Energy Subsidy Reform: Lessons and Implications by Benedict Clements David Coady Stefania Fabrizio Sanjeev Gupta Trevor Alleyne Carlo Sdralevich

Author:Benedict Clements, David Coady, Stefania Fabrizio, Sanjeev Gupta, Trevor Alleyne, Carlo Sdralevich
Language: eng
Format: epub
ISBN: 9781484339169
Publisher: International Monetary Fund
Published: 2013-08-15T00:00:00+00:00

Electricity Subsidies

Philippines

Context

The Philippine electricity sector became financially unsustainable in the late 1990s. Electricity generation and transmission were monopolized by the state-owned National Power Corporation (NPC) prior to the reform started in 2001. During the 1980s, the NPC’s mismanagement led to chronic electricity shortages. To solve this problem, the government opened up the generation sector to independent power producers (IPPs) in the early 1990s to increase supply. Because the NPC was a major purchaser from the IPPs, the IPP initiative left the NPC highly vulnerable to market, exchange rate, and fuel price risks in IPP projects. Eventually, the NPC became financially insolvent in the late 1990s. This was due to the failure to increase tariffs in line with rising costs, as well as the decline in demand (and higher external debt burden) in the aftermath of the 1997 Asian crisis.2

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