Protect consumers from surging fuel, power prices

The Senate Energy Committee says there are about 5.5. million households in the Philippines considered as lifeline consumers. They are marginalized/ low-income electricity end-users who cannot afford to pay the full cost of electricity.

As a consumer advocate, we have been monitoring developments in the energy sector in the interest of both lifeline consumers and the general public. One of our major realizations is that the steep electricity rates here, while a result of many factors, are ultimately because of the long-standing supply problem in our country and the heavy taxation imposed on the energy sector.

The high cost of electricity here becomes apparent when compared with the rates in other countries. 

Studies have shown that the high price of power has been due to high transmission and generation charges. Power rates fluctuate due to a combination of numerous factors including, but not limited, to the demand for energy, efficiency of power plants, and, of course, the cost of fuel in the international market.

In a Senate hearing, Meralco warned that world oil prices will affect the cost of power that Meralco purchases from the plants that utilize Malampaya natural gas where a third of its supply comes from. The current rates in effect since January and were based on the July 2021 to December 2021 crude oil prices, did not consider the price surges in the past few months (World Bank Commodity Price Data). The recent spikes in Dubai crude based on which averaged $83 and $93 per barrel will then be reflected in April. This would mean higher generation charge for customers, which will be billed in May.

Now, given the volatility in the price of fuel because of Russia’s invasion of Ukraine, we can only expect the price of electricity to go even higher. We also know that the hot summer months drives higher demand for electricity. Add to that the seasonal drop in hydroelectric power dam levels and power plant shutdowns that are becoming more frequent, power prices will spike.
    
Thus, from where we stand as consumers still struggling to recover from this 2-year pandemic crisis, the situation is truly worrisome.

Our national agencies in charge of the energy sector – no matter how ill-prepared they seem -- can still do something to cushion the blow of these price surges, especially for the lifeline consumers. 

First, the government can subsidize power costs using the Malampaya funds. These funds can be tapped precisely to help ease the effect of drastic spikes in power cost. 

The government expects about P15 billion in non-tax revenue from Malampaya gas royalties for 2022. Note that this estimate does not yet consider the recent surge in international crude oil prices.

Furthermore, there should be moratorium on any increase in the price of Malampaya natural gas limiting it to 2021 royalty levels. 

Secondly, they can take the cue from Albay Representative Joey Salceda who has recently proposed the revival of the so-called Katas ng VAT (KNV) program that was introduced in 2008 under the administration of President Gloria Macapagal-Arroyo. 

Now repackaged and dubbed as the Katas ng TRAIN (KNT), this initiative will mean around a P69-billion subsidy for power, fertilizer, relief program, social pension, and fuel subsidies.

The government actually stands to gain from tax collections with fuel prices surging. In my opinion, for government to take advantage of these huge windfalls created by the fusion of the ongoing geopolitical conflicts sparked by the Russian invasion of Ukraine is a callous exploitation of an already battered people.

According to Rep. Salceda said that the projected incremental VAT collections due to higher oil prices is about P75 billion! It is only proper that we use these extra revenues to help alleviate our overburdened masses. 

Like other government subsidies, KNT should be implemented efficiently to ensure the timely disbursement to targeted beneficiaries.

The government still has time to work on a Pantawid Kuryente Program. There is Meralco’s cooperation and possible assistance. There are other civil society groups that can help disburse resources and monitor such disbursement. Many sectors are willing to help. 

The power subsidies, when they are provided, must start with lifeline consumers -- or those with monthly consumption of 100 kWh and below. These are the low-income electricity end-users who cannot afford to pay the full cost of electricity.

Third, government should heed the already loud multi-sectoral clamor to temporarily the suspend the collection of VAT and excise tax on oil and coal. This will give immediate reprieve to all consumers not just on fuel pump prices but in easing power costs during the summer months.
    
The power industry is a P30-trillion-a-year industry. It is thus worth about ten times our most recent national budgets and an essential pillar for a sustainable economic recovery especially now that we are evolving into a more digitally enabled ecosystem. Every Filipinos dream of living in inclusive prosperity cannot be realized if our power and energy sector cannot be responsive to the fast-growing demand of consumers and industries. 

Our national leaders must act with urgency and well-balanced sensitivity that fosters the strengthening of our power resources and welfare of all consumers, with the upliftment of marginalized sector as a central focus. This is a call not just to the current administration but to the aspiring leaders of the next government. 

We need, first and foremost, to protect and secure the interests of the consuming public – us ordinary Filipinos. 
 

Louie Montemar is a fellow at think tank Stratbase ADR Institute and convenor of consumer group Bantay Konsyumer, Kalsada, Kuryente (BK3).