Energy developments and local government fiscal resilience

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Last week until this Monday, a number of important developments in the energy sector were announced. I briefly discuss them below.

One, the Department of Energy (DOE) convening a Special ASEAN Ministers on Energy Meeting (AMEM) last April 27 via virtual platform to discuss the latest developments in the Middle East and their implications for regional and global energy security. The meeting was chaired by DOE Secretary Sharon Garin and attended by energy ministers and representatives from all ASEAN member-states.

Focus was on coordinated regional action affecting energy markets and supply chains, particularly in oil-gas supply. It also reaffirmed ASEAN’s collective responsibility to safeguard regional energy security through strengthened cooperation, including with dialogue partners through ASEAN-led mechanisms, and timely policy responses.

Two, the Energy Regulatory Commission decision last April 22 directing Meralco to refund the remaining balance of P14.17 billion to its customers. Meralco completed the  regulatory “true-up” process for the distribution charges from July 2022 to December 2024. There was initial refund of almost P20 billion starting April 2025 at P0.12/kWh, remaining balance of P14.17 billion as of February 2026.

Three, National Grid Corp. of the Philippines earlier announced increase in transmission charge for April because ancillary service (AS) rates, a pass-through cost for supply by power generators that are AS providers during supply-deficit period, has increased from P0.83/kWh in February to P0.85/kWh in March. NGCP’s transmission wheeling rate slightly increased from P0.67/kWh in February to P0.70/kWh in March.

Four, Meralco press conference last Monday, April 27, clarifying many misleading claims about electricity bill charges. The company correctly reiterated that monthly electricity bills clearly show the breakdown of charges – generation charge, transmission charge, system loss charge, distribution charge, missionary electrification charge, taxes, subsidy charge to variable renewable energy via FIT-All, subsidies to poor consumers, and so on.

 Five, Aboitiz Equity Ventures (AEV) press con also last Monday announcing its allocation of P88.5 billion in capital expenditures for 2026, P62 billion for AboitizPower (AP) alone. The important item is AP’s planned 25 percent stake in Van Phong Power Co. Ltd., subject to approvals, a beautiful coal power project in Vietnam. Last year AP acquired the 789-MW Caliraya-Botocan-Kalayaan Hydroelectric Power Plant (CBK HEPP) Complex in Laguna via a consortium with Sumitomo Corp. of Japan. AP also partnered with Meralco PowerGen Corp. (MGEN) in Chromite Gas Holdings Inc. in big capex.

All good, for stable grid and distribution system, for reliable power supply and overall energy security of the country. The most expensive electricity is no electricity, blackout. We should avoid blackout even for a minute. Power supply redundancy, transmission and distribution network redundancy, we should have more of them, not less.

Also last Monday the Office of Executive Secretary (OES) issued a statement, “Recto: No politics, no favoritism in Presidential barangay support.”

Executive Secretary Ralph Recto emphasized that the release of funds for President  Marcos’ “Bawat Barangay Makikinabang Program” development support to 42,011 barangays nationwide is governed strictly by compliance with requirements – not by political considerations.

Under the program, each barangay will receive P200,000, half for development and safety projects such as street lighting, patrol vehicles, CCTVs, and power generators for health centers and evacuation facilities, the other half for “finisher program” for graduating college students to ensure that their education is not disrupted by economic shocks, expected to support up to 200,000 students at risk of dropping out.

I computed, (P200,000/barangay) x (42,011 barangays) = P8.4 billion. Not much given the P6.79 trillion total budget for 2026.

But since our budget deficit in the first quarter of 2026 has already reached P356 billion, and our interest payment for the same period has reached P273 billion or an average of P3 billion a day, interest payment alone, we need to cut some spending somewhere.

In this case, funding increase for local governments and barangays should be compensated by funding cut of some national agencies by at least a similar amount. My unsolicited advice is spending cut in 2027 of at least P4 billion for DILG and at least P4.4 billion for CHED and state universities and colleges.

Our outstanding public debt as of February 2026 was P18.16 trillion. Even if government will make zero new borrowings for the rest of the year, at 6.8 percent interest rate, the 10-year government bond rate, our public debt will rise to P19.39 trillion by February 2027. The P1.23 trillion is for interest payment alone, at an average of P3.37 billion a day.

Since it is impossible that government will make zero new borrowings, and net borrowings in the first quarter this year is already P539 billion or average of P6 billion a day, we are likely to have nearly P20 trillion by February 2027 with average interest payment of nearly P3.5 billion a day. What a waste.

Let us help the local governments to have fiscal resilience not by more taxation but by shrinking the budget of some national government agencies.