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Will power supply deals finally cut electricity rates?

Foreign investors are aware that the Philippines has one of the highest electricity rates in Asia. The prohibitive cost has forced a number of these investors to drop their plan to relocate their factories in the Philippines and, instead, set up shop elsewhere.

Even Energy Secretary Alfonso Cusi has conceded that the Philippines “continues to have one of the highest electricity tariffs in the ASEAN region.” 

“High electricity bills are a constant complaint we all often hear. For investments, this makes us less attractive as a destination for doing business. It means higher overheads for the business,” said Cusi earlier. What makes Philippine electricity rates uncompetitive with the rest of Southeast Asia-Pacific are subsidies in neighboring countries that keep rates elsewhere artificially low. 

Cusi, however, offers hope. “We have a long way to go before our energy prices are as competitive as our neighbors but I believe that by operating a transparent and competitive energy market, we will get there,” said the energy chief.

“The DOE (Department of Energy) remains committed to putting the Philippine consumer first. Guided by the EPIRA [Electric Power Industry Reform Act of 2001] law, we believe that consumers can be empowered by ensuring a transparent, competitive and rules-based energy market,” he said.

Electricity consumers early this year are experiencing a relief. Electricity rates are on a downward trajectory for two consecutive months since the start of 2020.  The lower rates for this month are unique since February usually signals a normalization of rates coming from a big drop in January due the reconciliation of outage allowances. 

Electricity rates are down to P8.80 per kilowatt hour, even lower than P9.03 per kilowatt hour rate in February 2010. The lower rates translate into a monthly savings of P200 for a typical household consuming 200 kilowatt hours.

New power supply agreements, or PSAs, resulting from the transparent competitive selection process undertaken by Manila Electric Co. are bearing fruits. The new PSAs resulted in more additional power supply and capacity to the grid and led to lower price of electricity for consumers.

The Energy Regulatory Commission now headed by pro-consumer chairperson Agnes Devanadera approved the PSA, which are adding additional capacity to the grid and reducing rates.

With Devanadera at the helm in ERC, the commission is proactively working to lower the power rates for the benefit of the consumers. Power rates as a result have decreased by a cumulative P1 per kilowatt hour for two consecutive months.

Former ERC commissioner Alfredo Non, however, is not convinced at all. He is spearheading a misinformation drive against his former office, alleging that ERC was neglecting its duty of ensuring low electricity bills for consumers. Power rates actually have gone down by P1 per kwh, belying Non’s claims.

The feed-in-tariff allowance (FIT-All) and the universal missionary charge, which are included in the consumers’ electricity bills, are the real culprit for higher power rates in the past. But the ERC decided to reduce these charges despite requests by renewable energy developers.

Many are not aware that it was Non, when he was still oversight commissioner at the ERC, who pushed and supported a higher FIT-All charge.

Non supported a higher FIT-ALL charge to aid the increasing number of renewable energy developers. It is a form of subsidy that consumers are paying in their bills. Electricity consumers are being charged over P30 billion a year, which goes to the pockets of RE developers. 

The Philippines is fortunate that a more credible and professional chair is currently heading ERC, which implements fair and transparent decisions for the benefit of the consumers. Since Devanadera and her team assumed leadership at the ERC, they have been blocking an increase in the rates for FIT-All and universal charge.

It may be most appropriate if FIT-All and the universal charge are permanently scrapped to reduce power rates in the Philippines to give electricity consumers a win-win solution.

E-mail: [email protected] or [email protected] or [email protected]

Topics: Ray Eñano , power supply deals , electricity rates , Energy Secretary Alfonso Cusi , Department of Energy
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