November 11, 2012, 7:48pm
By MYRNA M. VELASCO
All Filipinos want to use electricity – that’s a given. But not all are willing to pay the right price.
Here’s one clincher: The average rate billed by the country’s biggest power utility Manila Electric Company (Meralco) climbed P0.70 per kilowatt-hour (kWh) this year to P9.72 from the year-ago level of P9.02/kWh. Le sigh, that ain’t a bit of good news for penny-pinching consumers!
It too may negate whatever slip in “high electricity rates ranking” that the power utility firm had achieved in the past months.
Yet, there might still be some tinge of good things that consumers can see in their bills or in the delivery of service to them. At least, consider as well how the media places under the lens of public scrutiny any adjustment that will happen in power rates so regulators and policymakers will take notice.
And if we’re already thinking that we are miserable enough for paying one of the highest electricity rates in Asia, this could be the silver lining. Reflect on what’s happening in New York after hurricane Sandy’s havoc.
“The city that never sleeps” could be the symbol of all things “first rate”, but isn’t it ironic that it struggles from restoring its electricity supply at a duration almost longer than what we have had experienced with the strike of our “super typhoons”? Compounding its dilemmas are its power utilities apparent ‘unpreparedness’ in averting “disaster chain effects”, like the fires caused by its downed wires and damaged networks.
Not Asia’s highest?
Just months back, a new study by Perth-headquartered International Energy Consultants (IEC) attempted to paint a scenario that the Philippines was not really paying the highest electricity in the world. Purportedly, Meralco’s average rate was ranked ninth highest among the 44 market-samples in the study.
For some though, that presents a quizzical precept. Note for instance that the same study is prescriptive and revealing on one fact – Philippine electricity rates remained as the second highest on Asia-wide comparisons.
Interestingly, the IEC headed by Dr. John Morris selected Kansai Electric of Japan as its comparative market this time – it was some sort of “a shift” or diversion from Tokyo Electric Power Company (TEPCO) which was its original market sample when the same consulting firm ranked Meralco in 2010 as having the highest electricity rates in Asia.
To be fair though, the 2010 ranking was quite unfortunate because that was the episode when the Philippines was confronting its electricity sector’s “perfect storm” – rates skyrocketed due to extreme tightness in supply.
When Dr. Morris presented their study outcome, his caveat to the Joint Congressional Power Commission (JCPC) was that “the choice of sample markets was based on the availability of data.” Specifically, he noted that the use of Kansai Electric as a sample distribution utility (for Japan) was due to the fact he cannot “get accurate data from Tokyo Electric because they are mostly written in Japanese.”
Proving a theory
The heart of the argument requires unraveling a theory that: Philippine electricity rates are “highly-taxed” and cost benchmarking on imported fuels similarly contribute to the “high tariffs dilemma”; while some neighboring countries in Asia have subsidized rates and also have heftier base of indigenous fuels.
Many quarters similarly pinned blame on the restructuring of the power industry, as sanctioned by the Electric Power Industry Reform Act being price hike triggers. One solid fact to consider: The costs of fuels since 2001 have risen multi-fold. At that time, for instance, the price band anticipated for oil had just been at $22 to $28 per barrel – and everybody knows now how that price band was breached with global prices swinging to an extreme of $147 per barrel at one point.
Coal, which is the dominant fuel for power generation in the country, was just also hovering at lower than $30 per metric ton a decade ago. From then, it spiked drastically to more than a $100 per ton.
What consumers pay for electricity is a “gut issue”, alright. But there is really no need to deflect that the Philippines is paying one of the highest electricity rates in the world. What’s left to be done? A lot of explaining so consumers can fully understand what items are being reflected in their bills and why all these components are necessary in bringing that electricity to their homes and businesses.
Aside from the “golden rule”, one valuable lesson my mother taught me is distinguishing what I “really need” and what are the things I “just want” when it comes to spending. The same applies in managing our electricity consumption, there are certain needs that must be met and that’s non-negotiable; but extended television watching or internet addictions may fall on the “just want” category and something that we may need to cut on if our budgets don’t fit.
Fair is a matter of opinion
For panacea’s sake, it’s tempting to just accept the numbers presented in the IEC study. Albeit for the longest time, global energy experts were already accentuating realities that “the era of cheap energy is over.” They propounded that the more fitting consumer-chant would have been “the quest for affordable power rates.”
Of course, what is a “fair rate” is a matter of opinion. Yet again, there are some fundamentals worth examining, such as: What are the costs of fuel used for power generation; are utilities investing and how much return have they been pocketing? How much taxes and levies are integrated in the billed cost items? Are there subsidies embedded in the rates?
While the IEC study outcome is perceived by some as “debatable”, it still offers new levers as to what factors must be given closer examination if we are to compare our rates again with other markets.
The 68-page longer version of the IEC report stirred questions on the following: What’s the power mix of the sample countries? Which distribution utilities in each country were considered in the survey and how are they comparable to Meralco? What is the significance of Hawaii, Malta and Europe to the Philippines in rate-comparisons aside from “just the availability of data?” And on the issue of energy subsidies, many of the markets cited actually bequeath such financial support to their overall energy supply – so for some countries, like Indonesia and Thailand, how much of that subsidy really goes to power vis-à-vis the pie funneled to transport fuel? And for countries with fuel production, such as coal, how much cheaper does that translate in their overall generation cost because of reduced freight costs? And which countries are deregulated such as the Philippines; and which ones remain under State control? So far, not much data had been provided in the explanatory notes.
Others opine that the region-wide benchmarking would be more apt because these are the same jurisdictions we will be competing with in terms of cornering much-needed investments and these are also the markets we can relate to when it comes to economic growth dimensions – as compared to Malta and Hawaii or the European country-samples.
In the study, the Australian consulting firm noted that it also excluded value added tax (VAT) in the estimated tariffs across markets – but that could have been an important component of the overall analysis. The sample-month for most markets had been January 2012 which is generally a low-demand month for Meralco; while those in the European countries had been November 2011, a period when their demand picks up due to their need for winter heating.
And while Meralco is the specific subject-market for the Philippines, in other countries like the United States, the IEC presented estimated wholesale tariffs; and has not also named the sample power distribution utility in some markets. One observation had been: If the IEC study presented the wholesale rates of many countries, why has it not been done for the Philippines to really show the average tariffs being paid for in this country? (To be continued) source
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