PHL power rates 3rd highest in Asia

by Lenie LecturaSeptember 30, 2016

from Business Mirror

POWER rates in the Philippines are the third highest in Asia and fourth in the Asia-Pacific region, said a survey done by the International Energy Consultants (IEC), an Australia-based consulting firm specializing in Asian power markets.

IEC Managing Director Dr. John Morris, who led the study, said the results of the study reflect the period January 2016 compared with January 2012.

The Philippines’s power rates, he added, are also the 16th highest in the world.

The study, however, showed successive declines in retail-power tariffs in Manila Electric Co. (Meralco) franchise areas over the last four years have narrowed the gap between the country’s electricity rates and those of other countries.

Meralco’s average tariff, excluding value-added tax, declined 28 percent since January 2012 versus an average decline of 19 percent across 44 countries covered by the survey.

In local currency terms, this translates to a 22- percent decrease in the power utility’s average tariff versus an average decline of only 1 percent across all markets.

Morris said electricity rates in Luzon and selected markets from the Indo-Pacific region and other parts of the world are now at a closer parity than before.

Luzon’s average electricity tariff is only 11 percent above the survey’s average rate, which reflects an improvement from a similar survey done by IEC in 2012 that showed electricity rates on the island were 24 percent above the average rate of surveyed countries in that year.

“This is an excellent outcome for consumers,” Morris said, “considering the Luzon power market is unsubsidized and the majority of electricity is produced using imported fuel.”

Morris emphasized the role government subsidies continued to play to make power rates artificially low in markets like Thailand, Indonesia, Malaysia, South Korea and Taiwan.  He estimated subsidies in those countries amounted to almost $50 billion in 2015 alone.

During the period under study, IEC found lower fuel costs, mainly coal, was a major contributor to the lower Luzon power prices in 2016.  However, IEC said a lower distribution charge, lower system loss, and the power utility’s sourcing strategy were also major contributors to the decline.

Due to these three factors alone, Morris said Meralco customers were able to save around P30 billion in power costs. Since 2012, Meralco has been aggressively negotiating competitively priced power-supply agreements with new suppliers.

“Electricity tariff in Luzon will further go down should investment in new power generation be made to meet rapid demand growth, and competition at retail level is promoted such that wholesale electricity-cost reductions are fully passed on to customers,” Morris said.

Morris said the distribution charge, which accounts for 17 percent of the average tariff, is the only charge that accrues to Meralco. All other charges are collected by Meralco on behalf of third parties.