Think tank urges Congress to cut regressive energy costs

MANILA — Energy policy think tank Center for Energy, Ecology, and Development on Monday urged the House joint committee on legislative energy action and development to remove pass-through charges from electricity bills and aggressively deploy solar power as the country grapples with a national energy emergency driven by the conflict in the Middle East.

CEED submitted a position paper to the LEAD panel as it met with government agencies to discuss implementing a unified package of emergency energy measures.

The think tank’s primary recommendation is the immediate prohibition of pass-through costs — charges that allow generation companies and distribution utilities to shift fuel procurement and power generation expenses directly to consumers — which CEED said make up 55 percent to 60 percent of household electricity bills.

“Pass-through provisions allow generation companies and distribution utilities to pass to consumers the costs for transporting fossil fuels and generating power. These pass-through costs are vulnerable to fluctuations in the global market. With the US-Iran war persisting, there is the risk for generation costs to spike because of rising fuel costs and the weakening Peso. Meralco’s April price hike of P0.5335, driven primarily by shifts in foreign exchange rates and higher generation costs, is not yet the full extent. With global coal prices soaring by 17% and liquefied natural gas costs by 91% since the start of the war, we calculated that blended generation rates can spike by up to 5.01 Php/kWh, based on Meralco’s March rates. Off-grid areas fare no better. Driven by the 37% price increase of oil in the global market, average unblended generation rates for oil-based contracted power can increase by 2.75 Php/kWh for Occidental Mindoro and 3.81 Php/kWh for Oriental Mindoro,” said CEED Executive Director Gerry Arances.

The think tank stressed that electricity price increases driven by pass-through provisions must be prohibited especially during times of crisis, when Filipino households are already financially stretched.

“Implementation of pass-through provisions during the times of crisis is unjust. By suspending such, business risks will be shifted to the generation companies, which have already been profiting for many years, thanks to the consumers being their safety net, and further protect the consumers from inevitable price shocks amid the war in the Middle East,” CEED stated in their position paper.

During the LEAD panel hearing, the Department of Energy said it is assessing a price cap through a market-oriented approach, while the Department of Finance said it is still awaiting instructions from the Office of the President on lifting fuel excise taxes.

CEED, in its position paper, called for the suspension of excise taxes and value-added tax on petroleum products.

“Workers and consumers already deal with the burdens of pass-through costs in electricity bills, yet they are forced to pay for additional taxes for fuel. Such taxes exacerbate the economic precarity and challenges faced by low-income households and the transport sector. Subsidies for drivers, fisherfolk, and other affected sectors must go hand-in-hand with protecting workers from these regressive taxes,” said Arances.

CEED also raised alarm over the Department of Economy, Planning, and Development’s recommendation to suspend the coal moratorium — the government’s existing policy halting new coal-fired power plant approvals — as a response to the global energy crisis.

Instead of expanding coal, the think tank called for the development of the country’s renewable energy capacity, particularly solar, while stressing the necessity of ending dependence on imported fossil fuels.

“Our overdependence on imported coal and fossil fuels led to our vulnerability to high-cost electricity, thus it is critical that solar energy deployment be maximized to protect consumers. The government must pursue and subsidize the aggressive deployment of solar rooftop systems to the most vulnerable communities, including off-grid areas and low-income households. In subsidizing 500-watt solar rooftop systems for 1 million of these households, the government would ensure that these communities collectively secure Php 373,140,000.00 worth of electricity savings per month,” said Arances.

“There are 5,664.92 MW of committed solar generation for 2026. Should the government fast-track these pending solar energy generation projects, the country could benefit from an additional 5.6 GW of generation capacity within a few months and be free from the volatility of fossil fuels,” CEED wrote in its position paper.

For long-term solutions, CEED proposed structural changes to energy policy and the pursuit of a power industry running on 100 percent renewable energy.

The recommendation came in response to the DOE’s stated openness to reviewing the Downstream Oil Industry Deregulation Act for pricing scrutiny and intervention thresholds.

“The Electric Power Industry Reform Act (EPIRA) has enabled private companies to control the power industry to the detriment of consumers. EPIRA must be amended to ensure that stringent limits are imposed to democratize the industry, and that cross-ownership between companies across generation, supply, transmission, and distribution sectors is strictly prohibited. Likewise, the Oil Deregulation Act enables companies to profit off of consumers shouldering rising fuel costs, thus it must be repealed while affected sectors be given protection against oil price instability,” said Arances.

“The current energy crisis is a problem created by our dependence on fossil fuels. In order to ensure the security of our energy supply, and in order to align ourselves with global efforts to limit warming to 1.5°C, the State must commit to phasing out coal by 2035, and fossil gas by 2040 […] Shifting towards a 1.5°C pathway would reduce levelized costs of electricity in the Philippines and will enable the Philippines greater self-sufficiency by reducing dependency on imported energy,” CEED stated in the paper.

The Electric Power Industry Reform Act, enacted in 2001, restructured the Philippine power sector by privatizing generation and distribution while creating the Wholesale Electricity Spot Market. Critics have long argued the law enabled market concentration and left consumers bearing the cost of volatile global fuel prices through pass-through mechanisms — provisions that allow utilities to automatically adjust rates based on fuel and purchased-power costs without prior regulatory approval.

Levelized cost of electricity, which CEED cited in its phaseout argument, refers to the average total cost of building and operating a power plant over its lifetime divided by the total energy output — a standard metric for comparing the long-term expense of different energy sources.