Is Philippine electricity really Asia’s costliest?

Filipinos have always thought their electricity to be Asia’s costliest. But comparison shows that’s untrue.

Power only looks cheaper because it is subsidized in Indonesia, Korea, Malaysia, Taiwan, Thailand and Vietnam. The Philippine government doesn’t sponsor power firms.

Electricity rates of Meralco, the country’s largest franchise area, is three percent lower than the average of 46 countries in a study. But if the six subsidized countries above are excluded, Meralco’s rates would be 13 percent below global average.

That study by International Energy Consultants debunks long-held belief that Philippine electricity is the region’s most expensive next to Singapore and Japan. It wouldn’t be so if the country imitates the subsidies in Indonesia, Korea, Malaysia, Taiwan, Thailand and Vietnam.

But where to get the money is another story.

Government subsidies enable the six countries to halve electricity rates, IEC noted. The grants are in the form of outright cash, fuel and deferred expenditures.

The six countries subsidize more than 50 percent of their electricity rates. Still, those grants totaled $138 billion in 2022, IEC reported. A similar grant to Meralco would cost $4.2 billion or P241 billion a year.

Perth-based IEC advises power companies in Asia-Pacific. Among its clients are the region’s largest. In the Philippines, its website states, clients include Mercalco, San Miguel Corp. and GNPower.

IEC used Meralco rates to compare the Philippines with other countries in 2022. Twenty-three of those are (in US¢ per kilowatt-hour):

Energy Sec. Raphael Lotilla acknowledges that Philippine electricity rates only look costlier because of other countries’ subsidies. “Totoo yan. Mas mataas ang ating presyo ng kuryente kaysa ibang bansa sa Asia kasi hindi tayo subsidized,” he told a press forum in July.

He expounded: “Last year, Vietnam’s power company asked for subsidy from national government just to cope with the increase in fuel prices. Indonesia, Malaysia, Thailand can afford subsidies because they have enough oil and coal resources.”

The Philippines has no such option. “Kung i-subsidize natin ang power, kanino manggagaling ang subsidy?” Lotilla posed. “Manggagaling din sa atin.”

Funds would have to be diverted from vital government services. Education, health, infrastructure works could suffer.

The pandemic and Russia-Ukraine war pushed up electricity rates worldwide. Price of coal to run power plants jumped 270 percent from $105 to $390 per ton. Price of oil zoomed 32 percent from $69 to $91 per barrel.

Reliant on imported oil and gas, the Philippines was clobbered. Palawan’s Malampaya gas fuels 40 percent of Luzon’s power. But it’s indexed to international prices in US dollars.

Still, according to IEC study in November 2022, “the Philippines’ power supply industry has proven remarkably resilient and electricity prices have risen at or below global average.”

IEC attributed the resilience to Meralco’s bargaining for the lowest rates through open and transparent biddings and diligent management of power supply contracts.

“[Since 2018] Meralco’s tariff has increased by 24 percent versus 23-percent global increase. More than 100 percent of this increase was due to the generation charge, [which in turn] rose from fuel price increases (particularly imported coal but also domestic gas),” IEC said.

As distributor, Meralco merely collects from its customers the generation charges. Meralco’s distribution charge is 33 percent lower than the average rate of the market survey. For this reason, IEC judged it “fair and reasonable.”

Two weeks ago, Meralco held a competitive selection process of power suppliers. Lowest bidders were GNPower-Dinginin and SMC’s Excellent Energy Resources.

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