Power for the People: Making Electricity Fair, Affordable, and Reliable
- January 15, 2026
Electricity affordability is one of the Philippines’ most pressing economic and social challenges. With residential rates among the highest in Southeast Asia, high power costs burden households and deter investors alike.
Analyses note that high electricity prices, often passed directly to consumers, put pressure on Filipino households. Unlike its neighbors, the Philippines does not subsidize electricity. In Malaysia, heavy government support reportedly cuts what would have been monthly bills of ₱3,000 to ₱10,000 down to just ₱160 to ₱420. Thailand, meanwhile, imposes a retail price cap of 3.99 baht per kilowatt-hour (kWh), or approximately ₱7. Vietnam and Indonesia also maintain broad power subsidies to shield households from volatile energy costs.
Call for a tax reform
The Philippines applies a 12% value-added tax on goods, services, and imports, including electricity. This VAT is charged on power generation, transmission, and distribution, increasing the final cost to consumers.
On December 10, three major business groups and a labor organization threw their support behind a proposal to exempt electricity from the value-added tax. The Philippine Chamber of Commerce and Industry (PCCI), the Employers Confederation of the Philippines (ECOP), the Philippine Exporters Confederation (Philexport), and the Trade Union Congress of the Philippines (TUCP) endorsed House Bill 6740, filed by Trade Union Congress Party-list Representative and Deputy Speaker Raymond Mendoza, which seeks to remove VAT on power sales.
“The organizations emphasized that electricity is a basic and indispensable input affecting households, small and large enterprises, and key industries,” the groups asserted. “Exempting electricity from VAT would provide immediate relief to consumers.”
They argued that removing VAT on electricity would lower operating costs, enabling factories to expand production, attract new investments, and boost the sector’s contribution to GDP. More affordable power would also help micro, small, and medium enterprises manage rising expenses, sustain employment, and scale up operations.
They noted that the Philippines is competing for energy-intensive investments, including data centers, advanced manufacturing, and digital infrastructure. The measure, they added, would not only protect existing jobs but also support the creation of new ones, strengthening the country’s industrial base and overall competitiveness.
“We are in a global race for high-value, energy-intensive investments,” pointed out PCCI Chairman for Energy and Power David Chua. “Lowering electricity costs through a VAT exemption signals that our country is serious about attracting industries that create quality jobs.”
(Also read: PH Powers Up Clean Energy with $170M Geothermal Boost)
Renewable energy: New price driver in 2026
Renewable energy (RE) is often promoted as cheap and sustainable, but consumers may soon feel its cost in their bills. Beginning January 2026, the Energy Regulatory Commission (ERC) will implement the Green Energy Auction allowance (GEA-All), a new charge meant to compensate RE developers. Distribution utilities, the grid operator, and retail electricity suppliers will collect the fee and pass it on directly to households and businesses.
The GEA-All works like the feed-in tariff allowance (FIT-All), applying as a per-kWh charge to all grid customers. Set at ₱0.0371/kWh, the measure is projected to total ₱5.7 billion and will appear as a separate line item on electricity bills, including those from major distributors such as Meralco.
The collected funds will be managed by the National Transmission Corporation (TransCo), which will compensate eligible RE developers for their generated power.
Manila Bulletin’s Myrna Velasco wrote that while the Department of Energy (DOE) projects RE auctions could lower wholesale electricity prices to an average of ₱3/kWh by 2029, down from around ₱5 in 2026, consumers may not see immediate relief.
“Because renewables can bid ‘zero’ in the spot market due to their priority dispatch privilege—and because their capacities are already covered by PSAs—an illusion of cheaper electricity is created,” she explained. “This artificial dip won’t translate to lower bills if the GEA-All surcharge remains on an uptrend.”
Meanwhile, veteran business journalist Val Villanueva highlighted that GEA-5, a program dedicated to fixed-bottom offshore wind, will add 3.3 gigawatts (GW) of renewable capacity, making it one of the largest clean energy projects in the Philippines. Despite its scale, the initiative comes with a high price tag, with tariffs projected at around ₱12/kWh.
“The message is that transition will not be smooth, and renewables will not immediately translate into cheaper electricity,” he noted. “OSW will still impose a significant price impact for years. It will be a burden on the grid before it becomes a strategic advantage. And this is where the Philippines must avoid locking itself too early into massive OSW commitments.”
Velasco also questioned whether the focus on variable RE is appropriate, suggesting that the power mix may need greater emphasis on baseload and mid-merit technologies.
“With this avalanche of RE projects, one question is unavoidable: do we really need all this capacity, especially when relentless rate hikes could burden households for decades?” she wrote. “Renewables may be saving the planet, but when they drain your wallet, gobble up farmland, trample biodiversity, and displace indigenous communities, that ‘green beauty’ quickly turns into a pricey, chaotic mess that nobody signed up for.”
Chief advocate officer of the Partners for Affordable and Reliable Energy (PARE), Nic Satur, Jr., stated, “PARE supports the country’s shift to clean and renewable energy (RE), but these measures should move the Philippines toward a just, affordable, and participatory energy transition, not create new financial burdens for consumers.”
Reliability and affordability go hand-in-hand
Without adequate baseload, power systems can suffer from volatility — prices spike when supply can’t meet demand. Investments in dependable generation capacity help smooth pricing trends, making planning and budgeting easier for households and businesses.
When repeated yellow alerts gripped the Visayas in September 2025, electricity consumers were warned to prepare for higher bills as the region’s power grid teetered on the edge of supply shortages. The alerts occur when available capacity barely meets peak demand, leaving little margin for fluctuations.
Christian John Villena, Energy Sourcing Manager of Negros Power, explained that these conditions push up electricity prices in the wholesale spot market, directly impacting consumer bills. He stressed that such incidents highlight the urgent need for long-term solutions, including the construction of new power plants and reliable capacity planning, to shield households and businesses from the financial strain caused by an unstable grid.
Meralco echoed the need for new power plants to stabilize electricity prices. In April 2025, the utility pointed to a chronic shortage of baseload capacity on the Luzon grid as the main factor behind soaring Wholesale Electricity Spot Market (WESM) rates.
According to Meralco, the most recent additions have been solar projects, which generate power intermittently and leave gaps at night, driving up costs during peak demand. To address this, Meralco has been conducting competitive selection processes aimed at attracting greenfield projects and expanding reliable baseload capacity.
Officials also highlighted the importance of reliable baseload power. DOE Secretary Sharon Garin noted that “coal is always there… the most expensive electricity is no electricity at all,” underscoring the risks of supply shortfalls.
In 2025, the DOE updated its coal moratorium policy to allow exceptions for new or expanded coal-fired projects under specific conditions, including declared power crises, imminent supply shortages, self-generating facilities in industrial parks, off-grid projects, and plants supporting critical mineral processing for the energy transition.
As RE takes up a larger share of the country’s power mix, experts caution that the Philippines is not yet prepared for a full-scale transition. Eduardo Araral of the Lee Kuan Yew School of Public Policy warned that the shift must be carefully managed and should not be rushed.
“We should not rush to it [energy transition] and abandon our legacy simply because we want to be green,” he underscored. “I think we have to do this in a very, very pragmatic way, and the first and foremost principle really is energy security and affordability.”
(Also read: PHILRECA Urges Equitable Funding to Meet 2028 Rural Electrification Goal)
Putting green goals in perspective
Green energy is a worthy and necessary goal for the Philippines, promising cleaner air, lower emissions, and a more sustainable future. However, experts and stakeholders alike caution that the energy transition cannot focus on renewables alone. Other aspects of the power sector, such as reliable baseload capacity, infrastructure investment, and cost management, must grow in tandem. Without this balance, the country risks compounding problems—where intermittent supply and rising charges undermine the very benefits that clean energy seeks to deliver.
Electricity affordability is especially critical. For many Filipino households, power costs can consume 30 to 40% of a worker’s wage, making it a decisive factor in daily survival and long-term financial stability. Ensuring that energy remains accessible is essential not just for household welfare, but for national economic progress. High electricity prices can stall industrial growth, discourage investment, and constrain opportunities for upward mobility.
Ultimately, the success of the Philippines’ energy transition will be measured not only in megawatts of renewable capacity installed, but in the ability to provide reliable, reasonably priced electricity for all. Achieving this balance safeguards economic competitiveness, protects consumers, and—most importantly—helps lift the poor out of poverty while strengthening the nation’s overall economic resilience.
Sources:
https://opinion.inquirer.net/178064/ensuring-energy-security-and-affordability
https://mb.com.ph/2025/05/22/electric-co-op-group-calls-for-vat-removal-to-ease-consumer-burden
https://mb.com.ph/2025/12/12/erc-sets-new-power-fee-at-00371kwh-to-fund-renewable-projects
https://mb.com.ph/2025/12/22/bbm-admins-emerging-legacy-normalizing-high-power-rates
https://visayandailystar.com/electricity-rates-higher-due-to-yellow-alerts
