Meralco rates still 3rd highest in Asia – IEC

MANILA, Philippines — Average rates of Manila Electric Co. (Meralco) remained the third highest in Asia, but rates have already gone down in the past six years due to continued decline in power generation cost, according to a survey commissioned by the country’s biggest power distributor.

In its latest report, Australia-based International Energy Consultants (IEC) said Meralco’s average rate dropped by 18.2 percent to P7.77 per kwh in January.

This placed Meralco’s average rate as the 24th highest among the 46 markets surveyed, further down from 16th spot in 2016, IEC managing director John Morris said.

The tariff of the Philippines’ largest power distributor is also four percent below the average rate of the 46 markets, he said.

Focusing on residential tariffs, Meralco’s rate ranked 26th highest and eight percent below the average of the 46 markets covered under the survey.

Closer to home, Meralco rates remained as the third highest in Asia, but moved to the sixth spot in Asia Pacific this year from fourth spot in 2016.

Results of the 2012 IEC survey showed Meralco rates are the second highest in Asia next to Japan and the ninth highest across the world.

“This is an excellent outcome for consumers considering that the Luzon power market is unsubsidized and the majority of electricity is produced using imported fuel,” Morris said, citing the significant fuel price increases and a depreciating local currency.

“All of the components of the regulated tariff of Meralco are fair and reasonable, based on comparisons with other markets and versus the true cost of electricity. Meralco continues to deliver electricity at a fair and reasonable rate,” he said.

The latest IEC study attributed the decline in Meralco rates to the addition of competitively-priced power supply agreement (PSA) contracts in the generation portfolio.

“The biggest contributor in drop in rate is generation, which fell four percent.   “Meralco managed generation to bring rates down,” Morris said.

IEC said most of those markets with cheaper tariffs have subsidies from government.

Morris said government subsidies continued to make power rates artificially low in markets like Thailand, Indonesia, Malaysia, Korea and Taiwan.

In these five countries about 41 percent of their tariffs are subsidized amounting to around $800 billion, which comes in the form of cash grants, subsidized fuel or deferred expenditure.

IEC cited the need to build more plants and the need for stronger competition to reduce power rates.

It recommended that regulators and legislators should focus on facilitating investments in new generation.

“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.