Power rates to affect inflation forecast

Business Mirror

13 Jan 2014 

 

Written by Bianca Cuaresma

The Bangko Sentral ng Pilipinas (BSP) might lower its inflation forecast for this year if the Supreme Court (SC) decides to delay or halt the power-rate increase declared by the Manila Electric Co. (Meralco) and approved by the Energy Regulatory Commission but temporary stopped by the High Court, a central bank official said.

BSP Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo said the earlier forecast of a higher inflation depended heavily on the assumption of the power-rate increases of Meralco.

This means that if the power adjustments do not push through, or its implementation is delayed, the central bank would accordingly adjust its inflation forecast.

“Remember, [there was a] P2.41-per-kilowatt-hour [kWh] adjustment starting December, followed by a P1.21-per-kWh and 53 centavos in February and then March. The February and March adjustment was stopped.… They are also now talking about the already implemented P2.41-per-kWh rate adjustment…. So if those will be stopped, it is possible that the inflation outlook will be lower,” Guinigundo said in an interview with reporters.

The BSP’s latest forecast for inflation in 2014 is at 4.5 percent. This is higher than the 3-percent actual inflation seen in 2013. It is also in the higher band of the central bank’s target range of 3 percent to 5 percent for this year. As announced in its last policy-stance meeting last December 12, the expected uptick in inflation was largely attributed to the Meralco rate adjustments.

Guinigundo further said that the full-year inflation forecast of 3.2 percent may also be changed parallel to the possible changes in the 2014 full-year inflation forecast. He did not specify, however, if the forecast will be adjusted upward or downward, as it will depend on what will be the result of the resolutions between the power industry and the government.

Meralco earlier said it has to hike its power rates by a total of P4.15 per kWh due to the scheduled and unscheduled shutdowns of power plants in the country, allegedly forcing Meralco to resort to higher-priced supply of power from the Wholesale Electricity Spot Market. This proposed rate hike is the highest power price adjustment in the country’s history.

On December 23, 2013, the SC issued a 60-day temporary restraining order on the electricity-rate hike.    source