Demand and Supply Elasticity of Energy

2016

-10% increase in energy consumption

-demand peaked at 8.7% attributed to several factors such as the increase in temperature and utilization
of cooling equipment aggravated by the strong El Nio, the conduct of National and Local elections
during the first half of the year, increase in economic growth, and entry of large power generating
plants.

- The residential and industrial sectors remained the major drivers of electricity consumption in the
country while Luzon remained the largest on a per grid basis.

-increase in demand was supplemented by growth of total installed capacity at 14% from 18,765 MWh
(2015) to 21,423 MWh (2016) majority coming from coal-fired power plants

-Mindanao has the highest recorded growth in terms of capacity at 31% from 2015-2016. From 2017-
2025 a total of 5,068 MW committed projects are expected to come online.

-Along with supply security, the DOE also embarks on increasing the reliability and resiliency of the
system Mindanao was adversely affected by El Nio which caused the decline in hydro power
generation and curtailment of supply during the first half of 2016. The entry of large coal-fired power
plants in Mindanao on the latter part of 2016 has addressed these supply shortfalls.

(LAINE KANING TWO PICTURES

HERE IISA LANG SA ISA KA SLIDE PLEASE
THANKIESSS)
DEMAND AND PRICE ELASTICITY

In conclusion, Demand for electricity consumption is relatively inelastic to price implying that there are
few options available to the consumer in response to changes in the price of energy. Philippine power
rates remain one of the highest in Southeast Asia as of end-2016 due to continued lack of government
subsidies. The Philippines distributors of energy has been privatized with only intventions of the DOE,
which has led to the capitalism and monopoly of electric supply within the country.

In MERALCO, the government owns only 5% of the totality of the company, whilst private corporations
own 95%. Basic analysis would tell us that at the end of the day, majority wins. If majority wants to
make profit, and as long as they abide by what is mandated by the basic rules of the DOE, then they can
get away with it.

And we, the Filipinos, have to succumb to their prices because the electric market of the Philippines is
limited, with only few players in the industry. This fewness gives them the leeway to hike up prices,
knowing that the public will have no choice but pay.
SUPPLY ELASTICITY

The supply for electricity is relatively elastic considering that the Philippines is quite rich in natural
resources and can find other resources to utilize to power the nation. This is exemplified by the creation
of the Bangui Windmills, the Maria Christina Hydroelectric plant, among others. When the cost of
supplying electricity by a certain natural resource has become too expensive, then we can opt for the
utilization of others, albeit not quickly or easily, but it is possible.

MAJOR PROBLEM

DOE forms team to probe oil price hikes

Energy Secretary Alfonso Cusi has assembled a task force to investigate the successive oil price hikes
implemented by petroleum companies in the past five weeks. He said the Department of Energy-
Department of Justice (DOE-DOJ) Task Force was re-assembled to validate if there are irregularities in
the recent increases in domestic oil prices. In the latest price adjustments on Monday, oil firms raised
gasoline prices by P0.95 per liter, diesel by P0.60 per liter, and kerosene by P0.95 per liter. This is the
fifth consecutive week gasoline prices were raised totaling P2.95 per liter and the fourth successive
week for diesel and kerosene, equivalent to P1.75 per liter and P2.70 per liter, respectively. Prior to this,
gasoline prices were raised for the whole month of July, August and two weeks in September. Prices of
diesel and kerosene were also increased for the whole month of July and three weeks in September.In
particular, the DOE will investigate if there are market abuses being employed by oil companies,
Fuentebella said.
The DOE has a price monitoring function on oil trading in the international market and its effects on the
domestic prices of petroleum products as mandated by the Oil Deregulation Law of 1998, which also lets
market forces dictate domestic oil prices.