The heroic role of gas plants in cheaper electricity
August 5, 2025 | 12:02 am
My Cup Of Liberty
By Bienvenido S. Oplas, Jr.
A number of non-truthful statements against gas plants especially liquefied natural gas (LNG) came out recently. These include that: a.) gas plants are responsible for recent higher Meralco electricity prices; and, b.) gas plant costs are driving up electricity prices globally and cause more hardship to households.
I said “non-truthful” because there are numbers and facts that disprove the above narratives. I compared the electricity rates from July 2022 — the start of President Ferdinand R. Marcos, Jr.’s administration — to July 2025, the last billing period. Here we go.
Meralco’s total electricity rates collected increased from P9.75 per kilowatt-hour (kWh) in July 2022 to P12.64/kWh. This increase was due mainly to: a.) a lower distribution refund rate, and, b.) a higher generation charge from pass-through of higher Malampaya prices and the Energy Regulatory Commission (ERC) denial or inaction on requests to adjust charges due to Change in Circumstance (CIC) claims.
The LNG plants in Batangas — jointly owned by Aboitiz Power (AP), Meralco Power Gen (MGEN) and San Miguel Global Power (SMGP), the Excellent Energy Resources, Inc. (EERI) and South Premier Power Corp. (SPPC or the Ilijan plant) — have nothing to do with the higher prices this year. And there was even a decline in the Meralco distribution charge from 2022 to 2025 by nearly 4 centavos/ kWh (see Table 1).
Here are the numbers for the two reasons for the increase that I mentioned.
On (a.): in July 2022, Meralco residential customers got a refund of P1.80/kWh in the distribution charge due to distribution rate true-up. The total refund of P48.2 billion was completed in May 2023. In July 2025, the distribution refund rate covering the latest true-up was lowered by the ERC to P0.205/kWh. So there was an “increase” of P1.596/kWh in distribution adjustments which constitutes 55% of the P2.89/kWh increase over three years.
On (b): the generation costs of First Gas Sta. Rita and First Gas San Lorenzo, both owned by FirstGen (not affiliated with Meralco), increased by P1.988/kWh and P2.806/kWh, respectively, over the same period. Both power plants account for about 30% of the generation supply.
The ERC denial of, or inaction on, requests for price adjustment based on CIC claims forced the power suppliers — SPPC, Sual Power Inc. (SPI), and ACEN — to terminate their fixed price Power Supply Agreements (PSAs) with a total contracted capacity of 1,310 megawatts. Meralco was then forced to enter into emergency PSAs, which were more expensive by about P1.32/kWh than the PSAs that were terminated.
I asked Meralco for more data on the PSA between it and EERI. They replied that the generation cost of the EERI gas plant under the PSA with Meralco would have been lower if the ERC had acted on Meralco’s PSA applications filed in 2021. After conducting a competitive selection process (CSP) in 2021, Meralco and its counterparty suppliers (EERI and Masinloc Power) asked for ERC approval of the two resulting PSAs totaling 1,800 MW — but the ERC did not act for two years. So the power suppliers terminated the two PSAs in March 2023 after the lapse of the long-stop date. Meralco then conducted another CSP in 2024, a period of higher inflation (the Philippine inflation rate was 6% in 2023 and 3.2% in 2024). The offered prices of the 2024 winning power suppliers were P2+ per kWh higher than the winners of the 2021 CSP.
So the PSAs of the Meralco “sister companies” — EERI and SPPC/Ilijan — with a combined capacity of 2,400 MW, are not the main drivers of the increase in the total rate. Rather, these PSAs helped augment the supply in the grid to avert power supply shortages and bring down the cost of electricity.
Blaming gas plants for driving up electricity prices globally and causing more hardship to households is an idea that I find far out. Many countries, both industrialized and industrializing, are using more gas power. From 1985 to 2024, the expansion in gas power generation in terawatt-hours (TWh) among selected countries was as follows: the USA, from 314 TWh to 2,005 TWh; Mexico from 7 TWh to 222 TWh; Canada from 7 TWh to 109 TWh; Iran from 14 TWh to 340 TWh; Egypt from 9 TWh to 193 TWh. In East Asia the increase was as follows: China from 1 TWh to 321 TWh; South Korea from 0.1 TWh (or 100,000 MWh) to 176 TWh; and, Malaysia from 2 TWh to 74 TWh. Globally it increased from 1,426 TWh to 7,001 TWh.
The share of gas to total power generation for many countries has been rising. Looking at the numbers from 1985 to 2024, the USA’s gas share rose from 12% to 43%, Mexico’s from 7.5% to 62%, the UK’s from 1% to 30%, South Korea’s from 0.1% to 28%, and Taiwan’s from zero to 42%. There has been a significant expansion in GDP size of many countries as they used more hydrocarbons like gas to produce electricity over the past four decades (see Table 2).
The Philippines’ gas generation of only 18 TWh in 2024 was equivalent to only seven weeks of gas generation in Thailand, five weeks in South Korea, three weeks in Japan and China, and only three days in the US. It is so small and yet some climate-obsessed activists want to discontinue the expansion of our gas power capacity.
The Philippines should have expanded its gas power generation by four times (4X) to be at the level of Malaysia, or 7.6 times to be at the level of Thailand in 2024. The climate activists should turn their anti-gas noise and drama on the USA, Russia, Iran, Saudi Arabia, China, Japan, and Korea. It is very likely that these countries will laugh at these activists.
I hope that AP, MGEN, and SMGP will continue their LNG partnership and further expand the Philippines’ gas capacity. More power from stable, dependable sources means there is less threat of blackouts and lower prices of electricity.
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