By MYRNA M. VELASCO
The electricity rates in the Philippines for residential consumers have climbed anew to being the third highest in the Asian region; next to Japan and Hong Kong, with efforts being pursued to reflect true cost of power generation.
But the power rate uptrend may not necessarily stop at that rank; with yet pending policies to impose value-added tax (VAT) on the independent power producers; and the expected final approval of the Energy Regulatory Commission (ERC) on National Power Corporation’s bid for a total of
P1.98 per kilowatt hour (kWh) generation rate adjustment.
It would be noted that Philippine electricity rates dropped to the sixth and seventh spots in 2002 after President Arroyo’s directive to cap the fuel and purchase cost adjustment (FPCA) charges of the state-run power firm.
This decision, however, has been haunting the Philippines until today in a major way, with NPC’s losses ballooning to as high as
P113 billion in 2003; and with the overall fiscal deficit of the country swelling to P200 billion; a significant chunk of which is attributed to the power firm’s dismal financial performance.
With expected further up-tick in electricity rates due to implausible government policies, to include over taxation; such is seen undermining investor confidence; which at present is already preeminent among their concerns.
A report on the Philippine Power Sector by rating agency Moody’s has indicated that tariff adjustment has remained a critical issue being faced by power players with politics and government policies frequently being embroiled in decisions on tariff-setting.
It is worthy of note that electricity costs in the country is higher than its neighbors in the region, primarily those considered as its competitors in cornering prospective investments.
The Moody’s report has ranked Vietnam having the fourth most expensive electricity in Asia; followed by Singapore in fifth spot; Indonesia (6th); India (7th); Malaysia (8th); China (9th) and South Korea (10th).
The rank pattern of residential rates normally follows also that of commercial and industrial rates.
Due to the high electricity prices prevailing in the Philippines, both NPC and Meralco (Manila Electric Company) face major problems ˇV despite significant rises in their cost bases in obtaining government approval for tariff hikes. Political and social elements play a significant part in such government decisions,ˇ¨ the rating agency report has stressed.
In this vein, Moodyˇ¦s sounded off that both NPC and Meralco ˇ§will continue to face issues in regard to tariffs, given that the government must take into account the interests of different parties, and the risk of court interventions overruling ERC-approved tariff increases.
The complicated and usually politically-interwoven process of acting on tariff adjustment applications, it said, will continue to be one of the toughest regulatory challenges that the deregulation of the Philippine power market would have to face up to
