Contextualizing power rates in PH

Are power rates in the Philippines really expensive? Over time, the cost of electricity in our country has been criticized to be excessive in comparison to our neighbors in Asia sans any context on the predominantly influencing factors and prevailing circumstances.

A 2022 study by the Australia-based International Energy Consultants (IEC) covering 46 energy markets—including two states of the United States—dissected the costs and tariffs that influence the prevailing electricity rates among different countries and came up with interesting findings that provide a more accurate and comprehensive comparison of power rates across countries.

The study debunked several myths about power costs in the Philippines with data and research that allowed for a better appreciation of the energy industry landscape at the international level. For the study, the IEC used Meralco’s rates and data to represent the Philippines given that it is the largest distribution utility in the country.

Contrary to the often-rehashed criticisms that Meralco’s rates are too high, the study found that Meralco’s generation charge, which comprises the largest share in customers’ electricity bills, is significantly lower at USD0.1342 per kilowatt-hour (c/kWh) when compared to IEC’s USD0.16 c/kWh estimated cost of producing reliable wholesale electricity in Luzon. The IEC attributed these savings to Meralco’s efforts to source power at the lowest possible cost through its power supply agreements.

Meralco’s distribution charge, on the other hand, which comprises around 14% of customers’ electricity bills, was found to be 33 percent less than the average rate of energy markets surveyed for the study which means that the charge is definitely fair and reasonable.

On the discussion of dues or taxes, the IEC study found that the average tariff customers pay to Meralco is actually 3 percent lower than the global average despite the lack of subsidies and fundamentally high costs. This means, according to the IEC, that Meralco’s customers are paying a fair and reasonable price for electricity.

In terms of comparison with other countries, the study also provided context on the rate structure in the Philippines and why it is incorrect to compare our power rates with our neighbors based on costs alone.

This is because many of our neighbors, especially in Southeast Asia, are deemed to have cheaper electricity costs since tariffs in these areas are subsidized by more than half or 50 percent — a mechanism that is currently not available in the Philippines. Countries that benefit from these subsidies include Thailand, Indonesia, Malaysia, Vietnam, and Taiwan. Should a 50 percent subsidy be applied to the Philippines, IEC estimated that it would require around PHP241 billion in taxpayers’ money.

When it comes to comparisons on the power supply mix, it is interesting to note that countries included in the study that were found to have the lowest electricity costs utilize nuclear energy or are rich in hydro power.

The IEC offered recommendations specific to the Philippines to remain competitive in the energy industry. This includes driving investment in new power generation to meet the growing demand and ramping up development of renewable energy (RE) sources—areas wherein the administration of President Ferdinand R. Marcos Jr. has made great strides.

In the case of Meralco, the company is working not only to increase its RE supply but is also active on the power generation front—developing greener capacities and exploring alternative and cleaner energy sources such as nuclear power.

In summary, we Filipinos pay for the true cost of electricity and it would be a disservice to the truth to simply compare our power rates to other countries without any context. The energy industry landscape is different for each country and should be viewed more comprehensively to avoid misconceptions and come up with accurate conclusions.

Editor’s note: The opinions expressed in the foregoing article are solely the author’s and do not reflect the opinions and beliefs of the Philippine News Agency (PNA) or any other office under the Presidential Communications Office.