PPP to fail due to PH power rates, now Asia’s highest

Recent reports have confirmed that power rates in the Philippines—which range from P8 to P12 per kilowatt-hour—are the highest in Asia. With these rates, our economy is handicapped and no amount of public-private partnership (PPP) program of the government will be able to make it competitive in the global market or attractive to foreign investors.

The PPP program launched by the new administration is not something new, as the independent power producers or IPPs (of Napocor, and Meralco and other distribution utilities) in the power industry show. And one doesn’t need a college degree to understand that the cost of electricity keeps on rising precisely because of the IPPs’ foreign investments (foreign borrowings), and the burden of recovering such investment has been laid on the back of electricity consumers through the ERC (Energy Regulatory Commission)-approved power rates.

Indeed, it is very unfortunate that the amortization payments of these foreign borrowings have found their way into the consumers’ monthly bills as part of the generation charge (with the acronyms Cera or Icera). The distribution rates, another factor that drives our electricity rates higher, are a different story.

A new charge to recover the stranded debts and contract costs of the Napocor, purportedly incurred for the so-called development of the power industry, will soon be added to our monthly electric bill under the heading “universal charge.”

While we understand that these foreign borrowings should be paid, charging their amortization payments directly to electricity consumers is unjust and unreasonable simply because these are not costs of electricity. On top of this unjust imposition are more charges, such as, “environmental fund” and “missionary electrification” which are actually consumer subsidies and not costs of electricity. It is these charges that have greatly distorted the actual retail power rates.

This and the other factors that have contributed greatly to the increases in our power rates have been duly approved by the ERC, the government agency that is supposed to ensure that power rates are just and reasonable. This is clearly a case of a regulatory failure or regulatory capture.

Perhaps, our very popular President Aquino can do something about this.

—PETE L. ILAGAN, president, National Association of Electricity Consumers for Reforms Inc. (Nasecore), [email protected]