Bending the Curve: The Impact of Gradual Policy Reforms on Electricity Prices

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This chapter aims to assess the effect of a major structural reform in the power industry on power rates. With particular application in the Philippines, we examined the trend of electricity prices for each customer class and determine how each trend behaves before and after the reform was implemented. Critical to this assessment is disentangling the effect of the reform with the other factors that may affect power rates. These may include macroeconomic shocks and price shocks to major power inputs such as oil. Results suggest that changes in power prices are evolutionary, owing to the fact that reform implementation remains incomplete. Nonetheless, we find strong evidence to suggest that power rates are higher in the post-reform regime, but the rate at which these rates grow is much slower.