Philippines Looks Forward to Lower Electricity Bills
- July 3, 2024
The Energy Regulatory Commission (ERC) predicts that if average spot market prices continue to decline from their 2023 downtrend, the Philippines can expect lower electricity rates this year.
The ERC reported the plummeting of spot market prices of the entry of new power plants by 17.5%, or P6.605 per kilowatt-hour (kWh).
After the easing of pandemic restrictions in 2022, the surge in economic activity caused a spike of P7.885 average per kWh from P5.211 per kWh in the prices of the Wholesale Electricity Spot Market (WESM), the trading floor for large-scale power buyers and sellers
“If the downtrend continues, then, yes, we should expect lower power bills this year especially as capacity increases with the entry of new players,” ERC Chair Monalisa Dimalanta states.
35 new participants added to the WESM are generation companies who transitioned to renewable energy companies, according to the ERC data.
An average supply of 15,645 MW at the WESM was observed by the ERC due to the new facilities’ contribution of 749 megawatts (MW) of additional capacity.
Despite the 9% increase in demand, the ERC explained that additional supply “appears to have met such demand and resulted in a substantial decrease in average prices.”
Additionally, the completion of the 450-MW Mindanao-Visayas Interconnection Project (MVIP) was pivotal in opening the gates to power sharing between the three major island groups of the Philippines, the ERC notes.
“As a result, the supply margin increased while monthly average prices decreased compared with the previous year when MVIP or WESM Mindanao was not yet operational,” it said.
WESM Mindanao was launched in January 2023.
WESM are the vendors of power to distribution utilities, among them Meralco, which is known to have fluctuating prices based on supply and demand.
More than 50% of Meralco’s total bills are comprised of its generation charge, which is the cost of electricity bought from suppliers.
January 2024 saw an increase in Meralco’s rates as a result of higher charges at the spot market.
Although contradictory to its prospects of lower bills at the start of the year, Dimalanta stressed that they were also “monitoring closely” the impact of the El Niño climate pattern on demand, as it could have an “adverse impact on pricing even as we assure continuous power supply.”
A 5-6% increase in power supply from 17,000 in the previous year is predicted by industry players. However, the Department of Energy warns that El Niño could reduce the supply of hydroelectric power plants by almost 80% due to its long periods of drought.
