“Ordinary consumers are always hit the hardest.”
Like many of us pandemic-weary Filipinos, I have been cautiously venturing out of the confines of my little home. Of course I do this for very limited and well planned hours, just so I can wean myself out of the protracted lockdown mode. These days, mobility restrictions have eased owing to what I hope are relatively accurate reports of decreasing rates of infections and increasing COVID-19 vaccination numbers. Each time I go out, I go through what feels like a pre-battle checklist to make sure I am well equipped and mentally alert to behave safely.
When I pulled up to the gas station to fill up, I was a bit shocked to see that diesel was P50.30 per liter! Then I remembered the recent news reports of rising global fuel prices, and transport groups calling for relief either by raising fare rates, temporarily suspending fuel excise taxes, providing direct cash aid or fuel price discounts, while government leaders mull over and debate on what to do.
Fuel price spikes trigger a chain reaction of economic dominoes with inflationary effects that as always, will hit the ordinary consumer the hardest. We think of fuel as the expensive liquid pumped to run transportation and all sorts of internal combustion engines. Actually, our ecosystems are dependent not just on oil derived petroleum products like gasoline, diesel, and kerosene but also by coal and natural gas which are the primary fuels for the country’s base load electricity power plants.
Fuel costs account for approximately 50 percent of generation price. The generation charge is 55 percent of the electricity bill we receive every month.
Electricity consumers feel every movement in fuel prices because of the pass-through provision on imported fuel costs in power price agreements with distribution utilities. This is a policy that the Institute for Climate and Sustainable Cities (ICSC) Energy Transition Advisor Alberto R. Dalusung III is calling on the Energy Regulation Commission (ERC) to rectify — by letting the generation companies absorb fuel pass-through costs instead of passing them on to consumers. To translate in simple language, the risk of price fluctuation, especially the increases, are passed on to us consumers. We take the hit.
We haven’t even fully opened the economy yet and already power industry projections are seeing peak power demand to exceed pre-pandemic levels. Red alerts and rotating brown-outs hit Luzon residents this year, blaming forced shutdowns of ageing and high maintenance power plants.
The depleting output of the Malampaya gas field where some of the biggest baseload power plants and 25 percent of Luzon’s electricity are dependent is expected to run out in about six years. With no new sources of liquefied natural gas, these power plants will be forced to shift to more expensive liquid fuel. This won’t really matter for these companies because they just pass on the burden to consumers.
The Malampaya cronyism issue involving the President’s close friend and campaign funder Dennis Uy’s $100 company buy-in deal, which respected columnist Jarius Bondoc revealed as having daily earnings of $1.15 million a day and combined with another Uy company that also got into Malampaya, making another $1.15 million a day, is reminiscent of the cronies of deposed dictator President Ferdinand Marcos Sr. This was a dark and plunderous era in our history that the dictator’s son, Ferdinand Marcos Jr., and family will attempt to re-write and reprise if they return to power. But that’s another story.
Going back to our power and energy problem, we’ve seen how the breakdown of power plants while other plants were doing planned maintenance work has bumped up generation costs. This is because distribution utilities are forced to buy power from the Wholesale Electricity Spot Market (WESM) to meet their customers’ power demand. This always happens around summer, when water levels of hydro power plants are not at full capacity because of low water levels and when all air conditioning units are working overtime and full blast because of the hot weather. This recurring problem reflects how thin our power reserves are. This is worrisome because next summer is the May 2022 national elections.
Energy resilience is a matter of national security that must have the purest approach and should benefit our national interest, our people’s interest. We need a power and energy agenda devoid of corrupt interests. We need a clear roadmap that ensures stable and affordable electricity for the country’s economic recovery.
To get a deeper understanding of these issues, and viable solutions, I invite you to listen to the expert insights of esteemed panelists and representatives of stakeholders in the next virtual town hall discussion of Stratbase ADR Institute. The discussion is called “Ensuring Power Supply Security for a Sustainable Economic Recovery” and will be held on November 11, Thursday at 9:00 AM – 11:30 AM (Manila time).
Here’s the link to register: