hundreds of thousands, even millions, of households won’t just be a manpower challenge for the regime, but also a fiscal nightmare.
Improved electricity supply has been integral to Myanmar’s economic transformation over the past decade, but it has come at a cost.
In 2011-12, the government spent around K300 billion on power generation, and turned a small profit. At the time, nearly all power came from state-run hydropower dams and gas-fired plants.
The government of President U Thein Sein, which ruled from 2011 to 2016, encouraged private investment in the sector and signed power purchase agreements (PPAs) with independent power producers, known as IPPs. This boosted generation capacity and reliability, but it dramatically increased the total cost of producing power.
By 2017-18, the last year for which Frontier has figures, the government was spending around K1.9 trillion on electricity generation – a six-fold increase in six years – and recovering just K1.2 trillion from customers, resulting in a loss of K700 billion.
Although the subsequent National League for Democracy government significantly increased electricity prices in 2019, it also engaged private investors to undertake expensive emergency power projects, most notably two liquefied natural gas plants in Yangon Region that were awarded to Hong Kong-listed company VPower, which has partnerships with Chinese state enterprises.
The 2020-21 national budget law shows that economic enterprises under the Ministry of Electricity and Energy – which includes the Electricity Supply Enterprise, but also the profit-making Myanmar Oil and Gas Enterprise – together with YESC and MESC were expected to spend almost K9.4 trillion, and generate close to K8.9 trillion.
Because expenses and receipts are not broken down according to individual state enterprises, the figures do not reveal the amount spent on electricity alone. However, they are almost double 2017-18 levels, when total receipts were K4.7 trillion and expenses K4.8 trillion. Most of this increase, in both receipts and expenses, is likely attributable to electricity.
Another headache for the military regime is that the tariffs in the PPAs are in US dollars. In some cases, the contracts stipulate that the operator will be paid in US dollars, while under more recent PPAs the producer is instead paid the equivalent in kyat.
Costly contracts
With the kyat rapidly losing value against the dollar – since February 1 it has fallen close to 30 percent – the cost of servicing those agreements is going to rise, but the amount charged to customers remains fixed in kyat.
At the same time, the cratering economy, which some economists are forecasting to contract by up to 20pc, will offer some relief for the regime. With many factories and offices shuttered, demand for power is likely to decline significantly. The ministry has already instructed some IPPs to dial down the amount of power they’re producing.
“No economic activity means no demand for electricity,” said one operator. “So they’ve been asking IPPs to run at a fraction of capacity, especially at night.”
Nevertheless, there’s a limit to how far production can be scaled back, for both technical and financial reasons. Most PPAs, for example, have what’s known as a “take or pay” clause, which guarantees the IPP a certain level of revenue regardless of how much power they are asked to produce.
Even delays in payments from power consumers could have consequences for the regime’s financial position, said Mr Guillaume de Langre, a researcher and former adviser to the Ministry of Electricity and Energy, because the ministry’s budget for electricity is “very cash-flow-sensitive”.
“What comes in goes out immediately. If supply and demand are not closely aligned, losses can get out of control faster than we think,” he said.
“Right now, demand is declining and payments have collapsed. But the supply side is constrained by PPA commitments and the junta’s attempt to reassure investors by continuing the NLD’s power projects, such as the Mee Lin Gyaing LNG plant,” he added, referring to a China-backed US$2.5 billion project that received Myanmar Investment Commission approval earlier this month.
“Supply and demand are misaligned, causing further losses, which a depreciation of the kyat would only exacerbate. The question is how long can their reserves fill the gap before power sector losses become a systemic risk.”
Given the lack of revenue coming into regime coffers, some IPPs are indeed worried about whether they’ll continue to get paid, or whether the junta might try to break the contracts.
“What we are worried about is the government will run out of money, that in the next few months the government might not be able to pay all their obligations,” said an official from a private power company.
But another said they believed this was unlikely, at least in the short term. “They still have dollar reserves,” the source said. “When they stop paying for the electricity, that means the country is really in trouble – that means the government is starting to collapse.”
