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By Euan Paulo C. Añonuevo, Reporter
MOVES to lower electricity rates in the country
may scare off potential investors in the government’s power sector
privatization program, a consultancy firm said.
In a report titled “Power Struggles,”
GlobalSource said that recent developments in electricity pricing
“highlight weaknesses in the spot market and the regulatory
environment, which can be expected to lead to a withdrawal of
investor interest.”
Since the start of the year, the government has
yet to bid out a power plant, except for a decommissioned facility.
The advisory firm said that in the last two
months, spot market prices have dropped sharply to their lowest
levels since the start of the Wholesale Electricity Spot Market (WESM)
operations.
This was most likely borne out of the
“market’s thinness, which makes prices susceptible to swings in
the bids of a small group of players, mostly still government,
operating under a weak or non-existent incentive framework at this
time,” GlobalSource said.
“Already, local bankers, which currently have
large exposures to the power industry, are worried about the impact
of low WESM prices on their borrowers’ profitability,” it said.
The Energy Regulatory Commission recently
ordered state-owned National Power Corp.’s (Napocor) to reduce
electricity tariffs by P0.71 per kilowatt-hour in Luzon.
The decision was in response to Napocor’s
application for a P0.37 increase in its basic generation charge and
a P0.40 per kilowatt-hour decrease in pass-through costs related to
fuel, purchased power and currency adjustments.
“While it would be tempting to read more into
the twin price cuts, we think, based on discussions with industry
experts, that these are in fact independent developments rather than
politically-driven populist moves,” GlobalSource said.
GlobalSource provides research and analysis for
economists and political analysts based in China, Russia and Turkey.
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