Consumers should brace for LPG, power rate hikes

Consumers should soon brace for a double whammy after cooking gas retailers announced a price hike and the government warned of higher electricity costs. Starting August 31, a standard 11-kilogram (kg) tank of liquefied petroleum gas (LPG) will cost P524, the LPG Marketers Association (LPGMA) said, citing a jump in world contract prices. The price is P44 more than the current cost of P480 per tank, LPG Marketers Association (LPGMA) president Arnel Ty said in an interview on dzBB radio. Separately, oil companies that sell LPG – which excludes members of LPGMA – have already imposed seven cost increases from January to August this year. Price hikes of LPG products sold by oil companies have totaled P14.50 per kg during the same period, GMA News Research said, citing data from the Philippines’ energy department and oil firms. For the same period this year, four price rollbacks were imposed, resulting in a cost cut of P5.20 per kilogram, GMA News Research said. In a separate announcement, the Energy Regulatory Commission (ERC) said that electricity rates may rise by 55 centavos per kilowatt hour (kWh) if a petition recently filed by the Power Sector Assets and Liabilities Management Corp. (Psalm) is approved. Psalm, the agency tasked to sell the government’s power plants, sought approval to charge electricity consumers for its stranded debts and stranded costs. Stranded debts are obligations left unpaid after the government settled the National Power Corp.’s (Napocor) liabilities using proceeds from Napocor’s privatization.

Currently the Philippines’ largest power producer, Napocor was privatized after the Electric Power Industry Reform Act became a law in 2001. The same law split Napocor into three agencies including Psalm and the National Transmission Corp. (Transco) which dispatches power to its transmission facilities. Stranded costs cover financial obligations owed to independent power producers (IPPs) through generation contracts. Since these agreements feature “take or pay" provisions, the government remains required to honor them even though no actual electricity is produced, a source told GMANews.TV. However, the government will still seek documentary evidence from Psalm, ERC executive director Francis Saturnino Juan said at the sidelines of the first ERC-Media Dialogue at the Asian Institute of Management (AIM). Psalm’s submission should include a list of debts and obligations, including all its eligible IPP contracts, Juan added. Psalm needs to recover P470.8 billion of stranded debts and P22 billion of stranded contract costs of the Napocor, the agency said in its petition. The agency offered two options to recover stranded debts – the first involves charging consumers 30 centavos per kwh for 17 years or 22.5 centavos per kWh for 25 years. Three options were proposed for stranded costs’ recovery – either consumers will pay an additional 50.24 centavos per kWh for one year, 16.04 centavos for three years, or 9.20 centavos per kWh for five years. But before ERC approves Psalm’s petition, an audit of its performance should be undertaken first, the Freedom from Debt Coalition (FDC) said in a statement. “Proceeds from the sale of government energy assets and contracts with independent power producers were supposed to help pay off debts so we could reduce power rates," FDC said in a statement. “But the opposite happened. We were made to pay higher rates because we absorb stranded debts and stranded contract costs. Thus, they privatized the profits, but socialized the costs," FDC president Etta Rosales said. - with GMA News Research, RJAB, Jr.