Commentary: Mindanao power is more expensive than Asia’s major cities

A RADICAL’S NUT

By Arnold J. Padilla

Mindanao power is more expensive than electricity rates in major cities in Asia but Aquino wants the region to pay more to supposedly address its power crisis (Photo from manilastandardtoday.com)

Mindanao must pay more to end the rotating brownouts, the President declared in his Power Summit speech. The region, said Aquino, needs more power supply but “cheap” power rates are discouraging private investors from building new power plants to meet Mindanao’s growing energy needs.Pay more “But how can you entice anyone to invest—and this is the question—if their generating cost is more than their selling cost?” Aquino, in his speech, asked. “The simple truth is: we can have a lot more energy, but we have to provide the incentives for businesses to come here to put up those plants. Therefore, there will be a change in what we have to pay. We will have to pay, perhaps, a bit more… You have to pay more because this is the reality of economics… Everything has its price. We have to pay a real price for a real service. There are actually just only two choices: pay a little more for energy, or live with the lack of energy and the continuation of the rotating brownouts.”
Cheap rates?
Aquino must apologize to the people of Mindanao for blaming them for the power crisis and accusing them of being spoiled by “cheap” power rates. Aquino must apologize for being shamelessly insensitive to the plight of Mindanao where 36% of the country’s poorest families live (based on the latest official poverty statistics released by the National Statistical Coordination Board or NSCB).
The premise that Mindanao has been unjustifiably enjoying “cheap” power rates is totally wrong. True, Mindanao has lower power rates than Luzon and Visayas. Latest available comparative data show that the region has an effective residential rate of P6.69 per kilowatt-hour (kWh). Luzon has P9.84 while Visayas has P8.19. (Data from 18^th EPIRA Implementation Status Report, which may be downloaded here)
Most expensive in Asia
Aquino, however, did not mention one very important fact. Mindanao power is “cheap” only because the country has the highest electricity rates in Asia. In a survey conducted by the Japan External Trade Organization (JETRO), Manila posted the most expensive residential rate (P10.16 per kWh), while Cebu (P8.39) is ranked third (Singapore ranked second with P8.83). JETRO conducted the survey in January 2011 to compare investment-related costs, including electricity, in 31 major cities in Asia and Oceania. (See the table at the end of this article for the complete list; Download the JETRO survey here)
While Aquino is blaming the power crisis on the people of Mindanao for being pampered by “cheap” power, Mindanao is actually paying much more than most major cities in Asia. Did you know that residential consumers in the Autonomous Region in Muslim Mindanao (ARMM), Cagayan de Oro City, Northern Mindanao, and the Davao and CARAGA regions are paying twice the electricity rates of residents in Seoul and Beijing? Except for CARAGA, all the Mindanao regions I mentioned also have more expensive residential power rates than Hong Kong. These areas in Mindanao, plus Cotabato City, Iligan City, SOCCKSARGEN, and the Zamboanga Peninsula all have higher residential rates than major Asian capitals like Taipei, Kuala Lumpur, Jakarta, New Delhi, Bangkok, and Shanghai, among others. All in all, Mindanao is paying an average of P1.82 per kWh more for electricity than the collective average residential rate of the 31 major cities in Asia and Oceania surveyed by JETRO.
I summarized these findings in the chart below, which culled data on residential rates from the JETRO survey and data on average residential rates of private distribution utilities (PDUs) and average systems rates of electric cooperatives (ECs) from the 18^th EPIRA report. The red bars represent Mindanao regions and cities.

Poorest region
Note that Mindanao has an average official poverty incidence of 33.5% of families (the national average is 20.9%). The country’s three poorest regions are in Mindanao – CARAGA (39.8%), ARMM (38.1%), and Zamboanga Peninsula (36.6%). ARMM does not only have the most expensive power rates in Mindanao, it also has (consequently) the highest cost of living (more than P1,287 based on the family living wage released by the NSCB in July 2008) among all regions in the Philippines, while the minimum wage there is just P232 (or just 18% of the cost of living). Amid this condition, the people of Mindanao are being forced to pay for electricity that is way beyond the rates in Asia’s richest cities. Yet Aquino wants Mindanao to shell out more money to supposedly solve its power crisis.
Blame EPIRA
Mindanao has lower rates than Luzon and Visayas not only because it sources its energy supply from cheaper hydropower but also because the region has been relatively and temporarily spared from the privatization and deregulation drive under EPIRA. State-controlled/owned installed capacity in Mindanao is still about 82% of the total (as of 2010 data from the DOE), compared to 18% in Luzon and 36% in Visayas where most power plants have already been privatized and are now controlled by the country’s profit-seeking “power lords”. Furthermore, unlike Luzon and Visayas, Mindanao does not have an EPIRA-created wholesale electricity spot market (WESM), which has only become a venue for price manipulation and speculation by power monopolies, sparking off wild spikes in power rates.
But EPIRA is also to blame for Mindanao’s energy insecurity. While government retained control over most of the installed and dependable capacity in Mindanao, it did not invest in additional capacity to meet the growing power demand of the region. Government abandoned its strategic role to design and implement power development projects consistent with a long-term industrialization plan and instead focused on selling the assets of the National Power Corporation (NAPOCOR) to private investors as mandated under EPIRA.
Reverse privatization
To fully solve the energy insecurity of Mindanao and the rest of the country as well as the problem of expensive electricity, there is no other recourse but for the state to take over. Aquino could no longer use the excuse that doing so will just further bankrupt the government. Despite the EPIRA, NAPOCOR remains trapped in deep debt (read here). So instead of further wasting limited public resources on a flawed energy program – which only made electricity bills more exorbitant and power supply more insecure – government should start reversing the privatization and deregulation of the energy sector. #