Viewpoint: Meralco power rates fair and reasonable, now below world average; and continue to decrease
By Elinando B. Cinco – August 17, 2018, 12:12 am
from Manila Bulletin
Here is some good news to our readers which will certainly lighten up their mood and the rest of their week.
Contrary to general impression, we’re not actually paying that high a price for the power that we consume. As an innocent question to you, do you think that power rates have been increasing over the past few years? What if I told you that Meralco’s average electricity rates have been actually going down since 2012, by a whopping 18 percent in fact?
And we are now below the world average. Shocking, but it’s true. And these findings are based on hard evidence. So perhaps there is a bright side when it comes to paying your electricity bills, and you can take comfort in this fact that our electricity rates continue to go down.
One part of life nobody likes to deal with is paying the bills. But I always believed that we should take a step back and really understand what we truly spend for as consumers, and where our money goes. Therefore, it is always wise to get a bigger, and outside perspective on things when you are analyzing these issues, and it also helps to compare our situation versus those of other countries.
And that’s why I was pleased to read in the papers and watch on TV a certain bit of good news regarding electricity rates. And this was actually brought to us by a third-party research group of international stature who gave an objective analysis of the state of our power rates. My own judgment viewed from that international survey, the average Meralco tariff (US cents/kWh) is actually down 4 percent since 2016 despite rising fuel prices, and now ranks 24th out of 46 markets.
This is great news for consumers because this means that we in Meralco’s franchise area are actually in the median of what everybody else pays around the world, busting the common myth saying the Philippines has the highest rates in Asia or in the world. That news has been greatly exaggerated and is not true at all
Power rates in the Philippines are actually competitive to those around the world.
What I learned from the news reports on the study was that over the past two years, Meralco’s customers have been among the few in the world that have enjoyed rate decreases, versus substantial increases in that of some other neighboring countries. So while prices everywhere else are increasing, Meralco customers are actually enjoying lower rates.
According to the survey done by the International Energy Consultants (IEC), an Australia-based consulting firm specializing in Asian power markets, Meralco’s average tariff (excluding VAT) in US cents per kwh has declined 4 percent in January, 2016 versus an average increase of 12 percent across 46 countries covered by the survey. Versus 2012, this means that Meralco residential rates (P/kwh) are now down 18 percent versus the overall CPI which went up 19 percent. This is definitely a big drop, and this is music to my ears, or to any consumer’s ears for that matter.
The news states Meralco’s average tariff now ranks 24th out of the 46 countries surveyed, and 4 percent below the average of the survey. But emphasizing the role that subsidies play in other markets, and excluding them, then Meralco’s tariff would even be 10 percent lower than the average.
This shows us that right now, Meralco customers are paying the true cost of electricity, which in my opinion should really be the case, versus in other countries where people are paying an artificial cost due to subsidies established by the government. And in my experience, it is always more practical and economically sound to avoid subsidizing. Heavy subsidies cause consumers to lose grasp of the true value of resources.
Another surprisingly good bit of news that came out from the various reports was that IEC Managing Director Dr. John Morris, who led the study, said Meralco’s residential customers now pay 8 percent below the global average. This will definitely make me feel less bitter when I pay for this month’s electricity bill.
“This is an excellent outcome for consumers,” Morris said, “considering that the Luzon power market is unsubsidized and much of electricity is produced using imported fuel. In peso terms, Meralco’s tariff has increased by only 3 percent despite twin headwinds of significant fuel price increases and a depreciating local currency. All of the components of the regulated tariff of Meralco based on comparisons with other markets and versus the true cost of electricity. Meralco continues to deliver electricity at a fair and reasonable rate.”
Morris said government subsidies continued to make power rates artificially low in markets like Thailand, Indonesia, Malaysia, Korea, and Taiwan where about 41 percent of their tariffs are subsidized amounting to around US$80 billion. These are in the form of cash grants, subsidized fuel, or deferred expenditure.
