While I have strong opinions about coal and LNG, I will focus on keeping the market operational while directly addressing the price surge without government intervention.
Price regulation must be recognized as an immediate tool to shield consumers from soaring generation costs, delivering crucial short-term relief for households and businesses.
In times of crisis, implementing temporary caps or limits may be necessary to cushion the shock and uphold social stability.
Market risks, financing solution
Yet price regulation carries serious risks. The Philippine power sector is distinguished in Asia for its market-driven pricing. Suspending WESM rules or overriding contracts, even temporarily, sends a signal of instability to investors.
Actions like these erode long-term confidence, drive away investment, and jeopardize progress toward a more competitive power sector.
Instead, there is a better solution. I first proposed this in 2022 to key legislators, including former Congressman Joey Salceda, at the onset of the Ukraine crisis.
The principle remains urgent and relevant: let the banking sector provide the support.
A 16-percent hike in the generation charge to around P5.80 per kWh would add approximately P0.93 per kWh. Over three months, this amounts to roughly P30 billion.
A financing facility led by DBP and Land Bank, syndicated with private banks, should directly disburse funds to generators to sustain fuel purchases.
Cost impact
The cost could then be capitalized and amortized over 15 years as a minimal per-kWh charge on consumer electricity bills.
The math is straightforward. At 7 percent interest over 15 years, the annual payment on P30 billion would total about P3.3 billion.
Spread across 127 billion kWh, that translates to roughly P0.026 per kWh—only about P5 per month for a household consuming 200 kWh.
Compare this with an unmitigated P186 monthly shock—a 97-percent reduction in cost impact.
Approval from the Energy Regulatory Commission (ERC) for the financing charge as a recoverable tariff component will be critical.
Such approval would assure banks of regulatory backing through a guaranteed repayment stream collected via the utility billing framework, similar to today’s FIT-All recovery process.
Policy balance
The government must avoid interfering with market prices or using national funds. The financing facility should remain self-liquidating.
This approach would preserve market integrity, maintain generator liquidity, keep renewable energy development on track, and ensure consumers remain largely unaffected.
Ultimately, the government may need a hybrid approach that combines temporary price intervention—or even a direct subsidy—to provide urgent relief, alongside a financing solution backed by the banking industry to spread costs over time.
Such a strategy would ensure both immediate consumer protection and long-term market stability.
The government must act decisively now.
A power industry expert with over 40 years in experience as chief executive officer in firms ranging from banking, power, and advisory services.
