High power rates stymie manufacturing growth

Sen. Ralph G. Recto today reiterated his call on the Department of Energy (DOE) to let the Senate have a peek of what power rates would look like until 2016 to give business leaders a heads up in charting their investment or expansion plans, particularly in the manufacturing sector.

“A sneak peak of the power rate situation would signal predictability in the pricing and help industry players plan their expansion around this price scenario,” Recto, Senate ways and means chair, said.

He said the “power price scenario” would also gain significance as consumers brace for a new wave of increase in power rates starting this month.

Recto had asked the DOE during last year’s budget hearings for a “power rate scenario” at least up to 2016 but the request has remained unheeded.

“I’m quite concerned that PSALM and Napocor would again pass on their debt and losses to the hapless consumers,” Recto said.

He said these same consumers – households, workers and companies – would have to reach more from their pockets to pay increases in PhilHealth contributions, new taxes for “sin” products and the soaring prices of commodities brought about by volatile oil prices.

“Do they realize how much are they taking from the people’s pockets? That’s billions,” Recto said.

He said the high power rates are the single biggest stumbling block why the local manufacturing sector has not expanded and remained stunted over the years.

“We’ve the most expensive power rates in the region, are we still going to be the most expensive in 2016?” Recto said.

He added: “I guess it’s harmless to wish that even though power rates have no chance of coming down, it would at least not increase in the years leading to 2016.”

Power consumers will pay higher electricity this month after the Energy Regulatory Commission (ERC) granted the Napocor’s proposal to jack up their generation charges.

Napocor will increase its power charge in Luzon by 69.04 centavos per kilowatt-hour (kwh); Visayas by 60.60 centavos per kwh; and, Mindanao, by 4.42 centavos per kWh.
Currently, Napocor’s effective rate for Luzon stands at P5.0160 per kwh; P4.0740 per kwh in Visayas; and, only P2.9321 per kwh in Mindanao.

Recto nevertheless said government is actually imposing a new tax by passing on to consumers the burden of paying down the debts of Napocor through the new wave of power rate increases.

“The simultaneous power rate hikes in Luzon, Visayas and Mindanao are practically new taxes to be shouldered by consumers since the proceeds will be used to pay down the multi-billion debts incurred by Napocor,” he said.

Recto said the power rate hikes by the state-run but debt-saddled Napocor would further make it difficult for the country to lure in investors particularly in the field of manufacturing due to its already high cost of power.

He also said he hoped that the rate increase by Napocor went through the scrutiny of the National Economic Development Authority (NEDA) for an investment impact study.

“NEDA should have taken a look at this to check if this was congruent to good policy,” Recto said.

The senator said he would rather keep the current electricity prices, increase ten-fold the investment portfolio and ultimately secure an investment grade status from multinational credit rating agencies.

Recto said the increased investment due to stable supply and steady power prices would translate to more workers being hired and other economic opportunities being created and expanded.

“Why not keep the prices at current levels, which should get a more economic rate of return rather than raise power prices and stymie investment,” Recto added.

“Instead of looking forward to the traditional Flores de Mayo, each consumer would be rudely treated to a spectacle called “Increases de Mayo,” Recto said.

The price hikes covers the pending joint applications filed by Napocor and the Power Sector Assets and Liabilities Management Corp. (PSALM) under the Generation Rate Adjustment Mechanism (Gram), which allows utilities to recover costs associated with fuel and purchased power, and Incremental Currency Exchange Rate Adjustment (Icera) Mechanism, which allows utilities to recover foreign exchange-related costs.

Coinciding with the power rate adjustments is the admission of PSALM, the body tasked to sell the assets of Napocor to pay off its debts, that it incurred losses of up to P15 billion between 2001 and 2011 from its Mindanao power plants.