Lowering power rates to drive economy

This year, the recorded national inflation rate has been steady in its increase. The first month of the year was at 3.4 percent — a number that, by August, had ballooned to 6.4 percent. The consistency of the uptick is expected to continue until the end of the year; the third quarter closed with a 6.7-percent inflation rate.

Recently, Pulse Asia released survey results showing that controlling inflation is the No. 1 urgent concern of most Filipinos. Out of 1,800 individuals polled, 63 percent said rising inflation is an issue that the Duterte administration must immediately address. Thus, the challenge for the
government is to mitigate the effects of inflation before it tumbles into a free fall, and becomes unresponsive to policy shifts and governance.

The BSP’s Department of Economic Research attributes the inflation surge in September to higher domestic petroleum prices, the increase in the costs of rice and other agricultural commodities due to Typhoon “Ompong,” and the local currency depreciation. Electricity, gas and fuel are the commodities that contributed a giant share in the uptrend. Not surprisingly, a Pulse Asia report last August revealed that 60 percent of Filipino consumers are dissatisfied with electricity prices.

The correlation between fuel cost increase and electricity price hikes has been validated by Francis Saturnino C. Juan, the new president of the Independent Electricity Market Operator of the Philippines. Juan was a speaker of independent think tank Stratbase ADR Institute and consumer advocacy group CitizenWatch Philippines in its Sept. 27 forum, “Energy Outlook: Supplying Rising Demand at Lower Cost.”

According to Juan, a price impact on distribution utilities is certain because they are getting electricity from certain suppliers that will be running on fuel. And “since the prices of fuel have already gone up, then that will add to the increase in the electricity rate. That will be passed on also to the consumers of these distribution utilities.” Opening more power plants will subsequently increase power supply, and achieving source abundance will effectively lower the costs, Juan added.

The forum gathered power sector stakeholders to discuss solutions regarding electricity cost fluctuations and the rising energy demand. The Philippine power sector is faced with the challenge to provide what Sen. Sherwin Gatchalian, the event’s keynote speaker, called the three S’s of his energy sector vision: stable and sustainable power with maximum consumer savings.

Gatchalian lamented that electricity rates in the Philippines are among the highest in the region. The stakeholder challenge is how to protect consumers by lowering the price of electricity, while also providing reliable energy and meeting the country’s growing power demand.

Meanwhile, the Philippine Chamber of Commerce and Industry has called for government provision of power subsidies to invite foreign investors and further stimulate economic growth. Additionally, the chamber’s chair for energy and infrastructure, Jose Alejandro, underscored the need to focus on creating a competitive environment in the power sector. He said that “if real competition would be encouraged, easily that could bring down the cost by 10 percent to 15 percent.”

We are far from achieving the intended results of the current power sector reforms, but if stakeholders continue to take deliberate and purposeful steps forward, we may eventually find our energy sector at par with our Asean counterparts. Foreign investments will pour in, and this will power economic growth that will improve the lives of millions of Filipinos.

The relationship between the power sector and the overall health of the economy is clear. The power industry is a key driving force for growth and development; but prohibitive rates and unreliable supply can prevent an economy from fully accelerating, not least when its consumers cry foul over high electricity bills.

The need to remove bureaucratic barriers and policies that are delaying the building of much-needed power plants was the consensus of all the energy stakeholders. We must have adequate and affordable electricity to sustain the country’s economic growth.

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Dindo Manhit is founder and managing director of Stratbase Group.