Sound policies, more capacity needed to lower rates

MANILA, Philippines — Power distribution giant Manila Electric Co. (Meralco) is calling for sound government policies and the development of more power plants to reduce power rates.

During the company’s stockholders’ meeting yesterday, Meralco president and CEO Ray Espinosa said reducing electricity prices is always possible, but involves looking at many factors that affect the movement of electricity rates.

He said the biggest component of electricity bills is the generation charge, which is also the most volatile since it is driven by fuel prices, foreign exchange (forex) and demand-supply situation.

Fuel prices reflect movements in global oil prices, while the price of Malampaya natural gas is indexed to oil prices.

“What we need are sound government policies that can address the movement of fuel prices and forex and an environment that encourages the development and investment of additional capacities brought about by new generating plants,” Espinosa said.

Based on the Philippine Energy Plan (PEP) 2020 to 2040 of the Department of Energy (DOE), power demand in the Luzon grid is estimated to increase by about 800 megawatts (MW) per year from 2022 to 2026.

To serve this projected requirement, around 7,198 MW of new capacities are scheduled to come online during the period, based on the DOE’s list of committed power plants as of end 2021.

“Well, on paper there appears to be enough new capacity coming in the next few years to meet increasing demand and reserve requirements,” Espinosa said.

However, with the recent spikes in energy prices, particularly coal and fuel, Espinosa cited the need to diversify energy sources to ensure both energy security and affordability.

As of end-2020, coal dominated the power generating mix at 57.2 percent.

But in October of that year, the DOE announced a moratorium on new coal-fired power plants as it recognized the need for the country to shift to a more flexible power supply mix.