Mindanao power is more expensive than Asia’s major cities

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 18th 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 18th 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. #

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27 thoughts on “Mindanao power is more expensive than Asia’s major cities

  1. Well-researched piece, either the government reverses privatization and deregulation or completely liberalize the power generation in the country by opening the market to foreign investors. . . thus, making healthy competition possible.

    • thanks. mindanao has already seen what epira has done to power rates in luzon and visayas. after 10 years of epira, we should have already learned our lesson

  2. Have you considered that the Maria Cristina Falls is simply running out of water and thats basically why companies are going for rotational brownouts while looking for other reliable sources of power? If you actually saw the Maria Cristina falls 10 years ago and now, you’re bound to notice a great difference.

    • @bordge: actually the water level at ma. cristina falls today 2012 is above the critical level. in 2010, it fell way below, thus the similar energy crisis and load shedding in many parts of this island. however, today in 2012, nasira/napabayaan/ hindi namaintain/ hindi ginagamit ang ilang facility sa ma. cristina, kaya mas mababa ang output compared noong 2010.

  3. agree din pala ako sa panukalang Mindanao Power Monitoring Committee, para gawing patas ang pagpepresyo ng kuryente sa magkaibang antas ng lipunan sa Mindanao kapag tinuloy-tuloy ang EPIRA sale. sana nga lang, isipin din ni PNoy at Sec. Almendras na hindi EPIRA ang end-all solution, at all. dapat makapaghanap sila, & soon, ng private investors & developers ng renewable energy aside from hydroelectric. marami namang geothermal at wind locations sa Mindanao..

    • problema lang, ang gusto ng big investors ay yung madali at murang itayo para mabilis nilang pagkakitaan like coal plants. kaya dapat talaga the state should take the lead, para hindi profits ang habol at unahin ang energy security ng mindanao while ensuring reasonable rates. hindi ito posible under epira

  4. @bordge: 2010: below critical ang water level sa may ma. cristina, El Nino, etc. 2012: above critical ang water level, pero decreased supply production naman dahil pinabayaan / hindi ginagamit ang ilang makina nito. ergo, we should blame the poor maintenance of the facility

  5. arnold, many thanks for this. malaking tulong sa ginawa kong powerpoint for LI. may isang issue lang which I would like to pick your brain. I’ve noticed that you use the word ‘power insecurity’ to describe the Mindanao power sit. Sa Mindanao, the dominant perception is that ‘there is no power crisis’, that the rotating brownouts have been stage-managed to force the people to accept the privatization of Agus and Pulangui hydro power plants. Do you subscribe to this?

    • hi butch. mukhang ang main argument ay kaya pang pigain ang current capacity ng mga hydro plants to meet demand (tama ba?), pero masyadong maliit ang balanse that a disruption in one of the sources could easily lead to a shortage. ang mas sigurado ako ay walang additional capacity in so many decades habang lumalaki ang demand, matandang-matanda na ang mga hydro plants, at may climate change factor. amid all these, hindi nag–iinvest ang gobyerno sa power generation dahil sa epira. at walang interesadong investor dahil sabi nga ni aquino, masyadong “mura” raw ang kuryente, thus di attractive for profit-seeking investors. so for me, mas sigurado ako na i-describe ang sitwasyon na mayroong insecurity due to a flawed power program, insecurity that can only be addressed by not privatizing agus & pulangi & by reversing epira. i’m not disputing the argument that there is no power crisis, limited lang talaga kasi ang research ko to declare with all certainty na artificial ang shortage. thanks for reading my blog. will greatly appreciate if you can share studies/papers on the real power sit in the region. :)

  6. thanks for sharing the JETRO survey.
    im doing a position paper and somehow it helps.
    pls. continue on writing.

    - b stephenjr

  7. THANKS FOR WRITING, TAMA KA HINDI ANG EPIRA ANG SOLUTION SA PAGBABA NG KURYENTE SA PHIL. HINDI RIN ANG WESM. RIGHT?

  8. While it may be true that NAPOCOR’s debt has not gone down since the enactment of EPIRA, it is too simplistic to say that EPIRA was not effective at all. Please note that I am not saying that it is effective (disclaimer); nor am I saying otherwise.

    There are many other variables that need to be considered (e.g., interest on debts, operating losses due to government-owned power plants, etc.,). It may be possible that the funds generated from the privatization of the power plants reduced NPC’s debt, but another variable factored in and caused the debt to increase more than the benefit gained from privatization.

    I believe that certain groups are pushing for a renewable source of energy and for maximizing plant capacity (although I think not in Mindanao). This means higher output over unchanged fixed cost, which in turn equals to lower cost per unit of generated electricity. Lower production cost allows private firms to price lower and still retain the same amount of margin.

  9. sorry at nahuli ito arnold. maraming salamat sa enlightenment. comes the break of the session this October, I’ll try to get hold of the documents gathered at the committee on energy and whatever I’ll share them to you whatever I’ll get. Wala kaming sariling study on this issue for lack of time. Nakatutok kami ngayon sa budget. Kaya, talagang malaking tulong itong blog mo. lalo pa’t bumalik na naman ang rotating brown outs sa Mindanao and the Li office has to position on the issue. Keep writing. May FB page ba ito arnold? Please send the links kung meron.

  10. Pingback: The State of Moro Human Rights under President Noynoy Aquino: | DURIANBURGDAVAO

  11. Was asking myself the same question as the rest and found the answers in your blog. Kudos! No more brushing things off under the rag, people need to know we have alternatives and privatization/increasing the rates is not the answer. :)

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