Meralco, other power producers advise higher rates loom as oil, coal costs soar
Consumers will have to brace for high electricity bills amid soaring prices in the world market for oil and coal, compounding their.
Amid the already sharp rise in pump prices, a federation of jeepney drivers called for an immediate P1 increase in the minimum fare while they petition the government for a P5 increase. Motorists, meanwhile, can expect diesel prices to rise a whopping P5.50 per liter and gasoline to shoot up by P3.50 a liter on March 8, one of the biggest one-time price hikes since the passage of the Oil Deregulation Law in 1998.
On Friday, Energy Secretary Alfonso Cusi met with power generation companies to discuss the impact of increasing international coal prices, and seek measures to address the anticipated spike in the cost of electricity.
The Philippine Independent Power Producers Association (PIPPA) informed Cusi that the high coal prices in the world market will have a P9 per kilowatt-hour (kWh) effect in the price of electricity, given the March 3 coal price of $446 per ton, up from only $100 a ton.
PIPPA urged the Department of Energy (DOE) to endorse their efforts to recover the costs, even on a staggered basis, to the Energy Regulatory Commission (ERC).
On Sunday, Cusi said the DOE was working with electric power companies to ensure a steady supply and to arrest rising electricity costs.
Present during the Friday meeting were officials from the DOE and PIPPA members SMC Global Power; Aboitiz Power; Semirara Power; First Gen; Quezon Power; AC Energy; Team Energy; FDC; and Meralco PowerGen Corp. and Global Business Power.
At the moment, the country’s biggest power retailer Manila Electric Co. (Meralco) expects electricity prices to go up given the movement of oil prices in the world market.
“Malampaya natural gas, which is used for power generation, even though domestically produced, is priced in US dollars and the price moves with crude oil prices in the world market,” Meralco spokesman Joe Zaldarriaga said.
Zaldarriaga said that based on past data, a peso depreciation affects mainly generation costs.
“For example, the independent power producer (IPP) contracts of Meralco are more than 95 percent dollar-denominated,” he said.
“Given these conditions, there is pressure for power costs to mirror fuel prices. We have to note, however, that these are pass-through charges and as far as Meralco’s own cost is concerned, which is the distribution charge, it has not moved since July of 2015,” Zaldarriaga said.
Meanwhile, the power generators also assured the Energy chief of their firm commitment to ensure their full availability during the critical summer and election periods.
PIPPA members recommended several solutions such as possible suspension of the secondary price cap in the Wholesale Electricity Spot Market (WESM), the trading floor of electricity.
PIPPA also said the government should also explore the potential of providing government subsidies to electricity end-users through the Malampaya Fund.
Relief could come by way of exempting power from the value added tax, and suspending excise taxes on oil and coal and other electricity-related products.
It added that the DOE can explore relaxing the 30-day coal inventory requirement for generation companies to better manage the scheduling of their coal deliveries.
Meanwhile, the PIPPA also raised their concern over the actual completion date of the Mindanao-Visayas Interconnection Project (MVIP).
They noted that based on recent pronouncements, the National Grid Corporation of the Philippines is targeting to partially energize the lines with a limited transfer capability this month.
PIPPA stressed the urgency of speeding up the completion of the MVIP, which will be beneficial in augmenting the power requirements of other regions in the country.
Cusi welcomed the PIPPA proposals and said the DOE would evaluate them.
The Energy chief said he will raise the VAT exemption and excise tax suspension in the forthcoming National Economic and Development Authority-Economic Development Committee (NEDA-EDC) meeting today (Monday).
He also asked the association to submit a formal paper on the price simulations, including their recommendations, in addressing the anticipated electricity price increases.
Also on Sunday, the Federation of Jeepney Operators and Drivers Association of the Philippines (FEJODAP) called on the government to allow them to temporarily raise the minimum fare for jeepneys by P1 as pump prices continue to rise.
In an interview on radio dzBB, FEJODAP president Ricardo Rebaño appealed for “immediate action” from the national government to help them in their plight while the hearing for their petition to increase jeepney fares by P5 before the Land Transportation Franchising and Regulatory Board (LTFRB) is still ongoing.
“We are really having a hard time,” he said in Filipino. “Some drivers are saying they just want to stop working because of what’s happening. The big (oil) companies are taking advantage of us, because of the war in Ukraine, and the government is not doing anything to help us.”
When pump prices rise again on March 8, it will be the 10th straight week of increases.
Last week, Unioil Petroleum Philippines forecast fuel prices to go up from March 8 to 14 by P5.40 to P5.50 per liter for diesel and P3.40 to P3.50 per liter for gasoline, triggered by the Russian invasion of Ukraine.
This has pushed Duterte administration’s economic managers to meet on Monday to discuss how the soaring oil prices will impact domestic commodity prices, and come up with immediate solutions to cushion the effects on the economy
Rosemarie Edillon, National Economic and Development Authority (NEDA) undersecretary, said during a briefing on Saturday that they, the Department of Finance (DOF), Department of Budget and Management (DBM), and the Bangko Sentral ng Pilipinas (BSP), will exchange analyses and estimates on how the continued increase in oil prices will affect inflation this month.
Cusi has also ordered the DOE to expedite the implementation of its strategic petroleum reserve plan — the government’s oil buffer stock — to cushion the impact of price hikes in the domestic market.
Tuesday’s forecasted increase will be the 10th weekly consecutive price increase since January as world oil prices continued to surge. On March 3, the benchmark Dubai crude soared to $116.56 per barrel, but slightly declined to $108.80 per barrel a day later.
Based on data from the DOE, the latest oil price hike will bring the average price of gasoline to P69.28 per liter, diesel at P58.65 per liter, and kerosene at P62.21 per liter.
However, some stations in the National Capital Region sell gasoline at a high of P79.48 per liter (RON91) and diesel at P62.59 per liter. Prices vary depending on the brand, location, and market forces.
“We will see what will come out in our estimates and what we can do about it. Once we have the estimates, what will be the immediate solutions —short-term, medium-term, long-term solutions,” Edillon said.
Oil prices are spiraling higher on supply concerns as the Russia-Ukraine crisis develops, and this could lead to demand destruction and an economic recession, according to an oil analyst.
“I’m concerned that we don’t have enough oil at all here, and we need to go to $120 to $150 [per barrel], and then we get into economic destruction,” said Paul Sankey of Sankey Research.
The firm sees oil trading between $100 and $150 per barrel until the situation in Ukraine is resolved, according to a research note.
International benchmark Brent crude futures jumped 3.24% to $116.59 per barrel, after earlier crossing the $119 level. U.S. crude futures climbed 3.26% to $114.21 per barrel.