By:
Ronnel W. Domingo / 05:10 AM October 06,
2018
Electricity consumers
are expected to see greater price hikes caused by tax reforms—estimated at 11
centavos per kilowatt-hour in 2019 on top of the 9 centavos per kwh already in
place this year.
According to the
Independent Electricity Market Operator of the Philippines (IEMOP), operator of
the wholesale electricity spot market (WESM), the impact of the Tax Reform for
Acceleration and Inclusion (TRAIN) Act was also estimated to rise even further
to 13 centavos per kwh in 2020.
The law hiked excise
taxes on fuel and coal and adjusted the value-added tax on the transmission and
universal charges.
IEMOP president Francis
Saturnino Juan said the projections provided were based mainly on the assumptions
of Manila Electric Co. related to its sourcing mix or the spot market purchases
vis-a-vis contracted supply.
“There is not a strong
correlation between WESM prices and inflation,” Juan said. “In 2017 and 2018,
we are enjoying fairly stable WESM prices, notwithstanding that inflation
continues to rise to above 6 percent,” he said.
He said a better
determinant of the movement of WESM prices was the volume of transactions.
He said that currently,
with stable trading and prices, distribution utilities were buying 17.5 percent
of their total supply needs at the spot market. Previously, distributors bought
only 7.5 percent of their supply needs as the market was relatively volatile.
“A better correlation
is shown through interaction of supply and demand, if there’s a comfortable
cushion between the offered [power generating] capacity and demand, the price
will be lower,” Juan said. “But every time there is an increase in demand and
the buffer reduces, there is a corresponding increase in spot prices.”
The IEMOP chief said
that in the Luzon grid, spot prices may increase if the buffer supply went
lower than 1,500 megawatts and if there was no additional generating capacity
introduced by 2022.
He said this projection
took into account supply and demand only, and does not yet consider a rise in
fuel costs.
“In the Visayas,
capacity should be increased by 2019 or 2020 or the supply margin will be
gone,” Juan said.
“While building power plants can take years,
we can take advantage of the excess capacity in Mindanao, but only if the grid
interconnection between the Visayas and Mindanao happens as promised by
end-2020,” he added.
According to Juan, a
good measure to help mitigate the impact of inflation is to accelerate the
implementation of retail competition or allowing consumers to choose their
suppliers.
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