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From the Chairman

Charlie A.V. Gorayeb

Charlie A.V. Gorayeb

Chairman of the Board, CREBA Chairman, CREBA Advocacy & Legislative Affairs Committee Honorary Consul General, Republic of Djibouti

Energy Beyond Reach

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Last year, our country’s legislators have acknowledged that the Philippines now holds the infamous record of having the highest residential energy rates not only among its closest Asian neighbors, but possibly in the entire world. 

Data from the Department of Energy (DoE) reveal that the Philippines has overtaken Japan, now the 4th largest economy in the world, in terms of electricity rate for residential use. Congressman Ben Evardone, who initiated an inquiry in 2011 through House Resolution No. 106, said that the residential power rate here is 18 US cents per kilowatt-hour, while it is only 17 cents in Japan, 15 in Singapore, 8 in Thailand, 7 in Malaysia, 5 in Indonesia and about a mere 3 cents in Vietnam. Our own research reveals the same, and this we find very alarming.

This makes the cost of electricity in every Filipino household six times more than what families in Vietnam would have to pay, when it is a sad fact that the two nations are the closest and most comparable using per capita income and minimum workers’ wages as barometers. 

In terms of commercial rates, on the other hand, it is 14 cents in Singapore. The Philippines comes in second at 12 cents. It is also 12 in Japan, 8 in Thailand, 7 in Malaysia, 6 in Vietnam and 5 cents in Indonesia. 

There is no surprise why the general business climate in the Philippines remain unfriendly to potential foreign investors by beating developed countries and large economies like Japan, Singapore, Malaysia and Thailand in terms of power rates. This is not to mention the corruption, red tape, peace and order and political issues that continue to plague the bureaucracy to the consternation of the local and international business community. 

This long-drawn-out state of affairs denies the country huge potential and opportunity to benefit from increased economic activities that will redound to business, employment and fiscal revenues for government. It likewise denies the ordinary businessman with minimum capital the chance for a level playing field that will encourage healthy competition.

To implement a “socialized pricing mechanism for the marginalized end-users,” the ERC, in accordance with Section 73 of R.A. 9136 or the Electric Power Industry Reform Act (EPIRA) of 2001, implemented a lifeline rate for those who cannot afford to pay at full cost within a span of ten years. This was extended for another 10 years or until 2021 by R.A. 10150.

MERALCO customers with an average monthly consumption of up to 20 kilowatt hour enjoy 100% discount, those with 0-50 kwh pay 50% less, those with 51-70 kwh average monthly consumptions pay 35% less and those who consume 71-100 kilowatt-hour get 20% discount. 

However, these discounts are recovered by charging higher rates for bigger users, mostly commercial establishments, who in turn, input the added costs to be borne by the consumers of their products and services creating a vicious cycle of discounting and back-charging, putting citizens’ spending power in peril.

It has been more than a decade since the EPIRA came into being. Yet, its intention to bring down electricity rates, improve the delivery of power supply and ensure fair treatment of public and private sector entities in the process of restructuring the power industry has yet to be realized. And we have yet to redeem our citizenry from the debts NAPOCOR has incurred to the tune of several billion dollars. The high cost of electric power is even made worse by VAT.

On the side of real estate development, CREBA contends that the ERC’s 30-meter rule upon which to base the determination of who shall advance the cost of installing distribution lines, whether it is the developer or the consumers, should be clarified.

MERALCO insists that whether or not the project applied for is within the 30-meter distance to the last existing MERALCO post, MERALCO will install the distribution lines only up to 30 meters of the project and the balance shall be fully advanced by the developer.

It is our view that if the nearest existing electric post of the distribution utility or DU is within the 30-meter distance to the project applied for, then the cost of installing the distribution lines should be shouldered by the DU covering the entire project applied for whether or not the cost thereof is covered by the DU’s CAPEX for the year. A contrary interpretation would render illusory the DU’s commitment to answer for the financial and technical requirements of all projects covered by their franchises.

CREBA has also been batting for the acceleration of the refund and the reduction of the maturity period of the financial instrument or preferred shares from 15 years to only 5 years. For it not to become a burden to DU, the distribution lines to be funded by the developers may immediately form part of the DU assets so that upon completion said assets shall be assured of satisfactory 12% rate of return. 

In today’s modern communities, electric power has become a very crucial factor that can make or break economic progress for people and institutions. Hence, making it affordable and within reach works to the advantage of all.

Published in the Manila Bulletin October 2012

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