NSCB - 2004 Factsheet - 97.98 Centavo Electricity Rate Hike Pushes Production Cost by 2.6%

97.98 Centavo Electricity Rate Hike Pushes Production Cost by 2.6%
(FS-200410-ES1-01, posted 15 October 2004)

Electricity is both a prime commodity and a vital utility consumed/used by households for daily living, by the government in the delivery of services, and by industries as input to production of goods and services. Any movement in the cost of electricity thus affects the activities and outputs of these basic economic units.

On September 3, 2004 the Energy Regulatory Commission (ERC) granted a Provisional Authority through Case No. 2004-178 authorizing the National Power Corporation (NPC) to increase its generation rates by an average (weighted) of PhP 0.9798 per kWh.

With the implementation of the provisional rate increase of 97.98 centavos or a 40.09 percent increment from the present generation cost of PhP 2.4438 per kilowatt-hour, prices of commodities as well as costs of production of industries are expected also to increase.

To study the effects of the new electricity hike to industries as well as the consumers, the National Statistical Coordination Board (NSCB) conducted a price cost analysis using the 1994 Input-Output (I-O). Based on the study it was observed that the 40.09 percent increase in power generation cost would result to the following:

1. In terms of change in prices, manufacturing of ice except dry ice posted the biggest increase of 13.5 percent, which was expected knowing that this particular industry depends heavily on electricity in the production of and in storing its final output/goods. Higher prices were likewise observed for other manufacturing industries like iron & steel foundries (6.6%), non-ferrous foundries (5.2%), textile, spinning, weaving, texturizing & finishing (4.9%), blast furnace & steel making furnace, steel works & rolling mills (4.8%) and insulated wires & cables (4.7%).

2. On the other hand, a 2.6 percent increment in total cost of production would be experienced. The Industry sector is expected to suffer from an aggregated increment of 1.95 percent in the total cost of production with electricity, gas & water sector and the manufacturing sector registering the highest weighted increases of 0.97 and 0.87 percent, respectively. Meanwhile, the total cost of providing services would increase by 0.59 percent with trade, private and government services posting the biggest increases of 0.21 percent, 0.15 percent and 0.08 percent, respectively. Least affected of the three major sectors is Agriculture, Fishery and Forestry whose cost of production would increase by only 0.10 percent.

3. Finally, household consumer prices are expected to increase by 2.0 percent in addition to the “normal” inflation rate.

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