Consumer price pressures may ease somewhat following Manila Electric Co.’s (Meralco) decision to reduce its proposed hike in Metro Manila power rates resulting from a government-ordered recalculation earlier this month.
Bangko Sentral ng Pilipinas (BSP) said the effect of Meralco’s planned rate hike, said to be one of the main risks to inflation this year, would be moderated.
“Both the size and the timing are important. If the size is smaller than what we assumed, then that could result in lower risks even as upside risks would remain,” BSP Deputy Governor Diwa C. Guinigundo said.
Last December, Meralco said it would have to increase power rates by P4.15 a kiloWatt-hour after it was forced to buy more electricity from the Wholesale Electricity Spot Market and liquid fuel-powered plants.
This was brought on by the maintenance shutdown of the Malampaya natural gas facility. The situation also was aggravated by the temporary shutdown of smaller plants.
During its last monetary policy meeting, the BSP said Meralco’s rate hike in Metro Manila would add 15 basis points to the inflation figure of 2014, and 7 basis points to that of next year.
Without the rate hike, the BSP expects inflation to accelerate to 4.3 percent in 2014 from 3 percent last year. In 2015, inflation is expected to decelerate to 3.2 percent. All forecasts are within the BSP’s target range of 3 to 5 percent for 2014, and 2 to 4 percent for 2015.
But following the public outcry against the rate increase, Meralco last week announced that it had reduced its proposed rate increase for January to about a tenth of the original, following a recalculation ordered by the Energy Regulatory Board of the unusually high electricity spot market rates late last year.
According to Meralco spokesman Joe Zaldarriaga, the company’s deferred rate increase in January was cut down to 45 centavos per kiloWatt-hour, or just a tenth of the original P4.56 per kWh.
BSP’s Guinigundo, however, raised some concerns over the timing of the implementation of Meralco’s rate hike, which was previously blocked by the Supreme Court.
“Any delay in the implementation of the power adjustment, while inevitable, could result in lower inflation at least for 2014,” Guinigundo said. “Some impact might be felt toward the latter part of 2014, but the bigger impact could be felt next year.”