Electricity Rate Hike, Competition and Bureaucratism
Electricity rate hike, competition and
bureacratism: Reviewing energy supply and
demand in the Philippines
Bienvenido “Nonoy” Oplas Jr.
Presentation at the University of San Carlos (USC)
Main Campus, Cebu City
15 March 2014
I. Review: recent Luzon power rate hike
II. Luzon power supply-demand
III. Visayas Mindanao supply-demand
IV. Natural Gas challenge
I. Recent Luzon power rate hike
* Ave. price 2013
than in 2012 by
* Generation charge rate hikes last Dec. 2013 (P4.56/kwh) and Jan. 2014 (P3.44/kwh)
Main cause: Use of expensive diesel to run previously nat gas-running power plants in
Batangas, purchase from oil-fired power plants, to prevent brown outs last December.
III. Visayas Mindanao suppoly-demand
Source: Sec. Carlos Petilla, “Draft Supply-Demand Outlook, 2013-2020”,
MAP Breakfast Dialogue, August 02, 2013
Mindanao, Almost Daily “Earth Hour”
Legislators and politicians of Mindanao have “opted out of EPIRA” and objected privatization
of many NPC power plants there.
(as of May 2013)
• Clockwise, from right: Luzon, Visayas,
• As of 2013, Luzon dependence on coal
is 37.2%, on natural gas 24.3%, and on
• Visayas is dependent on coal and
geothermal, 73.7% of total.
• Mindanao is dependent on hydro
51.2% and oil-based 29.1%
1. Expanded competition among more generating companies
(gencos). From less than a handful, now over a dozen players.
2. Privatized Power Sector Assets and Liabilities Management Corp.
(PSALM) assets. Transmission now under a regulated private
company. Removed public debt burden and contingent
3. Established WESM/PEMC (Wholesale Electricity Spot Market/
Philippine Electricity Market Corp.), now a fully functioning trading
4. Introduced Open access, expanded a competitive market.
Threshold now of 1 MW and above represents around a quarter of
the Meralco and Visayan Electric Co. (Cebu area) service area total
demand. To jump 40% once the threshold is brought down to 0.75
Pathetic figure for the PH in terms of natural gas research and
The 3 power plants in Batangas relying on Malampaya gas to
power project (MGPP)
IV. Concluding Notes
1. Power rate hike immediate cause was overlapping
maintenance or scheduled shutdown + forced or
unscheduled shutdown. DUs bought from expensive oil
plants to prevent brownouts.
2. High electricity rates largely due to high government
taxes, fees and royalties. Thailand, Indonesia, Malaysia
governments do not impose royalties for their oil and
natural gas resources. PH government charges about
P1.46/kwh nat gas royalties.
3. WESM works. The spot market is real, not a farce or
rigged. It has supplied uncontracted or excess demand
by DUs and uncontracted excess supply by power
4. EPIRA works, ended NPC monopoly, now more
wholesale and retail competition
5. To lower electricity prices in this country:
a. Have more power plants, have more competition among
gencos, especially nat gas plants.
b. To encourage more gencos and players, government
bureaucracy, permits and regulations should shrink and decline.
c. Reduce taxes, fees, royalties on oil and natural gas. Better yet,
d. Lower further the threshold of Open Access. Electricity
consumers can choose their own power suppliers; small but
many power suppliers/generators can compete for end
users/consumers, by-pass distribution utilities (Dus)