Are Filipinos Paying Too High for Electricity? Let us compare. We are 121% higher than Vietnam and 43% higher than Thailand. (Part 1)
Part 1
David Celestra Tan, MSK
25 January 2021
If you ask Meralco if its electricity rates are not too high, their canned answer, with a big hoodwink, is it is lower, which is not really answering the question. A few years ago they supposedly even commissioned a foreign consulting firm to say that other countries in the region have low rates because they were subsidizing power, which may be true in some countries but a convenient excuse for Meralco’s high power rates.
To Meralco, it is evident “low rates” is a question of public perception, something to be solved by astute public relations schemes. They will not even allow the true market testing of power generation rates by holding a truly open and competitive bidding for their power supply. Their CSP continues to be a charade with them evidently determined that supplies only go to their chosen suppliers who are invariably their partners. Sure there are some small contracts to independent generators but they appear to be just token.
Are the Filipinos paying too high for electricity? Let us compare.
1. Based on the reports of the Global Petrol Prices website that as of June 2020, the Philippine power rate for residential customers was P9.10 per kwh and for larger businesses Ph 5.75 per kwh. These rates approximate the Meralco rates. Now let us see how we compare. (Data converted to Pesos at P50:$1)
2. There are countries in Asia who are rich in energy resources like Indonesia and Malaysia who naturally would have cheaper energy than the Philippines. Based on reports of the website, Indonesia’s average residential rate is the equivalent of Php 5.25 per kwh and for business Ph 3.70 per kwh. Malaysia, another country rich in fossil fuel, charges residential customers at P3.00 per kwh and business Ph5.30 per kwh.
Let us grant that the Philippines will not be able to achieve this level of rates.
Meralco is higher than Indonesia by 73% on the residential rates and 55% higher for business customers. Compared to Malaysia Meralco is higher by 203% for residential but only 8.4% higher for business customers.
3. Let us instead compare Meralco with the other countries that are more or less in the same energy resource situation like the Philippines and same level of economic development.
a. Vietnam is a country that only 40 years ago was ravaged by the war and its economy in total shambles. Visions of millions of their boat people spilled all over Asia including the Philippines. Not many Filipinos are aware that Vietnam’s economy surpassed that of the Philippines at least 15 years ago. Now they also surpassed Thailand as the alternative manufacturing destination for those leaving China. Their installed power generating capacity is in the range of 45,000 mw, 125% that of the Philippines 20,000mw. Their population is about 95 million compared to the Philippines 103 million. And their electricity rates? P4.10 per kwh for residential users and Ph3.85 per kwh for business.
Meralco is higher than Vietnam by 121% for residential and 149% for business. Vietnam also charges 10% VAT for their energy against the Philippines 12%.
With those energy costs, the Philippines is not able to compete with Vietnam in attracting business and manufacturing industries. And their people are enjoying better cost of living.
To be fair, Vietnam has some advantages in Energy sourcing. They get 32% of their power supply from cheap hydro, further bolstered by imported hydro from China at only Ph3.40 per kwh. They also get cheap hydro from Laos. However, just like the Philippines they get 38% of their power from coal, and some LNG and diesel power.
Comparatively, Meralco in the Luzon island has access to significant amounts of large hydro power, geothermal, LNG. The latter supplying them with about 45 to 50% of their generation mix. Coal had been so far 32% average but the MVP Group that owns Meralco is clearly determined to make coal its main power supply. If they are successful in their CSP maneuverings, coal will dominate with 75% of Meralco’s energy supply within five (5) years.
b. Thailand
This country is more or less in the same energy resource situation as the Philippines and at around the People Power revolution in 1986 in the same level of economic development. But while the Philippines was too pre-occupied with anti-Marcos driven government actions, Thailand focused on developing itself and beat the Philippines in attracting Japanese manufacturers looking for cheaper competitive bases.
Thailand’s current rate for residential customers is Ph6.35 per kwh and for business P6.25 per kwh. Meralco is 43% higher and 8% lower respectively.
c. Taiwan
Taiwan is another country that approximates the Philippines energy situation. However, their residential rate is the equivalent of Ph5.05 per kwh and P6.85 per kwh for business. Meralco is comparatively higher by 80% in residential and 16% lower in business. Oh, how we would kill for those rates!
d. China
The Global manufacturing juggernaut that is China has a residential rate the equivalent of Ph4.20 per kwh and P5.15 per kwh for business. Meralco’s rate is 116% higher for residential and just 11.6% higher to business customers.
One thing that is noticeable is that for Vietnam, Thailand, and China, they don’t charge residential customers much higher than business customers. Meralco charges its residential customers approximately 58% higher than business. Comparatively Vietnam only charge 6.5% higher, Thailand only 1.6%. China charges residents 18.5% lower and Taiwan 26.3% lower.
e. Residential vs Business customers
While Meralco works very hard to reduce the rate to large businesses, commercial and industrial customers and have all sorts of cost reduction and energy saving programs, their residential customers are loaded with higher rates.Vietnam, Thailand, China and Taiwan by contrast do not punish their residential customers supposedly to improve the rate to industrial customers. Ironically, the industrial sector of these countries nonetheless are vastly bigger and more competitive than the Philippines despite the residential to industrial rate disparity.
In their press releases, Meralco likes to trumpet the subsidized rate they give to lower consumption customers of 200kwh and lower a month representing only 10% of their revenue and not the regular residential customers and commercial that comprise 60% of their revenue. In our book this is deceptive advertising and one has to wonder why it is being tolerated by the government. Meralco’s advertising and public relations budgets are being paid for by the consumers. In the least they need to be honest. 200kwh per month consumers, while numbering 2 million still do not represent the average Meralco consumers.
Meralco likes to debate the issue. Publicize the process they are taking and pointing out that it is lower. And when they find themselves in the corner, their new go-to escape chute which is that their rate is legal and found to be fair and reasonable by the ERC. The reality is our generation rate is never market tested under their exclusionary and illusionary CSP practices. And the further reality is the captive customers are paying these excessive rates out of their hard earned income every month. Often taking away from the food and education of their children.
The household or residential rates of our Asian neighbors range from P3.00 of Malaysia to P9.25 of Singapore. The business rates from P3.70 per kwh of Indonesia and P7.50 of Singapore.
What should be a reasonable, realistic, and achievable target for the Meralco area?
Let’s tackle this in Part 2.
Keep Safe. Let us remember that Covid19 vaccines will only add to our protection from the virus. We don’t become Superman once we are injected. We still have to maintain our face mask, hand washing, and social distancing, and quarantine precautions. Keeping fit is a challenge. If no new problems emerge, things should be better by Christmas. Then we can have the new normal in 2022. Remember, they don’t know yet how long the efficacy of these vaccines will last.
Tuloyangingat.
MatuwidnaSingilsaKuryente Consumer Alliance Inc.
david.mskorg@yahoo.com.ph
matuwid.org
