The Philippine power distribution industry
C&C VIEWS - Ed F. Limtingco (The Freeman) - March 5, 2014 - 12:00am

According to Industry Trends, a regular publication of the Institute for Development and Econometric Analysis, Inc. (IDEA), the electric power industry provides electric power to Filipino households and businesses, driving industrialization and the modern economy. Numerous happenings and issues in the industry affect the economy at large. Because of this characteristic and the industry’s susceptibility to get driven by market power, it is heavily regulated by the government through the independent Energy Regulatory Commission (ERC) under the Department of Energy (DOE).

Generation, transmission, and distribution of electric power comprise the industry’s chain of production and supply. Private firms and the government?owned?and?controlled corporation National Power Corporation (Napocor) generate electric power from coal, hydro, diesel, natural gas, and geothermal energy. The National Transmission Corporation (Transco), which is run by the private National Grid Corporation of the Philippines (NGCP) under a 25?year license, operates the country’s power grid. The private sector distributes and supplies electric power bought from generators to end?users.

Per same published report, as expected in a growing and developing economy, electricity consumption has increased by 4.09 percent on average from 2000 to 2012. Increases in residential, commercial, and industrial uses have driven the increase. On average from 2003 to 2012, they have increased by 2.8 percent, 4.7 percent, and 3.3 percent, respectively. As shown, the commercial sector exhibited the fastest growth among the three sectors owing, in part, to the robust performance of the services sector. Usage by the industrial sector also has the potential to grow much faster in the coming years as the sector is showing a recovering growth for the past years.

Per IDEA, energy is the most common source of energy used by households as opposed to fuel, wood, charcoal, LPG, and kerosene, according to the 2011 Household Energy Consumption Survey. About 87 percent of the 21 million households surveyed used electricity from March to August 2011. However, the ratio of electricity use to output has been dropping. Figure 6 shows the ratio of the amount in Wh of electricity use to GDP from 2000 to 2010.

The economy has been doing with substantially less electric power. High and rising electricity rates—the highest in Asia—may have caused this trend. The recent surge of the country’s economic growth rate gives reason to expect that electricity consumption will continue to rise. DOE data shows the average elasticity of electricity use to GDP over 2000 to 2010 is 1.07. As the income and wealth of Filipino households rise, electricity use also rises.

Nonetheless, rising rates, as shown above, coupled with the impending Php3.44 per kWh hike in generation charge may serve as a supply shock to the economy at large and stint growth. According to the 2010 Survey of Energy Consumption of Establishments, the total amount of electricity purchased by establishments reached 41.2 billion kWh. The greater share, 70.5 percent, of electricity was bought from distribution utilities and electric cooperatives, and 11.4 percent were generated by industries. Power bought from the WESM accounted for 7.5 percent of total power used; the remaining 10.6 percent were from other sources. Similar to its effect on household consumption, economic growth will raise the amount of business and thus electricity use. The same caveat applies; increasing rates can hold back growth, according to the researchers of IDEA.

For comments, rejoinders and questions on credit and collection matters, send email to elimtingco@yahoo.com

DEPARTMENT OF ENERGY DEVELOPMENT AND ECONOMETRIC ANALYSIS ELECTRIC ELECTRICITY ENERGY ENERGY REGULATORY COMMISSION HOUSEHOLD ENERGY CONSUMPTION SURVEY INDUSTRY TRENDS NATIONAL GRID CORPORATION OF THE PHILIPPINES POWER
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