Cusi stops power rate hike in off-grid islands

August 11, 2019

ENERGY Secretary Alfonso G. Cusi has ordered the National Power Corporation (NPC) to hold its plan to increase generation charges in missionary and off-grid islands of the country by passing on to poor consumers the excise taxes and added fuel costs.

Instead, Cusi said, the NPC should find ways to reduce missionary subsidies by improving operational efficiency.

Cusi made the directive to NPC President Pio J. Benavidez after the corporation petitioned the Energy Regulatory Commission to increase missionary generation charges in the off-grid islands. The increase would result in the poorer consumers in off-grid islands paying much more in generation charges than Metro Manila consumers.

The corporation had filed an application with the ERC to increase the missionary generation charge in off-grid communities by P2.9140 per kilowatt hour (kWh) in Luzon, P3.4034 per kWh in the Visayas, and P3.4515 per kWh in Mindanao. . This would raise the generation charge by more than 50 percent to P8.5544 per kWh.

In his memorandum to Benvidez, Secretary Cusi expressed serious concern that the generation charge of P8.5544 per kWh sought by the NPC — compared to the P5.25 charge in Manila – would put a heavy burden on Filipino consumers in the poorer, off-grid islands. This, he said, is contrary to the government’s mandate to keep power rates affordable under the Electric Power Industry Reform Act (EPIRA) of 2001.

He further directed the NPC to reduce missionary subsidies instead of passing on to these poorer areas the costs of excise taxes and fuel and other costs that will cause this 51-percent increase in their generation rate.

The NPC had applied to pass onto consumers the added excise taxes on fuel being used to generate power in off-grid islands (P1.9648/kWh). This is on top of its previous application for an increase of P0.9492/kWh, bringing the total increase to P2.9140/kWh.  

The NPC is the administrator of the missionary subsidies provided by the government to consumers through the local electric cooperatives. Under the EPIRA, the NPC can cover its missionary subsidies by charging the consumers in those areas a missionary generation rate called the subsidized approved generation rate (SAGR), with the remainder likewise passed on as the universal charge for missionary electrification (UC-ME).

In addition, the Energy secretary said in his memorandum that “the DOE, in turn, will review the power supply contracts of existing private power generators to identify and possibly eliminate onerous provisions.”  

The NPC was asked to submit all existing contracts at the soonest possible time, and was given 30 days to submit its action plan on the matter.