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Electricity prices in the Philippines remain among the highest in Southeast Asia. Policymakers cite imported fuel dependence, global volatility, and infrastructure gaps. Critics argue that coal has cushioned inflation, grid upgrades were long overdue, and structural inefficiencies inflate costs more than the energy source alone.
This article explores both sides of the argument to provide a nuanced understanding of why electricity prices in the Philippines are higher than in other ASEAN countries, and examines what can be done to address the issue.
What’s really pushing up electricity costs in the Philippines?
High electricity prices in the country are largely driven by the limited role of government subsidies. In many countries, governments lower electricity costs through direct funding, tax incentives, or other measures that reduce production and delivery expenses. In the Philippines, however, electricity providers receive little to no financial support, meaning the full cost of generation, infrastructure, and operations is passed on to consumers.
“Our neighboring countries like Thailand, Taiwan, Vietnam, Malaysia, Sri Lanka, Indonesia, and South Africa boast lower electricity prices because their governments subsidize 36 to 60 percent of the costs,” said Department of Energy (DOE) Undersecretary Rowena Guevara.
Although global comparisons can be debated, analysts consistently rank electricity in the Philippines among the most expensive in the region, at around $0.18 per kWh. By contrast, rates are lower in neighboring countries, averaging $0.10 in Indonesia, $0.13 in Thailand, $0.08 in Vietnam, and dipping to roughly $0.03 in Malaysia.
Like in the Philippines, the Singaporean government does not subsidize electricity prices. Singapore’s electricity tariffs are intentionally set to reflect actual production and supply costs, so consumers pay rates that mirror fuel and generation expenses rather than artificially low government‑supported prices. Recent data shows Singapore’s average household electricity price around $0.24 per kWh, which is higher than in most ASEAN countries.
In Peninsular Malaysia, electricity tariffs were kept unchanged from January to June 2025, as the government absorbed cost fluctuations through direct subsidies. Total support during this period reached approximately $1.46 billion, helping maintain price stability. Targeted subsidies for households consuming 600–1,500 kWh per month shielded about 85% of households, or 7.1 million consumers, from any increase in their electricity bills.
Moreover, the Philippines imposes a 12% value-added tax on electricity across generation, transmission, and distribution, which directly increases the total cost passed on to consumers. This tax alone can make power significantly more expensive, layering on top of already high electricity rates.
Business groups have backed House Bill 6740, which seeks to remove VAT on power sales, arguing that lower electricity prices would ease operating expenses, support MSMEs, attract energy-intensive investments, and help protect jobs. While not a subsidy in the traditional sense, scrapping VAT would immediately reduce monthly bills and provide relief to both households and businesses.
Do high fossil fuel costs drive prices?
According to the International Energy Agency (IEA), fossil fuels, including coal, oil, and natural gas, account for about 67.2% of the Philippines’ total primary energy supply. This breaks down to approximately 33.9% coal, 29.5% oil, and 3.8% natural gas.
In the electricity sector, coal remains a major contributor, supplying roughly 60% to 62% of total generation in recent years. This reflects the country’s continued use of established baseload technologies alongside a steadily expanding share of renewable and other energy sources.
Coal prices surged in 2021 to 2022 due to a combination of strong global demand, supply issues, and geopolitical factors such as the war in Ukraine and temporary export restrictions from Indonesia. But by 2023 and into 2024–2025, benchmark prices fell substantially, at times dropping to multi‑year lows as oversupply and weaker import demand weighed on markets.
Coal-fired power plants in the Philippines provide continuous, predictable baseload electricity, running independently of weather or daylight cycles. This reliability reduces the need for costly short-term market purchases or frequent peaking generation, helping maintain more stable electricity costs. Historically, coal has offered a predictable generation base compared with variable solar or wind. Its ability to operate 24/7 ensures supply margins remain healthy even when intermittent sources are low, preventing sudden price spikes during periods of scarcity.
As highlighted in a Daily Tribune editorial, coal’s consistent output plays a key role in moderating short-term price swings. “With a gross domestic product (GDP) growth…, driven by strong domestic consumption, infrastructure investments, and a stable labor market, the country cannot afford significant disruptions to its electricity supply,” it stated.
Similarly, PhilStar columnist Bienvenido S. Oplas Jr. noted that coal plants “have actually helped anchor inflation control by providing dependable, price-competitive kilowatt-hours, especially when reserves are tight.” He also emphasized that energy policies focused solely on rapid transitions away from conventional generation could risk higher inflation and slower growth, stressing the importance of an abundant, stable, and affordable supply.
Vietnam provides a model of balancing economic growth with energy development. While expanding renewables, the country continues to heavily rely on coal and gas for reliable baseload power, complemented by hydropower, solar, and wind. This diversified approach has supported industrial growth, attracted investment, and helped raise GDP per capita to around $4,650 in 2024, ahead of the Philippines at $4,150.
Meanwhile, Indonesia remains heavily reliant on fossil fuels, with coal supplying around 62% of electricity generation. As the world’s top coal exporter, the country keeps coal-fired power affordable through its Domestic Market Obligation (DMO), which caps coal prices for domestic use at about $70 per ton. By stabilizing fuel costs, this policy ensures predictable generation expenses, supporting a reliable power supply. As a result, Indonesia is sustaining strong economic growth and is projected to become the world’s fourth-largest economy by 2050.
(Also read: SMGP Subsidiary Wins Meralco Supply Auction)
Clean energy is not always cheap
Transmission constraints in the Philippines can prevent RE, touted as the more affordable option, from reaching key demand centers, which in turn drives up Wholesale Electricity Spot Market (WESM) prices. To address these bottlenecks, the National Grid Corporation of the Philippines (NGCP) has outlined extensive projects in its Transmission Development Plan, including new substations, line upgrades, and critical interconnections across the archipelago.
But grid upgrades for RE come with a hefty price tag. The Philippines faces an estimated $1.79 billion in smart-grid investments to support its targets. Smart grids, which digitalize electricity networks and enable two-way communication between suppliers and users, are seen as essential for managing the variability of solar and wind power. Still, they require significant upfront investment in substations and digital infrastructure.
In the Philippines, RE support mechanisms like the Feed‑in Tariff (FIT) system and the Green Energy Auction (GEA) program function as built-in incentives that, in effect, subsidize clean power development by guaranteeing revenue to renewable generators and sharing costs across all consumers.
Under the FIT system, eligible wind, solar, hydro and biomass plants receive fixed tariff payments for their electricity over long‑term contracts, with the difference covered by a FIT‑All charge collected on every electricity bill to fund those payments, thus reducing investment risk and encouraging private capital into renewables.
Meanwhile, starting January 2026, the Energy Regulatory Commission (ERC) introduced the Green Energy Auction Allowance (GEA-All), a fee collected by utilities, the grid operator, and electricity suppliers to compensate eligible RE developers. The cost is passed directly to consumers.
The GEA-All functions similarly to the feed-in tariff, applying a per-kilowatt-hour charge to all grid users. Set at ₱0.0371 per kWh, the allowance is projected to generate around ₱5.7 billion annually. It will appear as a separate line item on consumers’ electricity bills. Funds collected through the GEA-All will be managed by the National Transmission Corporation (TransCo), which will distribute payments to qualified RE developers for the power they supply to the grid.
Substantial system losses
High system losses are cited as a key contributor to elevated electricity prices in the Philippines. System losses are the electricity lost in the grid before it reaches consumers, caused by technical issues and energy theft. Financial consultant Bingo Dejaresco described the country’s losses as “significant,” noting that it’s “five percent in Singapore versus 10 percent in the Philippines.”
However, high system losses are largely attributed to electric cooperatives. For example, in 2025, the Ilocos Norte Electric Cooperative (INEC) reported that roughly 600 consumers were not properly registered, inflating system losses that were ultimately passed on to paying members. These inefficiencies were estimated to cost around ₱10 million per month, or about 10% of the average electricity bill.
Similarly, the Zamboanga City Electric Cooperative (ZAMCELCO) continues to face challenges with illegal connections, unmetered households, and unauthorized reconnections, which drain resources, increase system losses, and shift costs onto compliant consumers, according to National Electrification Administration (NEA) Administrator Antonio Mariano Almeda.
Moreover, the Cebu Electricity Rights Advocates (CERA) has urged the ERC to review the current system loss cap, citing its effect on rising electricity rates and business competitiveness in Cebu. According to CERA convenor Nathaniel Chua, electric cooperatives operate under a 12% system loss cap, a major contributor to higher costs for consumers. By contrast, private distribution utilities are limited to 5.5%, comparable to system losses in Singapore.
Lowering Electricity Prices in the Philippines
Lowering electricity prices in the Philippines will require a blend of policy reform, market competition, infrastructure improvements, and strategic planning. A key recommendation is a more diversified energy mix, including coal, geothermal, hydro, natural gas, and renewables.
By avoiding overreliance on any single fuel source, the system can better absorb price shocks and reduce volatility. Indigenous baseload sources like geothermal help anchor supply.
Expanding retail competition is another tangible step. In 2025, the ERC lowered the contestable customer threshold from 500 kW to 100 kW, enabling more small and medium enterprises and organized groups to negotiate with licensed electricity suppliers.
The Green Energy Option Program (GEOP) also empowers qualified customers to source RE directly, encouraging pricing discipline and consumer choice.
(Also read: GEOP in Action: Powering Clean Energy Choice)
Reducing system losses through distribution modernization, anti-pilferage enforcement, and performance benchmarking can directly cut costs by lowering the amount of wasted energy that must be recovered through tariffs.
Finally, ensuring adequate baseload capacity, including dispatchable sources, helps stabilize prices by reducing reliance on expensive spot market purchases during peak demand or supply disruptions.
Together, these measures offer a balanced, practical roadmap for long-term, consumer-oriented electricity pricing reform.
Sources:
https://www.iea.org/countries/philippines
https://www.bworldonline.com/economy/2024/01/10/568081/phl-indonesia-deal-may-cushion-coal-gas-shock
https://context.ph/2024/01/01/12837
https://tribune.net.ph/2025/10/03/coal-still-cool
https://mb.com.ph/2025/12/12/erc-sets-new-power-fee-at-00371kwh-to-fund-renewable-projects
https://mb.com.ph/2026/02/17/an-option-to-reduce-power-costs-in-ph
https://www.pna.gov.ph/articles/1245517
https://cebudailynews.inquirer.net/583377/electricity-in-ph-why-is-it-high
https://lowcarbonpower.org/region/Vietnam
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https://www.pna.gov.ph/articles/1262544
https://www.energy.com.ph/geop
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https://apbi-icma.org/media-article/thermal-coal-prices-hit-4-year-low-in-asia-as-china-imports-wane