As I write this opinion piece, the Philippine peso is hovering around its weakest level of P58 versus the US dollar, amid the continued outflow of foreign funds meant to take advantage of higher returns in USA.
Prior to the current US administration, the US 10-year Treasury bond was only offering a 1.10 percent interest rate. It has now ballooned to 3.72 percent. Many are expecting the Philippine peso to further depreciate as the Federal Reserve is seen to hike rates further in the fourth quarter of the year and make the US dollar more attractive to investors.
The situation poses a challenge for the Philippines though, as a net importer of oil — a vital commodity priced in dollars. What this entails for us, is that more pesos will be needed to finance the dollar-denominated costs. This will create a domino effect on local fuel prices, which in turn impact the prices of goods and other commodities, thus, a higher cost of living.
The peso depreciation likewise significantly affects the Philippine power industry, particularly the generation sector, since the imported fuel used to operate power plants is priced in dollars. This increase is passed on to consumers via the generation charge, which makes up more than 50 percent of the electricity bill of any household or business. For the Filipino consumer, already beset with soaring prices of market goods and services, an increase in electricity bill has serious impact on the budget.
In his first state of the nation address, President Ferdinand Marcos Jr. promised that his administration will bring down the cost of electricity for the Filipino people.
He outlined several proposals to achieve the goal, including proposing amendments to the Electric Power Industry Reform Act or EPIRA to include improving the performance of electric cooperatives, restructuring the industry to foster accountability and improve government systems to ensure consumer protection and enhance competitive operation of the electricity market. The President certainly knows how to approach the resolution to the industry’s concerns.
The Department of Energy, under Secretary Raphael Lotilla, is tasked with leading the country toward power stability, in terms of supply and pricing. He is confident that the President’s energy programs will come into fruition, with strong support by all key stakeholders.
To ensure this, the government created an advisory panel co-chaired by retired chief justices Artemio Panganiban and Reynato Puno. The function of the said council is focused on giving advise to the DoE on various energy-related reform initiatives and legal matters, including the promotion of low-carbon sources; ensure that the agency’s policy recommendations to the President and Congress are fully grounded on the Constitution; and encourage more investments for an affordable, sufficient, and sustainable energy supply.
A pioneering step closer toward a future-proofed energy industry, as this ensures legality of initiatives and hopefully can cut on bureaucracy that hinders implementation of important programs.
Among the most crucial ones are the initiatives that encourage development of more power plants utilizing varied sustainable sources.
This will level the playing field and enhance competitiveness of all industry stakeholders, just like the success of the DoE’s Competitive Selection Process, in bringing down electricity rates, particularly in the National Capital Region.
Electrification of the rural areas, particularly those in off-grid island provinces, also should be prioritized to spur development and provide opportunities for Filipinos who have been living in the dark or enduring long hours of brownouts while still paying high electricity bill. A host of solutions can be implemented, including microgrids utilizing sustainable sources, such as solar and perhaps in the future, even nuclear.
The Marcos administration is dead set in its mission to curb high rates of electricity, evidenced by its choice of leaders who have been tasked with implementing the government’s identified programs in the energy sector. With global macroeconomic factors now affecting power, effective governance and the right solutions are all the more essential. But government cannot do it alone. The active participation and empowerment of the private sector is key to achieving what needs to be done if we, as a nation, want to get there.