Crackdown urged on power subsidies going to ineligible recipients

By Justine Irish D. Tabile, Senior Reporter

THE PHILIPPINES will need to address leakages in its energy subsidy programs and the vulnerabilities in the national grid to lower the cost of electricity, the Philippine Institute for Development Studies (PIDS) said.

Kris A. Francisco, senior research fellow at PIDS, said subsidy leakages hinder the effectiveness and fairness of the country’s electricity programs.

“The subsidies are well-intended, but when implemented, they leak to non-poor households and to economically viable areas,” she told a webinar on Thursday.

“We really need to review the mechanism for this to ensure (that leakages are minimized). It is okay to support a segment of our population, but it is not okay for us to pay subsidies needlessly,” she added.

The three main electricity subsidy programs are the Universal Charge for Missionary Electrification (UCME), the Lifeline Rate, and the Senior Citizen Discount.

She said UCME areas that become economically viable should be allowed to graduate from subsidized status.

“There is no performance-based reclassification. Palawan and Mindoro are actually viable, with stable operations, but they are still receiving financial aid,” she said.

“Support should be removed little by little, We do not want to support these areas forever,” she added.

The Lifeline Rate, or the discounted rate for households consuming less than 100 kilowatt per hour, also suffers from leakages.

“When you set your consumption threshold … the likelihood is that you include households that do not need it,” she said.

“The goal of the Lifeline Rate is to make electricity rates affordable for those households who cannot afford them in the first place,” she added.

Citing a previous study, she said that 60% of households at the regional level qualify for the Lifeline Rate, indicating a need to adjust program eligibility.

Meanwhile, the Senior Citizen Discount provides a 5% discount to households with electricity meters registered to a senior citizen.

“The problem with the Senior Citizen Discount is it has no means testing component. If you want to give it to a household, regardless of their economic standing, as long as there is a senior citizen, they get the discount. But our resources are not limited,” she said.

“We do not want to give a universal discount to everyone. All of these cross-subsidy mechanisms are occurring in the context of the Philippines already having the highest electricity rate in the Association of Southeast Asian Nations region,” she added.

Adoracion M. Navarro, senior research fellow at PIDS, said the transmission industry faces challenges like project delays, regulatory hurdles, right-of-way constraints, ownership and national security concerns, and insufficient capacity and system congestion.

Ms. Navarro cited the need to reassess regulatory incentives and cost recovery rules.

In particular, it said that the enforcement of Transmission Development Plan timelines should be strengthened through agreed milestones, binding triggers, and escalating penalties for unjustified delays.

This would ensure that the grid operator “internalizes the welfare cost of delayed grid expansion.”

She also cited the need to “separate system operations from transmission asset management” by creating an independent, tightly regulated entity with its own board and cybersecurity oversight.

She also proposed standardized valuation guidelines for land acquisition, faster judicial processes for expropriation to streamline right-of-way acquisition.