Meralco drops to 3rd highest rates in Asia

By Danessa Rivera (The Philippine Star) | Updated October 2, 2016 - 12:00am

http://www.philstar.com/business/2016/10/02/1629331/meralco-drops-3rd-highest-rates-asia

MANILA, Philippines - Manila Electric Co. (Meralco) rates has moved from second highest in Asia to third highest in the region, fourth in Asia Pacific and 16th worldwide in 2016 mainly due to the reduction in cost of power generation over the four-year period, based on a survey commissioned by the country’s biggest power distributor.

In its report, Australia-based International Energy Consultants (IEC) said Meralco’s average rates, excluding taxes, have declined 28 percent from January 2012 to January 2016. This compares with the average decline of 19 percent across 44 countries covered by the survey.

“It’s still the third [in Asia]. But if we include Australia, Meralco [rates] are fourth. But I might note, of the other Asian countries we looked at, all of them are subsidized,” IEC managing director John Morris said in a briefing yesterday.

Results of the 2012 IEC survey showed Meralco rates are the second highest in Asia next to Japan and the ninth highest across the world.

In the new study, IEC found lower fuel costs, mainly coal, was a major contributor to the lower power prices in 2016.

It also said the lower distribution charge, lower system loss, and Meralco’s sourcing strategy were also major contributors to the decline, allowing its customers to save around P30 billion in power costs, Morris said.

Since 2012, Meralco has been aggressively negotiating competitively priced power supply agreements (PSAs) with new suppliers.

With the lower rates in 2016, the country’s electricity rates is now closer at parity with the surveyed markets, Morris said.

The study showed an average Meralco customer is paying 4.5 percent of their disposable income on electricity compare with the world average of 3.9 percent.

“Rates have come down. You’re paying about the average around the world but most will say it’s still too high,” he said.

“(But) this is an excellent outcome for consumers considering that the Luzon power market is unsubsidized and the majority of electricity is produced using imported fuel,” Morris said.

The IEC official said the role government subsidies continued to play to make power rates artificially low in markets like Thailand, Indonesia, Malaysia, Korea and Taiwan, which are estimated at $50 million in 2015 alone.

“Until subsidies are removed in other countries, it’s going to be hard to move further down,” Morris said.

But in order to maintain rates, the IEC said the Philippines must allow more investments in power generation to come in to spark more competition.

“It is critical that regulators and legislators focus on facilitating investment in generation to meet rapid growth and promote competition at a retail level so that wholesale electricity cost reductions are fully passed through to consumers,” Morris said.