Higher power rates in ecozones loom

MANILA, Philippines - Locators in the Philippine Export Processing Zones (PEZA) must expect higher electricity rates, whether or not an open access regime in the sale of electricity will begin before the year ends.

The chief reason is that their subsidized rates will be terminated on Christmas day this year.

This was the clarification made by the Manila Electric Co. (Meralco) to an earlier PNF news story on the issues discussed in a recent meeting of the energy committee of the Philippine Chamber of Commerce and Industry (PCCI).

The clarification was issued by Ernesto Cabral, assistant vice president of Meralco’s electricity trading unit, the M-Power who led the distribution utility’s team in presenting the impact of the termination of their supply contract to ecozone locators by Dec. 25.

The subsidized ecozone power generation rates of P3.90 per kilowatt/hour was due to expire December of last year but was extended by the government for another year. Consumers outside the zones are charged much more at an average of P5.60 to P5.80 per kilowatt/hour.

Three other subjects were covered during the meeting, the re-inclusion of power projects in this year’s investment priority program of the Board of Investment, updates on the open access regime and the Mindanao power crisis.

In his clarification, Cabral explained that high power rates in the Philippines are not only caused by the absence of subsidy given by the government to consumers. Power rates in the Philippines are already the highest in Asia.

The rates have been further bloated by royalties and taxes slapped on the electric power industry, the high cost of doing business in the power sector plus the practice of consumers of using too much electricity during peak hours when electric rates are high when oil-fired plants are tapped.

PCCI vice president and committee chair Jose Alejandro added that another reason for the expensive rates is the practice of the Energy Regulatory Commission of granting up to 18 percent return on investments to power companies. Under the ERC rate fixing system, Meralco last year earned P12 billion in net profits.

Towards the conclusion of the meeting, Alejandro told the Trade Union Congress of the Philippines to follow up the demand of Senator Ralph Recto for the energy department to come up with a roadmap on how the government can bring down power rates.

High electricity rates in the country has been pinpointed as one of the primary reasons behind the erosion of the country’s competitiveness in luring in investments and in competing with products produced by neighboring economies.