Lower coal prices drive power rates down in 2024

Lower coal prices drive power rates down in 2024 | Daily Tribune

Falling coal prices led to a decline in power generation rates across the country last year, with the national average annual rate dropping 11.47 percent to P6.64 per kilowatt-hour (kWh) from P7.50/kWh in 2023.

Energy Regulatory Commission (ERC) data released on Thursday showed that all major island groups recorded lower generation costs, led by Mindanao with a 14.9 percent decrease, followed by Luzon at 11.7 percent and Visayas at 7.3 percent.

The drop in electricity prices coincided with a sharp decline in Indonesian coal prices, which fell from an average of $276.6 per metric ton in 2022 to $121.5 in 2024. While still above pre-pandemic levels, the lower coal costs helped ease power rates nationwide.

However, some regions saw price hikes, including the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), where rates rose by 14.6 percent, and MIMAROPA, which posted a 15.7 percent increase due to higher off-grid generation costs.

Regionally, most areas recorded lower quarterly generation rates by year-end. In Luzon, Metro Manila saw a slight decline from P6.9/kWh in the third quarter to P6.7/kWh in the fourth. Central Luzon and Bicol, which experienced rate hikes in mid-2024, ended the year at P6.0/kWh and P5.5/kWh, respectively.

In Visayas, Western Visayas peaked at P8.7/kWh in the third quarter before falling back to P7.1/kWh. Central and Eastern Visayas followed a similar trend, with rates normalizing to P6.7/kWh and P6.8/kWh, respectively.

Mindanao saw the largest reductions, with most regions posting year-end rates between P5.6/kWh and P6.5/kWh, except for BARMM, which remained at P6.9/kWh. Notably, Northern Mindanao, which remained stable at P6.9/kWh for most of the year, dropped to P6.5/kWh in the fourth quarter.

Despite a temporary surge in mid-2024 due to summer power outages, a weaker peso, and rising coal prices, rates normalized by year-end.

Areas in Luzon and Visayas saw increases of at least 10 percent in the second and third quarters, particularly in Metro Manila, Central Luzon, CALABARZON, and Bicol, but these rates declined in the fourth quarter.

ERC Chairperson and CEO Monalisa C. Dimalanta said the power watchdog will continue to validate the reports received from more than 120 distribution utilities (DUs) to ensure that only “just and reasonable costs” are passed on to consumers.

“Diligence in power supply procurement and optimal dispatch of suppliers to ensure least-cost pricing are critical obligations of DUs to their captive customers. The ERC will continue to enforce its regulatory authority to ensure these obligations are upheld,” Dimalanta said.