On inflation, an ERC resolution, and CBK

There is good news this week: gasoline prices are set to decline by P3.90 to P5.90 per liter, with diesel prices to decrease by P9.04 to P11.04 per liter, as announced by the Department of Energy (DoE) yesterday. We need energy prices to lessen some more to control the country’s rising inflation.

Our average inflation of 6% in January-May was much higher than the 3.8% and 1.9% over the same months in 2024 and 2025, respectively. In East and South Asia, only Pakistan and Bangladesh have had higher inflation than the Philippines.

Central Banks or monetary authorities respond normally to rising inflation by raising their interest rates to help protect the domestic currency from further depreciation and to help dampen inflation pressure. Our 4.75% is the 5^th highest in the region, after Pakistan, Bangladesh, India, and Indonesia (see Table 1).

There have also been some important developments in the local energy sector.

The DoE announced with some optimism last week that power conditions in the Visayas Grid are expected to significantly improve next month. In Iloilo, the Panay Energy Development Corp. (PEDC) unit 3 (which produces 150 megawatts) is set to resume operations by July 3. In Cebu, the two units of Therma Visayas, Inc. (TVI), which each produce 169 megawatts, are currently under repair, and it will soon have a third unit which is currently under construction.

NEW ERC RESOLUTION
The Energy Regulatory Commission (ERC) announced last Friday a new ERC Resolution establishing the “Implementing Rules for the Development, Ownership, and Operation of Point-to-Point Limited Transmission Facilities and for the Financing and Construction of Transmission Projects by Entities Other than the Transmission Network Provider.”

The resolution says that entities other than the National Grid Corp. of the Philippines (NGCP) will be allowed to finance and construct projects identified by the DoE as Associated Transmission Projects (ATPs) or Priority Projects that include new transmission lines, substations, switchyards, and other facilities to accommodate additional power generation capacity and strengthen the country’s transmission network.

This is a good move by the ERC, but it should be noted that system operation, connection to the grid, rules on dispatch or non-dispatch to the grid, are still done by the NGCP.

I think a good example is the Davao City-Samal power interconnection project, with the laying of a submarine cable in the Pakiputan Strait done last March by Aboitiz Power (AP) through its distribution utility, Davao Light and Power Co. Cable terminal stations were also constructed at both shore ends. The 69-kilovolt project will bring power network stability and support the growing load requirements of Samal and brighten the economic potential of Samal’s population of 120,000 (2024 Census).

IMPLIED CAPACITY
Meanwhile, the rainy season is here, and a new storm this week will pour a lot of rain in many provinces. Hydropower plants will have more water in their reservoirs.

Given this, I decided to compute the implied capacity factor (ICF) of each energy source in the Philippines with this basic formula: ICF = (Generation in GWh) / (24 hours/day x 365 days x installed capacity in GW) x 100.

Last year had a bad La Niña, with too many cloudy and rainy days and too many storms, so hydro output and ICF were high while solar output and ICF were low, at only 15%. Oil-based power plants had the lowest ICF, only 2%, because they are used mainly as peaking plants — they run only for a few days and weeks in a year (see Table 2).

Solar energy has seen fast growth in installed capacity but low ICF, meaning this is more dangerous because of grid instability. Pumped hydro storage (PHS) plants help address this problem.

The CBK (Caliraya-Botocan-Kalayaan) plant in Laguna is the largest PHS in the country with a capacity of 797 megawatts. It was privatized by PSALM last year and the winning bidder was Thunder Consortium (Aboitiz Power, Sumitomo Corp., and Japan Power) which offered a high bid of P36.3 billion. CBK turnover to the consortium was done last February, led by President Ferdinand Marcos, Jr. and Energy Secretary Sharon Garin.

The Finance department saw not very big non-tax revenue from privatization proceeds — only P3.3 billion in 2024, P2 billion in 2025, and P0.7 billion from January to April this year. When the full P36.3 billion from CBK is reflected, the Finance department’s privatization revenues will jump high.

CBK utilization should rise this rainy season for three reasons. One, hydro works harder as many baseload coal and gas plants hold their regular maintenance shutdowns during the wet season. Two, the Malampaya gas field is also under maintenance shutdown, from June 15 to July 15. Three, there is the need to export more power to the Visayas Grid while the yellow alerts persist.

Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers. He is an international fellow of the Tholos Foundation.

minimalgovernment@gmail.com