Do My Fellow Filipinos Understand the ECONOMIC WHY Behind High Electricity Rates?

-

Yes, it's official, and it's sad. Recently, the Philippines has had the highest electricity rate in Asia. Right now, I feel like that, even as a casual blogger, I still feel the need to react to current events. After all, this is a business and economics perspective blog. Now, going back to the topic, the Philippine Star (the blatant source of the picture above addresses the issue. 

The blow was even felt in the Visayas, with Southern Leyte Electric Cooperative recording the highest on-grid residential rate at P16.57 per kilowatt hours (kWh), 32 percent up from a month ago’s P12.53 per kWh.

Manila Electric Co., the country’s biggest power distribution utility that serves Metro Manila and nearby provinces, was also among the top distribution utilities with high rates. In June, its residential rate reached P14.48 per kWh.

It's annoying, but social media comments can show downright economic ignorance 

As always, I will not directly shame people, but their comments. In fact, it's a real problem when corruption is blamed. I'm not overlooking corruption, as corruption, too, can be a source of economic problems. However, corruption alone can never be blamed. Blaming corruption alone for all the economic ills fails to look for every possible cause. For example, you can't blame rats and mosquitoes alone for every ill the country has. To blame corruption alone is a single cause fallacy. 

It's effortless to say something like, "I'm sure that the corrupt politicians are using the air conditioning 24/7, that's why electricity in the Philippines is expensive." This definitely ignores the supply/demand cycle of electricity. I'm not saying air conditioning doesn't significantly increase the cost of electricity. However, we need to look at where the electricity demand can significantly increase against the electricity supply. 

Let's have this example of "Hacienda Bongbong" to illustrate a point 

Honestly, even if let's say President Ferdinand "Bongbong" E. Marcos hypothetically created the Hacienda Bongbong with 24/7 air conditioning, that is merely a ripple vs. those machines used in factories. Let's just say Bongbong created that villa, and he began partying with his friends there. However, the energy drain there, while astronomical, couldn't compare to the electricity consumption of establishments. It's not that Bongbong's hypothetical villa shouldn't be investigated if it were real. 

We have these examples where electricity would be significantly higher than a corrupt politician who uses an air conditioner, 24/7, as they use megawatts instead of kilowatts:

  1. Cement kilns 
  2. Electric arc furnaces
  3. Industrial air compressors
  4. Large industrial pumps and fans
  5. Large-scale electric aluminum smelters
Those machines above are used by major businesses. In the hypothetical scenario of Hacienda Bongbong, his electricity payment would be excessive for a civilian like me. However, let's pretend Bongbong owned Bongbong's Piaya. Bongbong would be using the following equipment, which will consume more electricity than air conditioning units in the factories:
  1. Automated dough processing 
  2. Electric ovens
  3. High-capacity industrial mixers
  4. Industrial refrigeration and climate control 
In short, my hypothetical Hacienda 

How the Filipino First Policy actually helped the Philippines become "proudly" number one in high electricity rates in Southeast Asia

The problem is that many people have their half-brained analysis. One writer from Behind Asia even blamed the high electricity rates as the reason behind the lesser FDIs entering the Philippines. Hopefully, that writer got fired from Behind Asia because that was a dumb analysis. Now, if we must look into the real issue, we look at the problem behind restrictions.

The ASEAN Briefing even reveals an ongoing problem last 2023, and please, it's the second half of 2026:

What are the implementing rules and regulations?

100 percent foreign ownership of select public services

Starting April 1, 2023, select sectors such as railways, airports, expressways, and telecommunications are now open to 100 percent foreign ownership. Previously, these sectors were limited to 40 percent foreign ownership.

Restrictions on public utilities

The following public utilities have foreign ownership limited to 40 percent:

  • Electricity distribution;
  • Electricity transmission;
  • Seaports;
  • Water pipeline distribution and sewerage; and
  • Public utility vehicles.

These systems are deemed vital and would have a debilitating impact on national security if they were incapacitated or destroyed.

The big problem is electrical demand is too huge compared to the number of electrical plants. It's not just how many Filipinos there are, but the amount of electricity used. Just think that the Philippines may have invited FDIs in other areas. However, as long as the Philippines still relies so much on the National Power Grid, the cost will naturally grow higher. The reason behind the alert levels getting to Red Alert more often than not is that relying on the power grid alone isn't a good idea. The power grid is overworked because the demand for electricity has exponentially grown. 

Honestly, is the Philippines now proud of having the highest electricity rate in ASEAN? 

Popular posts from this blog

Indonesia's Barito Group's $5 Billion Offer to Buy EDC isn't an Trojan Horse for Invasion, It's an INVESTMENT

-
Image
Some time ago, I remember writing about Jollibee's acquisition of Shabu All Day  and Compose Coffee . It might be easy to scream to the top of one's lungs, "Pinoy pride! The Philippines is taking over the world ! However, when news like t he recent plan of the Barito Group from Indonesia to purchase the Energy Development Corporation of the Lopezes  for $5 Billion (which might be in USD) arrived, I'm getting comments like: "This should be blocked by the Philippine Competition Commission!" "Foreign ownership of such a big percentage of our electrical generating capacity might have national security implications." "What does this mean for the Philippines' energy future? Maybe a higher price increase? The Philippines is selling everything! "The Philippines has its own but keeps selling everything." I wonder if the same people who are writing their comments danced, thinking that the Philippines was "conquering the world" th...
Read more

Why I Think Most Indian Restaurants Tend to Refuse Credit Card and Prefer Cash/GCash Instead for Dine-Ins

-
Image
There are times I remember when I tend to run out of cash because I would go to Bollywood Tandoor (my favorite) or Cherry's the Spice (depending on my mood) for a good old curry or Indian barbecue. Right now, my favorite food at Bollywood Tandoor is either the grilled butter chicken, mutton curry, or the rather pricey (but also tasty) chicken kabsa biryani. Little India Healthy Cuisine (which permanently closed in Cebu City while thriving in Quezon City) was the only one that accepted credit cards during dine-ins, but the place was vegetarian . I felt sad learning that Little India Healthy Cuisine had permanently close d. In the case of Bollywood Tandoor, it was once Mr. India in Gaisano Country Mall prior to its rebirth as Bollywood Tandoor. Cherry's the Spice, which is South Indian style, also served its own charm. Overall, Bollywood Tandoor is still my favorite because North Indian food tends to be more adjustable for my personal taste. I thought about the number of times ...
Read more