Rising electricity costs across the Philippines are being driven primarily by external economic forces and state energy policies rather than distribution fees, according to Manila Electric Company (Meralco), the country’s largest private electric distribution utility.
Meralco clarified that recent rate hikes stem from elevated generation charges fueled by international market volatility, currency fluctuations, and government directives.
“The recent electricity price increases pertain to generation charges which reflect the spike in international fuel prices and peso depreciation as a result of the ongoing conflict in the Middle East, and the government’s policy to use natural gas as energy transition fuel and the suspension of new coal-based power plants,” the statement said.
The utility noted that generation costs tied to natural gas are inherently “more expensive than coal, even before this period of geopolitical tensions.”
To maintain system reliability, the Department of Energy (DOE) instructed Meralco to continue sourcing power from the First Gas Sta. Rita natural gas plant “to ensure grid security.” Currently, natural gas facilities fulfill 50% to 60% of Meralco’s operational requirements.
“If not contracted by Meralco, the Luzon grid will experience supply shortage which would result in prolonged power interruptions,” the statement said.
Meralco emphasized that it is “the only DU sourcing from natural gas-fired power plants to ensure grid security,” which is “the reason why its generation costs may, at times, appear higher than those of other DUs (which are largely dependent on coal and other cheaper RE sources).”
Defending its supply procurement practices, the distributor emphasized that its operations remain “very heavily regulated by the government.”
Meralco pointed out that procurement rules established by the DOE and the Energy Regulatory Commission (ERC) ensure “equal opportunity is provided to all eligible and qualified generation companies, regardless of affiliation,” and that contracts go “to generators with the lowest prices.”
With the exception of First Gas Sta. Rita, power supply agreements signed with suppliers—such as Excellent Energy Inc. and South Premiere Power Corp.—underwent competitive bidding. All resulting contracts are submitted to the ERC to verify compliance with the Electric Power Industry Reform Act (EPIRA) mandate requiring distribution utilities to secure the lowest-cost power options for consumers.
The utility highlighted that all of its contracts “were approved by ERC, a testament to its compliance with the Least Cost mandate under the EPIRA.”
Furthermore, Meralco noted that the ERC conducts “a confirmation process” during supply contract execution “to ensure that what the DU collects on behalf of generators is accurate” and that only “the proper and allowable generation costs” pass through to end-users.
The distributor also explained that total monthly charges reflect both unit rates and overall consumption levels.
“There are instances when electricity prices decline but the overall bill increases because of increase in electricity consumption,” the statement said.
Addressing its own operational pricing, the distributor maintained that its internal fees have decreased over time.
“Our rates have actually gone down by 18% since 2014 unlike all other private DUs. Customers are paying less today for the distribution-related charges that go to Meralco compared to more than a decade ago.”