Teka-teka responses

The next gauntlet for consumers would be higher electricity costs as fuel prices rise. With a series of problems arising from the still-unsettled war, the government’s responses have been too tentative and ephemeral.

It is akin to a “teka-teka policy,” signaling drift or uncertainty, where government actions appear provisional rather than deliberate.

The situation becomes critical with the decision of Qatar, the biggest supplier of LNG, to consider declaring a five-year force majeure after Iran attacked its biggest facility.

The Qatar crisis will have direct ripple effects on already rising monthly electricity bills, particularly for electricity traded in the Wholesale Electricity Spot Market, unless the government intervenes with subsidies.

QatarEnergy has declared a long-term force majeure on its LNG contracts, affecting buyers in Asia and Europe, after Iranian missile strikes extensively damaged the Ras Laffan Industrial City, the world’s largest LNG hub, halting production equivalent to about 17 percent of global supply.

Repairs could take three to five years, slashing Qatar’s export capacity. The biggest concern for the country is that this will drive spot LNG prices sharply higher.

The country began significant LNG imports in 2023, powering gas-fired plants, notably on the Luzon grid, which serves major load centers like Metro Manila.

Global LNG price spikes immediately raise the variable fuel costs for these plants, which in turn feed directly into WESM pricing.

The WESM handles electricity not covered by bilateral contracts or power supply agreements, as well as the spot portion that sets the benchmark for the entire electricity system.

Generating plants submit offers that reflect costs, dominated by fuel, not exceeding the primary price cap. The offers are ranked from the cheapest to the most expensive, with renewables given priority dispatch.

Simulations project WESM clearing prices rising to P4 per kilowatt-hour (kWh) from April onward and potentially averaging near P8 per kWh, reflecting higher LNG, coal and oil costs driven by Middle East disruptions and peaking demand during the dry season.

This flows into consumer bills through the generation charge component, which accounts for 50 percent to 60 percent of the total.

The emergency powers that Congress would likely grant President Ferdinand Marcos Jr. can be employed to regulate the market, boost coal-fired output and secure alternative fuel supplies.

Short-term relief may come from regulation and coal substitution, but long-term energy security hinges on diversifying away from dependence on imported LNG.

Indigenous sources must be encouraged, as the Middle East conflict has exposed the country’s vulnerability to external factors, the cost of which is shouldered by households that have had to endure multiple impacts from rising prices and the possibility of overseas Filipino workers losing their jobs.

OFWs will be returning to a country that does not have the economic capacity to absorb them.

The dire condition is worsened by the government’s token responses, in the form of one-off subsidies that do not even benefit everyone affected by the fuel crunch.

The Palace said the President should not be blamed for the crisis, as he had nothing to do with it.

Considering the huge amounts of discretionary funds, most of which are spent to satisfy allies in Congress, much can be done to bridge the income gap for households.

Augmenting families’ capacity to meet the surging cost of electricity must be given priority.