Lower commodity prices

Orlando Oxales, Fellow of the Stratbase ADR Institute and Lead Convenor of CitizenWatch Philippines

The latest findings of a Pulse Asia nationwide survey specifically on today’s State of the Nation Address of President Rodrigo Duterte revealed the top problems that majority of Filipinos want the government to address.

Most cited among the issues that the public would like tackled in the SONA are economic in nature, in particular those that have an impact on their everyday lives. For instance, topping the list both at 17.1 percent are those related to increasing wages and reducing the prices of basic goods, followed by creating more jobs or livelihood opportunities at 15.2 percent.

Not surprisingly, this preoccupation resonates most loudly among the poorest segments of the population, with 20.8 percent of those in Class E preferring that the president talk about lowering the prices of basic commodities, and a further 16.5 percent saying he should talk about job creation. Meanwhile, 10.3 percent hopes Duterte talks about fighting illegal drugs and 9.3 percent wishes for a discussion on increasing wages.

These numbers represent an interesting insight. With the exception perhaps of illegal drugs, all these are economic concerns, which reveals the challenge of living from day to day for most Filipinos. Probably still fresh in people’s minds is the disastrous beginning of last year when the implementation of TRAIN caused inflation to skyrocket to record highs. The Filipino consumer is thus alert to whatever stresses his or her wallet.

Lower electricity rates

Some reprieve came in the form of lower electricity rates when the Manila Electric Co. announced a third consecutive month of lower power rates. Overall electricity rates for a typical household consuming 200 kilowatt per hour went down from P10.09 per kWh last month to P9.98, an adjustment that should translate to around P21 in the bill. The three straight months of rate decrease totaled around P0.57 per kWh since May.

The lower rates are mostly attributable to lower charges of Independent Power Producers and stable charges of Power Supply Agreements, which effectively offset a slight increase in generation charge due to higher prices in the Wholesale Electricity Spot Market.

The increase of P1.88 per kWh was mostly due to tight supply conditions in the Luzon grid. Demand peaked at 11,344 megawatts in June, which, with limited supply, saw five days on Red Alert as declared by the National Grid Corporation of the Philippines, a jump from the two recorded in May. Moreover, about one in every three days in the month were under Yellow Alert.

Thankfully, the share of WESM in Meralco’s supply needs went down to 8.1 percent, while IPPs and PSAs provided 41.4 and 50.5 percent of Meralco’s supply needs, respectively. The cost of power in the latter decreased due to the appreciation of the peso even as the cost of power remained stable.

Other factors contributed to the overall reduction, including lower transmission charge for residential customers and lower taxes and other charges. Meralco, which has maintained over the years that it does not earn from these pass-through charges such as the generation and transmission charges, said its distribution, supply, and metering charges have remained unchanged for 48 months now since July 2015. Generation charges go to the power suppliers, while transmission goes to the NGCP.

The cost of electricity, as we know, affects the costs of other commodities and inflation in general. Thus, any positive development in terms of stabilizing supply or increasing access is welcome.

Smart grids

A more long-term solution can be in the form of maximizing the potential of so-called smart grid technologies. A smart grid is an electricity supply network that makes use of digital communications technology to detect and react to local changes in usage. As such, the adoption of a smart grid will improve safety and efficiency, make better use of existing assets, enhance reliability and power quality, reduce dependence on imported energy, and most importantly minimize costly environmental impacts.

It is also seen to reduce the cost of power for consumers and reduce the probability and cost of widespread blackouts, while creating jobs and enabling a larger penetration of renewables in the mix and therefore reducing emissions. Consumer group Bantay Konsyumer, Kuryente, Kalsada, BK3, has called on the Department of Energy to consider supporting smart grid technologies because of these reasons.

“The smart grid will promote efficiencies in power system operations, thus reducing energy losses,” said Louie Montemar, BK3 convenor. “It will allow for greater integration of renewable energy sources such as solar energy and energy storage systems such as batteries and charging stations for electric vehicles.”

Pet Climaco, the group’s secretary general, said while the National Policy Framework on the power industry mentioned principles and technologies, “there is a need for more concrete and defined policies” that will push all parties to adopt the smart grid in the foreseeable future.

“We need government to act now,” Climaco said. “We do not understand what is taking so long. The more delay there is, the more we are depriving customers of the benefits of smart grid. The benefit of the system will greatly outweigh its costs, especially in the context of addressing the risks of climate change.”

Even so, the most advanced grid technologies in the world are useless in the face of inadequate supply, and long-term solutions still hinge on building more base load power plants as soon as possible. With the increase in demand outstripping the addition of capacity, a dire power supply will stop the economy from fully taking off.

Stable capacity and affordable rates are non-negotiable requirements of any thriving economy. There is nothing that can address this except substantial investments in power generation. And whatever benefit this generates will doubtless redound on the hapless ordinary Filipino consumer, who can use any reprieve he can get.



This article was originally published in Manila Standard.

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