Meralco Stands Strong: Upholding Reasonable Rates in Global Energy Landscape

Manila Electric Company (Meralco), the largest distribution utility in the Philippines, has been spotlighted in a comprehensive study by the International Energy Consultants (IEC) for maintaining fair and reasonable electricity rates. This assessment comes amid a tumultuous period marked by global disruptions like the COVID-19 pandemic and the Russia-Ukraine war, which significantly impacted electricity rates worldwide due to the reliance on imported coal and domestic gas.

The IEC, an Australia-based consulting firm, conducted its fourth study in 2022, comparing 46 energy markets globally, including the Philippines. This analysis revealed that Meralco’s average tariff in 2022 was 3% below the global average, ranking 21st among the surveyed markets. Notably, this was achieved despite the absence of subsidies in the Philippines, unlike neighboring countries where tariffs are heavily subsidized. Meralco’s tariff increase of 24% over the past five years aligns with the global average of 23%, attributed mainly to higher generation charges due to fuel price hikes.

Despite the absence of subsidies and facing global economic pressures, the Philippine power supply industry, led by Meralco, has shown remarkable resilience. Meralco’s tariffs have consistently been close to the global average and median for the past decade. In contrast, heavily subsidized markets in neighboring countries have seen massive increases in government support, with subsidies ranging from 35% to 66%, translating to substantial government costs.

Meralco’s commitment to maintaining fair rates is further demonstrated by its strategic management of supply contracts and diligent efforts to minimize tariff increases. All components of Meralco’s regulated tariff are considered fair and reasonable by the IEC, taking into account the underlying cost of electricity supply in Luzon. The absence of subsidies in the Philippines means that Filipinos are paying the true cost of electricity, a situation that would require significant government support if subsidies were introduced.

Looking forward, the IEC recommends that Meralco and the Philippines focus on investing in new generation capacity to meet the rapidly growing demand and prioritize the development of domestic renewable energy sources. Meralco has already embarked on this path, transitioning to cleaner energy sources through decarbonization and increasing its renewable energy portfolio. The company aims to cut its direct emissions by at least 23% by 2030, aligning with the government’s goal for a coal-free future by 2050. Meralco’s renewable energy capacity has already exceeded its initial target, with 1,880 megawatts of contracted capacity from various suppliers, and plans to further increase the share of renewable energy in its supply portfolio by 2030​​​​​​.