interconnection. Certain international grid operating actions, however, could be handled on a bilateral basis through utility-to-utility support agreements. For instance, two utilities could agree to support the other in cases where one or the other is unable to perform its system balancing obligations in the regional market or needs other ancillary services support.

While the positive impacts of regional integration are expected to exceed the negative impacts, there are a few potential negative consequences to examine. There may be occasional system perturbations or even outages driven by events in external markets. These impacts would tend to impact smaller markets more than larger ones, all else equal, though the same smaller markets would also tend to see more significant positive operational benefits. This is because inter-connections of a given size would be larger in proportion to smaller markets than larger markets.

Another potential negative impact is that occasionally, penalties may be assessed on a national utility for failure to adhere to the regional grid code (primarily a concern with synchronised systems). On the other hand, failure in this respect may also reflect a failure in the first instance to reliably serve the national market, meaning that regional grid code penalties could be avoided by investing in better national-level outcomes.

Under both the harmonised bilateral and secondary models, revenues should increase and energy generation costs should decrease for all participating countries in comparison with scenarios with less trade. As discussed previously, national utilities would import only if doing so reduces domestic generation costs, and they would export only if domestic demand is already served and the export is economic.

Transmission costs could increase for some countries because of investments to implement cross-border trade, increased congestion on some transmission paths requiring incremental transmission investment (though there may be reduced congestion on other paths), and increased losses on some paths (though there may be reduced losses on other paths).

There are two types of trades and their impacts to examine in this context: exports from/imports to the country and wheeling trades (from the perspective of the wheeling country). In the first case, the costs/benefits of grid impacts from the trade should be valued by the country itself as part of its overall economic evaluation of the trade. There should be no incremental investment impact unless the country assesses that over the longer term, it would like to facilitate more trades. Wheeling, however, presents a different situation. Consider a case where Country A is used to wheel power from Country B on one side to Country C on the other side, and the trade pattern is persistent. In principle, wheeling charges should fully compensate Country A for its role in facilitating the trade, but if wheeling charges are not carefully set (and periodically adjusted), then trading patterns could impose net negative impacts. On the other hand, errors in setting wheeling charges could also overcompensate Country A for the wheeling service. It is therefore important to include a regular review of the wheeling charge methodology and its implications in the overall governance process.

Regulators

In a secondary regional market model, there are some implications, albeit limited, for national market regulatory bodies (regulators/ministries). National markets would continue to function independently of the regional market. Although a regional market operator would be created, this entity would act only in relation to the regional market, pursuant to regional market rules, and hence would not directly affect domestic regulatory structures.

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In terms of ongoing responsibilities, with respect to the regional market, national regulators would be focused on matters such as how to approach the export of energy-constrained resources, such as storage hydro; how fuel price subsidies affect outcomes for export of generation fired by domestic gas/liquid fuels; the appropriate balance of fixed and variable operations and maintenance costs to use for exports; and similar matters.

Investors

A regional market represents potential risks and rewards for investors in the national markets. This section focuses on IPP investors; since most regional markets are not libralised, there are few other opportunities for private investments in the region.

Although IPPs certainly would see increased opportunities for revenues related to exports in a regional market, IPPs may worry about being undercut by lower-cost imports in national dispatch. This could undermine financing, especially where the IPP is exposed to dispatch risk under its PPA. Even where a PPA does not involve dispatch risk, such as for take-or-pay arrangements, lenders will have an interest in the underlying economics of the project in the market, in case the PPA is terminated. Nonetheless, for most or all the ASEAN countries, it is not expected that anticipated participation in the regional market would significantly impede any project financings.

For the liberalised markets in the region, especially Singapore, the issues discussed above for IPPs would be joined by retailer concerns about seeing reduced IPP interest in the domestic market versus retailer hopes that they could procure more competitive supplies from imports.

Consumers

Implementation of a regional market should bring significant benefits to consumers: lower wholesale energy costs (tending to support reduced retail tariffs), improved reliability of service and potentially increased overall electrification, as discussed below.

Consumers could see downward pressure on tariffs associated with implementation of the regional market, driven by expected reduced wholesale energy prices. Any increased costs for transmission should be covered by wheeling fees and/or simply from gains from energy trade. In addition, the ability for regional utilities to count on potential imports should help avoid costly emergency generation projects that would ultimately need to be paid for by consumers. Of course, the extent of consumers’ benefits depends on tariff design choices. There is also a possibility that national governments may use reduced power sector costs to attend to pressing needs in other areas, rather than reducing retail electricity tariffs.

In markets with retail choice (Singapore), consumers would be expected to benefit from retailers’ increased access to potential supply of competitive power in the form of imports. There is also the possibility that some uncommitted generation in Singapore would seek higher margins in export markets rather than selling to domestic free customers, but the impact of this on prices should be negligible.

Currently unserved communities near borders could potentially benefit from cross-border supply in a regional market. Cross-border retail supply is already occurring in some parts of ASEAN; for instance, significant areas of Myanmar are served by Thailand. This is distributionlevel “trade”, more like an international extension of distribution company service territories than the wholesale trade envisioned for the regional market. However, some hard-to-reach

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