Energy Regulatory Commission (ERC) Chair Francis Saturnino Juan said reducing the electricity cost gap between on-grid and off-grid areas in the Philippines requires long-term structural solutions—not an immediate rollback of the Subsidized Approved Generation Rate (SAGR).

Juan made the remarks amid calls from lawmakers to defer the SAGR adjustment in missionary electrification areas, which are off-grid communities that rely on subsidized power. House Deputy Minority Leader and APEC Party-list Rep. Sergio C. Dagooc endorsed a “Manifesto of Support for the Deferment of the Implementation of the ERC Order Increasing the SAGR in Missionary Electrification Areas,” citing concerns that higher generation rates could burden local consumers.

In a letter dated 22 January 2026, ERC Chair Juan explained that the SAGR is intended to reflect the true cost of generation while balancing the financial sustainability of power providers and affordability for consumers.

“Yes, one way to narrow the gap is to lower the True Generation Cost Rate (TGCR),” Juan told Power Philippines. “But this won’t happen overnight. It will require replacing expensive generation sources with cheaper options like solar plus battery and other hybrid systems—or extending grid connections, such as planned interconnection projects in Mindoro.”

The ERC noted that rising diesel prices, higher transportation costs, and the deteriorating condition of NPC-SPUG facilities have increased generation costs in off-grid areas. Without SAGR adjustments, NPC-SPUG and other new power providers (NPPs) risk under-recovery, threatening both their financial viability and the reliability of electricity supply.

The Universal Charge–Missionary Electrification (UCME) bridges the gap between actual generation costs and the subsidized rate. However, excessive reliance on UCME threatens the fund’s sustainability. As demand in off-grid areas grows—driven by economic developments in regions like Mindoro and Palawan—the Commission said a balanced SAGR policy is essential to conserve UCME resources for those who need them most.

“Even after the interim adjustment, commercial and industrial consumers in off-grid areas will pay roughly PHP 7 to PHP 9 per kilowatt-hour, still far below the actual generation cost of PHP 18 to PHP 30 per kWh or higher in many SPUG (small power utilities group) areas,” the ERC letter stated. “The adjustment merely keeps the subsidy requirement at a manageable level, delaying the need for a further increase in UCME that would affect all consumers nationwide.”

Starting February 2026, the UCME subsidy will be PHP 0.2763 per kWh, intended to help fund off-grid electricity costs. Juan emphasized that any SAGR adjustments aim to strike a balance between affordability for consumers and the financial sustainability of power providers in remote areas.

Juan also told Power Philippines that the UCME rate provisionally approved in 2025 for the National Power Corporation (NPC) remains insufficient to fully cover operating costs and subsidies. Additional funding will still be needed to sustain operations and support new power providers in these areas.

The ERC acknowledged the concerns raised in Rep. Dagooc’s manifesto but said deferring the adjustment could worsen under-recovery, jeopardize service reliability, and ultimately increase the burden on all consumers in the future.

Should the cost of powering off-grid communities be shared nationally through universal charges, or should it be borne locally by the already high-cost areas themselves?

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