Lower power rates seen in 3-5 years

MANILA, Philippines - Suffering household, commercial and industrial users of electricity can look forward three to five years from now before they will see power rates in Luzon going down.

This was the promise made by Energy director for planning Jesus Tambang during an open forum following his presentation in a national conference on climate change. In his presentation, Tambang made known that the Philippines is a world leader in the use of renewable and clean fuel in power generation.

He told his audience that the country as of today is 58 percent self-sufficient in using local fuel to generate electricity. And of all the fuel used, 46 percent are considered clean fuel including natural gas drawn from the Malampaya gas deposits in Palawan.

Tambang admitted that locally-sourced fuel has not translated to lower electricity rates precisely because under the old contracts the government signed with power plant developers, the rate of locally-sourced fuel including geothermal energy was pegged to the international prices of oil.

The Department of Energy (DOE) under its present leadership, he explained, is now delinking power rates of plants using indigenous fuel to the cost of oil as it encourages investors to build new baseload power plants.

The Luzon grid requires at least 1,000 megawatts of new generating capacity in the next three years to escape crippling power outages similar to those that happened from 1990 to 1992.

“The new power plants will be setting their rates on the basis of the true cost of indigenous fuel plus the recovery of their investments, not pegged on the cost of imported oil,” he said. “That will be the time when the cost of electricity will start going down.”

He dodged, however, the question on whether the new policy of delinking the cost of power from indigenous fuel like geothermal energy, hydro and local natural gas will lead to the renegotiation of the contracts with suppliers of such electricity sources.

Because baseload plants take between three and five years to build, it may take the same time before lower power rates are implemented.