The Market Monitor Minding the Nation's Business
By Riza Lozada
The government has lined up measures, including subsidizing electricity costs in economic zones, to address business concerns about the high cost of electricity in the country, particularly during the shutdown of the Malampaya natural-gas facility.
Foreign business groups have pointed to the high cost of electricity as among the major impediments to investing in the country.
The Philippine Economic Zone Authority (Peza) said it would put to a test run in three regions in Mindanao the government’s plan to subsidize the cost of electricity among economic zones.
PEZA Director-General Charito Plaza said Peza and the Department of Energy (DOE) will sign a Memorandum of Agreement (MOA) to subsidize power costs in all economic zones in Mindanao.
“The (energy) secretary wanted me to recommend at least three areas for the meantime,” she said.
The pilot areas for the scheme would be the Autonomous Region in Muslim Mindanao (ARMM), Davao, and the Caraga region.
She noted that ARMM and Caraga were among the poorest regions in Mindanao, while Davao has existing economic zones that can attract more locators once power rates are competitive.
“The DOE is improving the Agus-Polangui source. They will improve it in order for the government to subsidize power costs in Mindanao,” Plaza said.
Under the subsidy scheme, power rate is expected to go down to P2.75 per kilowatthour (kwh) from about P6 to P7 per under current rates, she said.
Another measure being studied is the delaying of the increase in power bills as a result of the Malampaya shutdown.
Simulations at the DOE came up with a P1.44 per-kwh increase in power rates as a result of the one-month maintenance work on the natural-gas facility.
The DOE is also reviewing the provision of a secondary price cap at the Wholesale Electricity Spot Market (WESM) to mitigate the impact of electricity price shocks.
The Malampaya shutdown will affect fuel supply to three major power plants that run on natural gas. These are the 1,000 megawatt (MW) Sta. Rita plant, the 500 (MW) San Lorenzo plant and the 97 MW Avion plant.
These power plants will use conventional fuel that is more expensive during the Malampaya maintenance period.
The government also plans to activate the idle 470MW Malaya Thermal Power Plant in Pililia, Rizal, which also use bunker fuel.
The DOE said the Interruptible Load Program involving huge power users running their own power generators during peak demand periods are also in place.
The ILP will free up about 900 MW of power supply but it would entail consumers reimbursing the expenses of large power users that would reflect in higher electricity bills.