Meralco rates 2nd highest in Asia

MANILA, Philippines - Rates charged by the Manila Electric Co. are the second highest in Asia and the ninth worldwide – largely due to the high cost of power generation, a study commissioned by the country’s leading power distributor showed.

In its report, the International Energy Consultants said the cost of producing power in other countries is tempered by generous government subsidies – hence lower rates for end users.

“You live in a country where it is fundamentally expensive to make, transmit and deliver electricity,” John Morris, IEC managing director said in a briefing.

“Although Meralco’s tariffs are, in some cases more than double those of its regional counterparts, the main reason for the difference is government subsidies that are provided to customers and/or utilities in these markets so that tariffs remain well below the cost of supply,” Morris said.

For instance, there is a 37-percent subsidy in Thailand, 51 percent in Korea, 54 percent in Taiwan, 50 percent in Indonesia and 36 percent in Malaysia, IEC data showed. Meralco, whose franchise covers Metro Manila and adjacent provinces, has commissioned the IEC to conduct an in-depth and comparative study on tariffs worldwide.

The IEC study covers 44 markets across the globe, 16 of which are in Asia.

“When subsidies are added back to the tariffs in lower-priced countries, the total costs of supply in these markets are comparable with, or, in some cases, even higher than Meralco’s,” Morris said.

 “You may not like high electricity prices but at least there is a valid reason for it,” Morris said

Specifically, countries with high power production costs are island-countries like the Philippines, Malta, Singapore, Sri Lanka, Hawaii, Japan and Australia that have little or no access to fossil fuels like oil, coal and gas. Hence, these countries rely on costly importation.

The less expensive nuclear energy is the principal power source in countries like the United States, Bulgaria, France, Finland and Canada, Morris said.

“Now customers are paying what it takes to produce the (electricity),” Morris said. He said subsidies – usually in the form of fuel or tariff freeze – are unsustainable.

“It appears Meralco is doing a lot of work to keep a lid on those prices” Morris said.

Other factors that drive up power prices in the Philippines include geography and heavy reliance on hydropower. The country’s geography and topography make transmission more expensive. Hydropower efficiency, on the other hand, suffers during dry season, Morris said.

“The most important thing is causing new power plants to be built. It would put down the pressure on prices,” Morris said. Power generation cost represents 65.5 percent of charges reflected in consumers’ electricity bills, while distribution represents 16.1 percent. Transmission and other charges including taxes make up the rest, IEC data showed.