Stretched thin? ERC seeks new shield against forex-driven hikes

SINGAPORE — With existing relief measures already weighing on power players, the Energy Regulatory Commission (ERC) is scrambling for new ways to shield consumers from higher electricity bills as the peso’s slide past P64 against the United States dollar threatens to drive up generation costs.

ERC Chairperson and Chief Executive Officer Saturnino Juan said the commission is studying additional interventions to soften the impact of currency depreciation, particularly as imported coal and liquefied natural gas become more expensive in peso terms.

“We are still studying what measures we can implement as we anticipate an increase in generation charges brought about by depreciation of the peso,” Juan told reporters on the sidelines of Singapore International Energy Week, following a panel discussion on Wednesday.

According to Juan, the ERC has already rolled out several relief measures, including staggered payments, restrictions on electricity disconnections, and wholesale power market interventions, leaving limited room to cushion another potential cost shock.

Lawmakers have also pressed the regulator to act as the weakening peso threatens to further drive up electricity bills for households and businesses.

“That is the typical question of the day because (on Tuesday) the exchange rate reached P64. So we’ve seen our legislators asking ERC to act on or institute measures that will somehow mitigate the impact of this,” Juan said.

Even if global coal and LNG prices remain unchanged, a weaker peso means power producers must spend more to purchase imported fuel, with additional costs potentially passed on to consumers through fuel adjustment mechanisms in power supply agreements.

“The more immediate impact of foreign exchange movements, of course, would be on generation cost pass-through charges because of the way generation prices are structured,” Juan explained.

Baseload and mid-merit power plants are particularly exposed because many of their contracts allow fuel cost adjustments. Renewable energy contracts with fixed energy charges, however, are largely insulated from currency fluctuations.

Relief comes at a cost

Juan acknowledged that existing consumer protection measures are increasingly straining distribution utilities, particularly electric cooperatives that rely on customer collections to settle obligations with power suppliers.

“But this has been going on. With the no-disconnection policy, our distribution utilities, especially the electric cooperatives, are also feeling the financial strain,” he said.

While consumers may be given more time to pay their bills, utilities must continue paying generation companies, creating cash flow problems.

The ERC is also clarifying a proposal involving the use of certain bill deposits held by utilities to help settle supplier obligations and secure payment discounts that could eventually lower generation charges.

The ERC has also clarified the regional application of the secondary price cap and suspended the reserve market to curb electricity costs, although these measures do not directly address fuel price increases driven by the weakening peso.

Juan stressed that distribution charges would not immediately be affected, as adjustments require separate regulatory proceedings.

“In terms of the distribution charges, they are not immediately impacted by this depreciation, because their rates have to be scheduled or set after a rate filing,” he said.