{"id":25577,"date":"2022-11-07T00:58:19","date_gmt":"2022-11-07T00:58:19","guid":{"rendered":"https:\/\/energytracker.asia\/?p=25577"},"modified":"2022-11-07T01:15:59","modified_gmt":"2022-11-07T01:15:59","slug":"electricity-price-hikes-in-the-philippines","status":"publish","type":"post","link":"https:\/\/energytracker.asia\/electricity-price-hikes-in-the-philippines\/","title":{"rendered":"Electricity Price Hikes in the Philippines"},"content":{"rendered":"
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The electricity price in the Philippines<\/strong> is among the highest in Asia. Due to global energy market instability and fossil fuels’ volatility, people are at risk of paying even more for power. Experts warn that the LNG expansion plans in the Philippines<\/a> risk exacerbating the problem further.<\/p>\n\n\n\n

Drops in fossil fuel prices don\u2019t seem to be on the horizon. While the local regulator is trying to tame the situation, there is not much that it can do. The country needs a significant energy policy shift and a transition to renewable energy sources by its leading power utilities or independent power producers. Without those, it will continue paying unreasonably high energy prices and locking itself into a fossil fuel-dependent future.<\/p>\n\n\n\n

The Energy Regulatory Commission (ERC) in the Philippines Rejects Electricity Price Hike Proposals<\/strong> by Independent Power Producers<\/strong><\/h2>\n\n\n\n

In May 2022, San Miguel Corp. (SMC) and Manila Electric Company (Meralco), the largest distribution utility in the Philippines, filed a joint petition<\/a> for a temporary adjustment to the 2019 power supply agreements with the ERC.<\/p>\n\n\n\n

The cited reason was the increasing prices of <\/a>coal and natural gas used to produce electricity. In an unaudited financial statement, SMC noted that, due to the higher fuel costs, it has lost around USD 255 million<\/a> (15 billion Philippine pesos). The SMC admitted<\/a> that, through the move, it aimed to recover a third of the losses without any margin.<\/p>\n\n\n\n

However, the regulator denied the petition<\/a>. It cited that the two businesses were responsible for having accounted for such potential price spikes in their risk-mitigating strategies. The ERC stated<\/a> that it \u201ccannot afford relief to any party for its miscalculations, imprudence, or inadvertence, at the cost of consumers”. ERC\u2019s chairperson also added<\/a> that the petition wasn\u2019t approved, since Meralco and SMC hadn\u2019t exhausted all available options before filing it.<\/p>\n\n\n\n

Local consumer group Power for People Coalition welcomed<\/a> the regulator\u2019s decision. The Center for Energy, Ecology and Development (CEED), along with local clean energy advocates and youth organisations, urged<\/a> SMC to abandon its fossil gas projects in the pipeline. Instead, they advised the company to help advance renewable energy in the country.<\/p>\n\n\n\n

SMC\u2019s Stance on the Rejection<\/strong><\/h3>\n\n\n\n

SMC released a statement<\/a> saying that the company regretted the denial, \u201cnot so much\u201d for its own interest but \u201cmore for the consumers\u201d. The company accused the ERC, saying it knew \u201ctoo well\u201d that denying the petition would cripple SMC and burden consumers who \u201cwill have to face higher electricity bills\u201d.<\/p>\n\n\n\n

Furthermore, SMC claims that had the ERC approved the petition for temporary relief, electricity prices in Luzon would have increased by only 30 centavos\/kWh over six months. On the other hand, the denial could lead to a 30% increase in electricity prices<\/a>.<\/p>\n\n\n\n

After the request was declined, Bloomberg reported<\/a> that SMC risks a funding shortfall of as much as USD 1 billion by June 2023. However, its president and CEO, Ramon Ang, announced that the conglomerate has the money to avoid a capital crunch.<\/p>\n\n\n\n

A Situation Long in the Making<\/strong><\/h2>\n\n\n\n

The companies claimed the need for the petition was due to a \u201cchange in circumstance<\/a>\u201d. The circumstance included supply disruptions caused by a coal export ban, Russia\u2019s war on Ukraine, and value chain issues triggered by the pandemic. There are arguments that the companies couldn\u2019t have predicted<\/a> these unforeseen circumstances when executing their power supply contracts.<\/p>\n\n\n\n

However, it seems they could have, since experts have warned of fossil fuels’ financial and stranded asset risk. In August, IEEFA<\/a> cautioned about the potential risk of passing high import fossil fuel prices to consumers. The group noted that such a move would cause higher power prices for Filipino households and businesses. This would potentially stunt economic development.<\/p>\n\n\n\n

Sam Reynolds, an energy finance analyst with IEEFA, highlighted<\/a> that SMC promised a specific price for its LNG-fired power, knowing that LNG prices are highly volatile. The expert urged that if the company couldn\u2019t meet the price of its bid, it should be the one bearing the costs of the skyrocketing fossil fuel prices, not Filipino citizens.<\/p>\n\n\n\n

In 2019, SMC’s electricity arm, SMC Global Power Holdings Corporation (SMGCP), entered into two fixed-price agreements<\/a> to supply energy to Meralco consumers. At the time of the deal, coal prices were around USD 65 per metric ton (MT). Since then, they have risen to over USD 440\/MT<\/a>. Furthermore, the depleting gas field in Malampaya was public knowledge<\/a> \u2013 a fact highlighted by the regulator. The Department of Energy even issued notices on the matter back in 2014 and 2015. Experts believed the company should have known well enough to have accounted for such risks<\/a>.<\/p>\n\n\n\n

In fact, this is a situation that the ERC has already addressed. In 2020, the regulator stressed<\/a> that power suppliers should bear the risk of market volatility, not consumers.<\/p>\n\n\n\n

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The Way Out of the Phillipines’ Energy Price Crisis<\/h4>\n <\/div>\n
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