Philippine elecricity rates remain one of the highest in Asia despite a wide-ranging reform that overhauled the power sector. Past presidents failed to straighten out the convoluted power tariff system amid complaints from local industries and foreign investors.
Lowering electricity rates significantly, thus, should be one of President Rodrigo Duterte’s priorities during his six-year term. Cheaper power rates reduce production cost and will make the Philippines more competitive in this part of the world. They will attract more investments, which in turn, create jobs.
The road to lower electricity rates, however, is far from being smooth. The rates will likely spike next month after the forced or unplanned outage of several plants with a combined output of 1,297 megawatts early last week. The situation prompted National Grid Corp. of the Philippines to place Luzon in yellow alert.
The unplanned outages have led some to suspect that a number of power companies were pushing the government into letting them raise electricity rates.
The Energy Regulatory Commission quickly ordered a probe on brownouts affecting Luzon consumers and the spate of yellow and red alerts declared over the main grid.
ERC chairman Jose Vicente Salazar called the attention of the market surveillance committee of Philippine Electricity Market Corp. to find out if some private companies were cashing in on an apparent power shortage to sell electricity at higher prices. One such alert was interestingly issued on a Saturday, leading many to ask how a power supply shortage could happen when most factories, offices and other establishments were on a weekend break.
Salazar was opiqued when several companies failed to submit reports on the power outages despite an ERC directive. The failure may have led the ERC head to warn that he woulde probe “firms which may have taken advantage of the tight supply to drive up spot prices for their own benefit or that of their affiliates.”
Priority agenda
President Duterte should put the power sector in his list of priority concerns to address the problems bedeviling the industry. Government agencies like the ERC and the Department of Energy so far have been doing their share to keep electricity rates at reasonable levels. But a clear signal from the President that he is monitoring the situation should send a powerful message to the industry. After all, the President gave a campaign promise that he would look into the issue of high power rates.
ERC’s Salazar, meanwhile, is determined to implement the provisions in the law opening the door to greater competition among service providers in the power sector. The ERC also appears bent on making sure industry players do not connive with their affiliates and that the process of buying and selling electricity is transparent.
Salazar, of course, may face stiff challenge, especially from those opposing the reform. This is also a major challenge to Energy Secretary Alfonso Cusi.
Cusi so far has stayed on the same course as President Duterte in giving consumers relief from high power rates. The new energy chief can initiate an amendment to the Electric Power Industry Reform Act, if necessary, to finetune the law and make electricity rates more competitive, especially in the trading floor of the Wholesale Electricity Spot Market.
Cusi and Salazar should find a way to implement the provisions in the law that promotes greater competition and lower rates.
Cusi, on the other hand, is looking into the provision of replacement power for contracted capacities and the creation of technical audit teams to assess the operations and contracts of generation companies and distribution utilities following last week’s outages.
“We are keen on improving the power supply situation in the country. We will strengthen the policies and programs and we will work with the Energy Regulatory Commission to ensure that all standards are enforced to ascertain reliable, stable and reasonably priced electricity, because we cannot let the people suffer from power interruptions,” says Cusi.
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