INTERNATIONAL comparisons always seem to portray the Philippines in a bad light.
Unfortunately, the cost of domestic electricity is typical.
The Philippines has by far the most expensive electricity in the Association of South East Asian Nations (Asean) region.
In terms of cost per kilowatt hour (kWh) in pesos the data is: Philippines 9.20, Singapore 7.00, Thailand 6.10, Indonesia 6.00, Vietnam, 5.20, Malaysia 4.20.
Within the Philippines, there are significant regional variations. The cost of electricity sold by the Central Negros Electric Cooperative (Ceneco) is on average, around P1 per kWh more expensive than in Manila which is supplied by the Manila Electric Company (Meralco). Electricity in Iloilo is also approximately P1 per kWh more than Manila.
Why is this?
Ceneco suffers from disadvantageous bilateral contracts. It would do better to accept the vagaries of the Wholesale Electricity Spot Market (WESM) than to have signed the second contract with Kepco-Salcon in 2011. This has imposed enormous penalty costs which are still being debated.
In 2014, a joint application of Kepco-Salcon and Ceneco sought approval of Energy Regulatory Commission (ERC) to extract P189 million from Ceneco’s hapless electricity consumers. This is for electricity that the consumer did not ask for, did not want, did not need, and, above all, did not use.
In 2015, Kepco-Salcon, this time unaccompanied by Ceneco, made another submission to force Ceneco’s consumers to pay P232 million. As far as I know, ERC is still considering this proposal.
With the election of President Rodrigo Roa Duterte and the appointment of Alfonso G. “Jack” Cusi as Energy Secretary we look forward to the possibility of a more realistic relationship between those who provide electricity and the consumer.
It is unconscionable that Ceneco’s consumers should pay P232 million for electricity they did not use.
If ERC finds that P232 million is due and payable, then Board members who approved the disadvantageous contract should pay.
Another possibility is for Kepco-Salcon to prove how much it suffered by not selling the unused electricity to Ceneco. The cynical ones may argue that this cost is zero.
Denizens of Iloilo also suffer. Due to a cozy contract between Panay Energy Development Corporation and Panay Electric, the generation charge alone is around P7 per kWh. Even Ceneco’s generation charge is only around P6, but has higher local distribution charges. This is far too high and I hope Cusi quickly establishes this.
Duterte is looking for rapid economic growth. There are, however, obstacles. Our economic growth is dependent to a significant extent on expanding the manufacturing sector. Industrialization is extremely energy intensive. Foreign companies, therefore, are likely to establish manufacturing plants in Vietnam, Thailand, Indonesia, Malaysia where electricity is cheaper. These countries, all within the Asean Economic Community (AEC) will then export goods to the Philippines at zero tariff as part of AEC policy.
We will lose out.
The seriousness of our expensive electricity cannot be overrated.
Cusi’s pronouncements have been encouraging. He is seeking lower rates. He recognizes that finding ways of reducing systems loss charges is significant.
The Feed-in-tariff (FIT) arrangements for solar electricity are overly generous. The FIT subsidy for solar is P8.69 per kWh. This is in excess of the total electricity cost of anywhere else in Asean.
The youthful Leandro Leviste recently gave international examples of where solar electricity can be produced very cheaply. Good!
Let’s have cheaper solar here.
Until then, if coal is cheaper then we should use coal.
Our carbon footprint is approximately one tenth per capita of the United States of America. We need economic expansion which, given a degree of inclusivity, will reduce poverty. To reduce global carbon footprint, it is the developed countries, not the developing ones, that need to make the reductions.
We are not alone in thinking this.
India is in the same situation where it needs substantial economic expansion. If this means having a larger carbon footprint, then so be it.
India’s Prime Minister Modi spoke eloquently on this at the Paris Conference on climate change last December. He will have an articulate ally in President Duterte.
Let developing countries develop.