Electricity rates tipped to decline

MANILA, Philippines  —Consumers may see lower electricity rates this year, but only if average spot market prices continue the downtrend observed in 2023, according to the Energy Regulatory Commission (ERC).

The regulator on Friday reported that the entry of new power plants had pulled down average spot market prices last year by 17.5 percent to P6.505 per kilowatt-hour (kWh).

Prices at the Wholesale Electricity Spot Market (WESM), the trading floor for large-scale power buyers and sellers, spiked to an average of P7.885 per kWh in 2022 from P5.211 per kWh in the previous year due to increased economic activity after the government had eased COVID-19 restrictions.

“If the downtrend continues, then, yes, we should expect lower power bills this year especially as capacity increases with the entry of new players,” ERC Chair Monalisa Dimalanta said.

New suppliers

ERC data show that 35 generation companies utilizing renewable energy technologies were added as new participants at the WESM.

These new facilities provided 749 megawatts (MW) of additional capacity at the WESM, resulting in an average supply of 15,645 MW, the ERC said.

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While a 9-percent increase in demand had also been observed, the regulator explained that additional supply “appears to have met such demand and resulted in a substantial decrease in average prices.”

Moreover, the ERC noted that the completion of the 450-MW Mindanao-Visayas Interconnection Project (MVIP), which finally allowed power sharing among the country’s three major island groups, also contributed to the decline.

“As a result, the supply margin increased while monthly average prices decreased compared with the previous year when MVIP or WESM Mindanao was not yet operational,” it said.

WESM Mindanao was launched in January 2023.

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Distribution utilities such as Manila Electric Co. (Meralco) buy power from WESM, whose prices tend to fluctuate based on supply and demand.

It is included in Meralco’s generation charge, or the cost of power purchased from suppliers that accounts for more than 50 percent of total bill.

Last month, higher charges at the spot market triggered a slight increase in Meralco’s January power rates.

Despite the ERC’s projection of lower bills this year, Dimalanta clarified that they were also “monitoring closely” the impact of the El Niño climate pattern on demand, as it could have an “adverse impact on pricing even as we assure continuous power supply.”

Industry players have projected power supply to increase by around 5 to 6 percent this year from last year’s 17,000 MW.

The Department of Energy, meanwhile, said El Niño, which is characterized by long periods of drought, could cut the supply availability of hydroelectric power plants by nearly 80 percent.

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