In line with the ASEAN Vision 2020’s goal of achieving closer economic integration, ASEAN Leaders during the Second Informal Summit (Kuala Lumpur, December 1997) decided, among others, to establish interconnecting arrangements in the field of energy for electricity and natural gas within ASEAN through the ASEAN Power Grid and a Trans-ASEAN Gas Pipeline. In the Sixth ASEAN Summit (Ha Noi, December 1998), the Leaders resolved to develop and strengthen the ASEAN regional infrastructure by developing networks of electricity grids, gas and water pipelines. Under the Hanoi Plan of Action, they called for the institutionalization of the policy framework and implementation modalities for the early realization of the trans-ASEAN energy networks covering the ASEAN Power Grid and the Trans-ASEAN Gas Pipeline Projects.

To assist ASEAN member countries prepare for regional power interconnection and electricity trading, the study must:

A. Promote understanding of the concept of electricity trading in ASEAN, its challenges, opportunities and options . Specifically, this will require:

1. A critical examination of the key issues and policies for electricity trading in ASEAN, including the attendant external and internal challenges. A discussion on other forms of tradable energy for electricity such a natural gas, oil, and coal shall also be included.

2. A critical review of the electricity trading arrangements elsewhere, discussing the potential and actual gains achieved as well as barriers encountered and the risks involved.

3. A thorough evaluation of the benefits, drawbacks and risks involved with the adoption of Electricity Trading for Member Countries and for ASEAN as a region.

B. Guide the formulation of common policy for power interconnection and trade in ASEAN. Specifically, this will require:

1. Review of the present capacity of each ASEAN member country to participate in power interconnection and electricity trade (“Institutional Capacity Analysis”). This involves a comprehensive assessment of the current status of market, institutional and regulatory reforms in the Electric Supply Industry in the ten ASEAN countries and the identification of barriers to power system intercon -nection and trade, providing policy options, strategies and reforms to eliminate such barriers.

2. Design of the appropriate step by step common policy and cooperative framework for ASEAN power interconnection and trade, identifying both short-term and long-term strategic objectives, actions, policy options and indicative implementation schedule, with due recognition to fair competition, energy supply security, environment, and other national policies and priorities.

3. Discussion of possible institutional arrangements to support power interconnection and electricity trading. For example, this may include a multi-jurisdiction regulatory body to administer interconnection and trading rules to be developed, a market management body to implement trading rules, etc.