Missionary electrification

Providing access to electricity in isolated rural areas is a laudable social development endeavor of the government. But it must be funded through the regular national budget.

Right now, we who are connected to the grid, are being forced to subsidize the electricity bills of households in isolated areas to keep power affordable. We subsidize up to 85 percent of the actual generation cost for every kilowatt-hour consumed in missionary areas.

The Energy Regulatory Commission (ERC) authorized a total missionary electrification subsidy of P30.773 billion for the current 2026 program, charged to the electricity bills of grid-connected power consumers.

The National Power Corp. (NPC) petitioned to increase annual collections to P44.2 billion (or P0.4405 per kWh).

The Universal Charge for Missionary Electrification or UCME directly subsidizes the operations of NPC’s Small Power Utilities Group (SPUG) diesel plants and independent power providers that serve remote off-grid islands and isolated areas.

Providing electricity to these areas is very expensive. Most are isolated islands that are dependent on diesel generators for their electricity. NPC operates 281 SPUG power plants across 125 islands and isolated communities in the Philippines.

The True Cost Generation Rate (TCGR) to produce power in small islands ranges between P20 to P30 per kWh due to fuel transport and diesel costs. According to the DOE, the cost can go as high as P62 per kWh.

However, off-grid residents are only charged the Subsidized Approved Generation Rate (SAGR) of roughly P7 to P8.3 per kWh, even for those living in areas where the generation cost is P62 per kWh. We pay the difference under Universal Charges our government has tucked into our bill.

Going solar would reduce the operating and fuel costs of SPUG units. According to the DOE, transitioning to solar-plus-battery solutions costs less than the average P18 per kWh true cost of diesel generation.

This is where the Maharlika Fund comes in with a pilot project in Mindoro.

According to DOE data, Mindoro and Palawan together account for roughly 60 percent of this subsidy. At current levels, sustaining a diesel-dependent system costs approximately P15 billion annually. That’s a cost trajectory that will only worsen without intervention.

The economics no longer make sense — especially given Mindoro’s vast untapped renewable potential in hydro, solar and strong wind corridors. A recent DOE-supported grid upgrade in Oriental Mindoro has already enabled the full dispatch of a 16 MW wind facility.

This serves as clear proof of concept: the resources are there. Mindoro can shift from a net drain on national subsidies to a clean energy contributor.

Mindoro should be connected to the Luzon Grid by submarine cable to Batangas. NGCP had applied to do this in 2011, but their application slept for 10 years at ERC. NGCP refiled in 2021 and it took energy regulators two years to approve it.

Senate and House inquiries into the island’s chronic blackouts revealed that some local officials deliberately stalled the approval processes for NGCP to protect diesel power providers, where they have vested interests, from losing business.

But from what I last heard, the connection to the Luzon grid is again on the table. DOE wants NGCP to target the start of operations in late 2027. But there is a lot of resistance from environmentalists who are concerned that the submarine cable will affect the corals in Verde Island.

There is also a design problem. If the goal is just to get power from the Luzon grid, the 230-kv connection is sufficient. But if they want to use it to export wind power from Mindoro to Luzon, it must be upgraded to 500 kv. That means, ERC must re-approve it.

In the meantime, Maharlika Fund will finance a plan to modernize the system to transition to local renewables and prepare for eventual interconnection with the main grid. That will reduce or eliminate the need for ongoing UCME subsidies. This structurally lowers electricity costs for every Filipino.

Providing reliable 24/7 power also unlocks Mindoro’s potential in mechanized agriculture, cold storage (green economy), and sustainable marine industries (blue economy).

The Maharlika Fund, according to Joel Consing, its CEO, will help build the infrastructure to transform Mindoro from subsidized electricity consumers into self-sustaining economic drivers — building a more resilient, lower-carbon national economy.

Using renewable power in Mindoro would reduce the demand for diesel (which now powers the NPC plants) and save us valuable foreign exchange, in addition to reducing our power cost.

The experience learned here will be replicated in other SPUGs and reduce the burden on our electricity bills.

Indeed, it is not just NPC’s SPUG unit that is working to electrify remote and unserved or underserved islands not connected to the national grid. A Google search revealed that some private firms are also helping.

First Philippine Holdings operates a separate unit called FP Island Energy Corp. focused on designing, building, and operating smart microgrids, which function independently of the main grid (known as “islanded mode” operations).

FP Island began commercial operations in December 2021, providing uninterrupted electricity to the islands of Lahuy, Haponan and Quinalasag off the coast of Camarines Sur.

With a combined capacity of one MW, these microgrids use solar energy, batteries and back-up diesel generators to provide 24/7 electricity to around 16,000 residents across the islands.

The availability of continuous power has helped foster new livelihood opportunities, such as ice making for preserving fish catch and attracting eco-tourism.

So, it is all good. But the government must not pass on the cost burden on other electricity consumers for something that is clearly its responsibility.

Our government should stop imposing add-ons (including RE allowances) to our electricity bills because it impacts on our inflation rate and deter investments. Our government has the funds if it reduces the kurakot.

Helping the underserved is good. But overburdened electricity consumers, like most of us, also need a break.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco