A new survey from a foreign energy consultant ranks the Manila Electric Co. (Meralco)’s power rates as the world‘s “ninth most expensive.” In a presentation before the Senate’s Joint Congressional Power Commission (JCPC), the Perth, Australia-based International Energy Consultants (IEC) also reported that the Philippines still has the distinction of having the “highest power rate in Asia.”
The JCPC, tasked to oversee the Electric Power Industry Reform Act’s implementation in providing “least cost” power to the public through “competition and efficiency,” is chaired by no less than Sen. Serge Osmeña who chastised the conservative economic think tank Foundation for Economic Freedom (FEF) as “communists” for supporting the review of Epira.
Many Filipinos, especially Mindanaoans, aware of or adept in the power sector issues, such as labor advocate Louie Corrale or Jojo Borja of Iligan Light and Power Inc. (ILPI) or consumer advocates Butch Junia and Mang Naro Lualhati, believe Osmeña actually stonewalls real reforms.
The IEC named Hawaii, Italy, Malta, Japan, Cyprus, Germany, Denmark, Netherlands, Philippines, and Singapore as having the highest power rates, saying: “Meralco is comparable with Singapore, Australia, the Netherlands and Denmark (the highest in the world — HTL) but significantly higher than several other countries within the Asia-Pacific Region … In terms of commercial retail tariff, the Philippines ranked sixth among the 44 jurisdictions, with its $0.2043 per kilowatt-hour (kWh), exclusive of value added tax (VAT), 31 percent above the average among the 44 jurisdictions.  The Philippines’ $0.1728/kWh industrial retail tariff was also sixth highest and 26 percent above the average, while its $0.2485/kWh residential retail tariff was 17th highest and 13 percent above average.”
Note that Filipino residential consumers are subsidizing the local industrial sector by paying 25 percent higher rates — and subsidizing private power companies that have never fully paid their privatization dues to this day.
IEC consultant John Morris further stated: “Several neighboring countries … have average tariffs that are much lower than Meralco’s … due to … subsidies of up to 50 percent to consumers… IEC believes that providing subsidies via lower tariffs is bad economic practice and ultimately unsustainable.  When subsidies are added back to retail tariffs, the true cost of electricity in these countries rises to a level that is much closer to Meralco’s…”
Morris’ opinion obviously attempts to justify Meralco’s high rates by blaming it on “subsidies;” but on this he provides no basis for the claim. If the policy of subsidizing power is “bad economic practice and ultimately unsustainable,” then why are all the Asian countries cited by Morris as practicing this “bad subsidy” all growing far faster economically, with their people living better lives than the Philippines’?
Also, government subsidy to a country’s power sector in its various modes of generation is the predominant practice in the world.  This is obvious when considering mega-projects like tapping hydroelectric or nuclear energy sources all over the world, which only governments can undertake.
IEC was also quoted by the Philippine Chamber of Commerce and Industry (PCCI) in the latter’s February 2011 meeting — the same report cited by the Trade Union Congress of the Philippines (TUCP) in backing up its direct and written appeal to BS Aquino III to bring down power costs, which it said is causing investors to turn away and has led to massive job losses.
But even before the IEC study came out in Oct. of 2010, many Filipino power consumer advocates have already reported on this fact. The only difference is, there’s a new twist to this survey on the matter of an inserted opinion on subsidies to the power sector. Those who understand the power industry in the Philippines will immediately recognize as blatant lies the following assertions: 1) that Philippine and Meralco power rates are among the highest because of subsidy from government and 2) that subsidy for electricity is bad for the economy.
Let us state it clearly and emphatically here: There is NO government subsidy in the Philippines for its power sector.
If any subsidies were being provided, it is the power consumers shelling them out through (a) advanced payments each year for four-year regulatory periods to Meralco and other distribution utilities (DUs); (b) the Wholesale Electricity Spot Market (Wesm)’s exorbitant premium rates for power purchases from selected independent power producers (IPPs); (c) payments to Meralco of rates based on a 500-percent to 900-percent overprice of transformers, substations, electric poles, and other assets (as proven by Jojo Borja’s documented testimonies); (d) payments to Meralco for “regulatory liaison” amounting to P2.2 billion (exposed by Butch Junia); (e) Meralco’s carry-on into its asset base of non-power related assets such as the Rockwell real estate projects; and (f) the up to 17-percent Performance Based Regulation (PBR) rate that the Energy Regulatory Commission (ERC) approved in place of the 12-percent Return-on-Rate Base (RoRB) formula already affirmed by the Supreme Court in 2003.
But that’s not all: Filipino power consumers are also paying for subsidies for the “Lifeline Rate” of those consuming below 99 kWh/month, the “senior citizens” discount, as well as the Small Power Utilities Group or the financially less viable electrification of rural communities.
So you see, government is not paying for any of these subsidies.
Don’t be fooled by the “subsidy” card used by the likes of Morris, Osmeña, and others like them.  They only make everyone assume that “subsidy” is always from government and a “freebie” to people.
In the case of the Philippines’ privatized power, water, and tollways systems, it is always the consumers who pay for or subsidize such privatized public enterprises — a case of socialism and “freebies” for the capitalists from the people’s pockets.
Like the other foreign consultants of Meralco and the ERC (e.g., Emmerton Consulting, SKM and NCL) IEC is playing an insidious role by obfuscating data, mixing in half-truths, and covering its ass while taking in huge consultancy fees — all to provide the power pirates and privateers the smokescreen to arbitrarily “fudge” information and manipulate the industry to their maximum benefit.
(Watch Talk News TV with HTL, Saturdays, 8 to 9 p.m., with replay at 11:15 p.m. and Sundays, on GNN Destiny Cable Channel 8, this week on “Politicization of the Judiciary” with Bono Adaza and Alan Paguia; visit http://newkatipunero.blogspot.com)