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April 23, 2015

Electricity rates should be going down, not up -- solon LPG-MA cites falling coal, geothermal prices, along with oil

Electricity rates nationwide should stay depressed, amid the general decline in the cost of primary energy sources, House Deputy Minority Leader Arnel Ty said Sunday.
 
“It is not just the cost of oil that is down. Coal prices are also deflated,” said Ty, who represents the LPG Marketers’ Association (LPG-MA) in Congress.
 
“In fact, geothermal power producers are already slashing their tariffs so that they can compete more aggressively with coal-based suppliers of electricity,” Ty pointed out.
 
The lawmaker cited the case of Lopez-owned Energy Development Co. (EDC), which recently reduced the average tariff of its Palinpinon-Tongonan geothermal plants by around 7.5 percent.
 
EDC said it had to lower the usual tariff “to extend the life of its supply contracts with most of its customers amid historic low coal prices.”
 
Ty said some 41.4 percent of the country’s power supply is derived from geothermal resources; 28 percent from coal; 15 percent from natural gas; 11.4 percent from hydro; 3.9 percent from diesel and fuel oil; and the rest from biomass, biodiesel, solar and wind energy.
 
“Power rates should be going down, on account of the overall decline in energy costs. If producers are cutting their tariffs, electricity distributors should be rolling back, and not jacking up their rates,” Ty said.
 
The Manila Electric Co. previously announced that its customers will see their bills go up by P0.46 per kilowatt-hour this April and by P0.72 per kwh in May, due to the 30-day shutdown of the Malampaya natural gas field that drives three large power plants in Luzon.
 
But even if the power generators dependent on Malampaya have to run of alternative fuels, the costs of those substitutes are also down, so the higher electricity rates may not be justified, according to Ty.
 
“Power producers and distributors should allow consumers to benefit from cheaper electricity owing to the drop in energy prices,” he said.
 
Ty expects the prices of leading energy sources to stay deflated in sympathy with oil.
 
The price of the global benchmark Brent crude oil has plunged below $55 per barrel, from a high of $115 in June last year, due to a global glut in supply amid falling demand.
 
Oil prices will likely fall some more once the U.S. and Europe reach a nuclear deal with Tehran. The subsequent easing of sanctions could mean a flood of Iranian oil exports, according to energy market analysts.
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