Press Release - Gatchalian urges NPC to endeavor to reduce UCME subsidy to lower electricity costs

Senator Win Gatchalian said that the National Power Corporation (NPC) should endeavor to reduce the universal charge for missionary electrification (UCME) subsidy to possibly bring down electricity rates for consumers connected to the main transmission grid.

"Look for ways to reduce UCME. I know that hybridization is one and connecting to the grid could be another," Gatchalian told NPC officials during a recent Senate hearing on the proposed budget of the NPC, which is mandated by law to energize far-flung, off-grid areas, and islands in the country.

UCME is used to subsidize the more expensive cost of providing electricity in off-grid areas.

The vice-chair of the Senate Committee on Energy, however, noted that the UCME subsidy has steadily increased over the years, from P7.34 billion in 2015 to P24.62 billion in 2024.

Currently, NPC is pushing to accelerate the hybridization of its Small Power Utilities Group (SPUG) diesel power plants using renewable energy resources.

According to the NPC, hybridization lowers the cost of energy by 2 to 3 pesos per kilowatt hour. The NPC said that with the completion of hybridization for 16 projects, the NPC expects to generate up to P1.3 billion in savings from fuel costs by 2025. The NPC, however, accounts for only 30% of the energy supply in missionary areas, while 70% is provided by new power providers (NPPs).

"How do we convince the NPPs, which account for 70%, to hybridize? I understand they have supply contracts, so we should explore the possibility of incentivizing or compelling them, if necessary, to hybridize. The UCME subsidy is steadily increasing," the senator said. At the same time, Gatchalian urged the NPC to pursue a rationalization study of the UCME that the DOE has conducted.

"I am not suggesting that we impose the true cost of energy because if you do that, it might discourage business establishments, and they might leave and cause massive unemployment. But we need to find the right balance," he said.

According to the DOE, the islands of Palawan and Mindoro account for about 60% of the UCME subsidy.

"I'm very optimistic that one day, the benefit of hybridization and rationalization of the UCME would