UP Forum reduces power rates by Php2.00/kWh

Major players and stakeholders in the Philippine power sector convened last Aug. 4 at the forum “Reducing Power Rates by at least Php2.00/kWh” held at the University of the Philippines (UP) in Diliman, Quezon City. The presentors were composed of four faculty members of the UP College of Engineering.

The forum presents the preliminary results of the research study entitled, “Anatomy of Power Rates in the Philippines”, which shows that power rate reduction may be effected through a combination of regulatory and implementing policy adjustments, and amendment of the Electric Power Industry Reform Act of 2001 (EPIRA).

In a nutshell, the presentors have shown that the Php2.00/kWh savings can be generated from the following:

Among the items listed above, I think that only three are doable and they are items no. 8, 9 and 10.

Item no. 7 is unnecessary and must be removed. It's like paying for the power generators' CSR (corporate social responsibility). While the VAT (value-added tax) on system losses must be scrapped as transactions involving them can not be categorized as sales transactions. On the other hand, the royalty tax on the Malampaya natural gas must be removed also since the fuel is sourced in the Philippines and not imported from other countries.

Other issues that came up included overcharging by the National Power Corp. (rate base still include the value of assets that were already privatized), overcharging by distribution utilities (returns include uninvested capital due to high appraisal value of assets), non-VATable items that are being taxed (system loss, lifeline rate subsidy, power rate reduction and loan condonation), WESM's highly concentrated market (above the 1,800 HHI threshold for competitive markets), a PBR with no efficiency target, among others.