SINGAPORE — Electricity rates could rise as the peso’s continued depreciation against the US dollar drives up the cost of imported fuel used for power generation, Energy Secretary Sharon S. Garin said on Tuesday.
Ms. Garin said the peso’s recent slide against the dollar could drive up electricity rates as the cost of imported coal, diesel, and liquefied natural gas (LNG) goes up.
“It will impact the rate of electricity because it passes through, so it will impact per kilowatt-hour,” she said on the sidelines of the Singapore International Energy Week.
The Philippine peso closed at an all-time low of P64.17 per dollar on Tuesday, from the previous record low of P63.95 on Monday, data from the Bankers Association of the Philippines showed.
This marked the peso’s 38th record low this year and its ninth so far in October.
As a net fuel importer, the Philippines relies on foreign suppliers for much of its energy needs. A weaker peso means power producers and other fuel buyers need more pesos to pay for coal, natural gas, and diesel imports.
These higher costs could eventually be passed on to electricity consumers through their monthly bills.
Ms. Garin said the Department of Energy will coordinate with the Energy Regulatory Commission to explore measures to cushion the impact of higher costs stemming from the peso depreciation.
“We have the oil crisis. We have the currency [depreciation]. We have the El Niño and the coming summer,” she said. “This is not the best time to be [Energy] secretary, [but] we try to work out as much as possible to minimize the impact.”
Last week, the Philippine Atmospheric, Geophysical and Astronomical Services Administration said a strong to very strong El Niño is active in the Tropical Pacific. It is expected to peak before the year ends and last until the first quarter of 2027.
El Niño typically causes severe dry conditions to parts of the country, threatening water supply and posing risks to the country’s hydropower capacity. Hydropower accounts for less than 20% of the country’s total electricity generation.
With the weaker peso driving up import costs for petroleum products, Ms. Garin said the government may ask oil companies to stagger the possible pump price adjustments.
“We’ll ask them [oil companies] once we see the computations this week — what is the impact — and then we can ask. Normally, they follow, but hopefully, it won’t be necessary anymore,” she said.
Since the outbreak of the US-Iran war in late February, domestic oil prices have surged to record highs, reaching as much as P170 per liter. On a year-to-date basis, pump prices have risen by a net P68.85 per liter for gasoline, P64.43 for diesel, and P62.76 for kerosene.
Juan Paolo E. Colet, managing director at China Bank Capital Corp., said power generation companies that rely heavily on foreign exchange (forex) rate sensitive fuels like oil and LNG will face increased costs.
He noted local power companies that have US dollar-denominated debts may also see their debt service costs rise.
“These costs will ultimately be passed on to consumers,” Mr. Colet told BusinessWorld. “Careful forex hedging strategies may help cushion the impact of currency movements.”
As the country experiences a very strong El Niño, Ms. Garin said the issue would go beyond the energy sector and require coordination among government agencies.
The Energy chief said the department could coordinate with other government agencies such as the Department of Environment and Natural Resources, Department of Agriculture or Department of Transportation to potentially provide assistance.
“If there’s really the impact of El Niño and all else, that is also a whole-of-government approach because that will uplift the El Niño activities of the government,” she said. — Sheldeen Joy Talavera
