The President said the power reduction was the result of the Wholesale Electricity Spot Market (WESM) scheme launched by the government last June, where consumers can now choose the lowest prices of electricity.
WESM can be compared to a stock market where power instead of stocks are sold in the open market.
"For example, Meralco (Manila Electric Co.) rates for those who consume at least 200 kilowatt-hours in a month will be reduced by 52 centavos per kilowatt-hour, which will translate to P100 less in the actual bill to pay," Mrs. Arroyo said.
"This is a result of free competition in selling electricity from power generators. This is a big blessing for consumers, businesses and workers," she said.
The President said every household consuming 200 kilowatt-hours will notice a P100 or more reduction in their electricity bill for August.
While the average reduction would be 52 centavos per kwh, Energy Secretary Raphael Lotilla said there would be a reduction of 79 centavos per kwh this month as compared with the average cost of electricity in July.
"You can take a look at the generation cost in your bills and then it will show whether in fact there was a reduction in the generation cost and this generation cost will ultimately be reflected in the final bill of every customer," Lotilla said.
Energy Undersecretary Melinda Ocampo added a similar reduction in the systems loss by one to two centavos per kwh would also reflect in the bills of consumers this month due to the decrease in generation charges.
Meralco, for its part, said basic rates for electricity will be reduced by 89 centavos per kwh in the August billing.
This is because of the onset of the rainy season where there is less consumption of electricity, aside from the shifting of the regulated rates of the National Power Corp. (Napocor).
Meralco said the August billing, covering the cost of power used by residential and commercial clients of Meralco in July, will reflect the reduction of more than P120 for residential users consuming an average 200 kwh per month.
Meralco president Jesus Francisco explained the actual reduction is 79 centavos because of the lower costs of buying contractual and spot power.
Another 10-centavo reduction is due to lower systems losses from independent power producers (IPPs).
Francisco said another rate reduction could be expected in September because more hydro-electric power plants are being utilized, and they charge cheaper rates than coal or imported fuel plants.
Meralco said the change in the next billing dates is due to their shifting from Napocor to the WESM.
But a negating factor for a large rate reduction, Meralco said, is the application of certain rules governing the currency exchange rate adjustment (CERA).
Napocor rates are CERA-regulated as against WESM which are market driven.
"In the long term, Meralco’s long term perspective is to expand sourcing from the WESM, and use whatever we can get from it to use in negotiating with Napocor," Francisco said.
Meralco, the country’s largest power distributor, is among the big buyers at the WESM.
Meralco supplies about 70 percent of the electricity requirement of the main island of Luzon.
The power distributor firm has started buying about half of its electricity in the spot market after its long-term contract with Napocor expired.
Philippine Electricity Market Cooperation president Lasse Aznar Holopainen said this would generally bring down consumers’ bills.
Holopainen said WESM would allow competition in generation, "so at any single time you get the cheapest possible energy being generated by the system."
"But when you talk about retail and open access that’s the other side of the coin, it’s the ability of consumers whether large or even smaller ones, to be able to choose who to buy from," he said.
Another advantage is that when electricity prices are high, power distributors can change the way they use electricity and they benefit from low prices when there is abundant supply.
"So again this has implications across our system and as the President mentioned, it’s really the efficiency of the system. We’ll start getting better through competition and through the consumer responses and hopefully that means we’ll have a very competitive electric industry," Holopainen said.
Mrs. Arroyo vowed to implement more reforms to be able bring down the price of electricity, not only in the power-generating sector but also to electric companies.
She said the government could open access and retail competition by distribution of utilities at the level of households, industries and businesses.
Mrs. Arroyo said the public could expect further decrease in electricity rates in the coming months as Napocor has begun to make use of hydro-electric plants with the onset of the rainy season.