Eliminating delays in the country’s power-related projects will be the ultimate goal of the proposed $60-million Millennium Challenge Corp. (MCC) threshold program, according to the Department of Finance (DOF), as it will fund the Energy Development Governance Efficiency Project.

DOF Secretary Frederick D. Go, the government’s lead for engagement with the US aid agency, said in a statement on Thursday, July 9, that the project is designed to address the Philippines’ specific policy and institutional constraints to growth.

According to the DOF, the project is structured around two distinct components intended to modernize the power grid, with the first focusing on policy and regulatory reforms designed to streamline energy planning, programming, and permitting, which officials expect will significantly accelerate the development of new energy projects.

Meanwhile, the second component will finance targeted investments to reinforce these reforms and directly improve the efficiency of operations within the energy sector.

These initiatives seek “to reduce delays in project implementation, improve the reliability of electricity supply, and encourage greater private investment in the energy sector.”

Go described the MCC board’s decision last June 24 as a “strong vote of confidence in the Marcos Jr. administration’s reform agenda” that reflects international trust in the country’s institutional strengthening.

The DOF chief added that the grant “comes at an opportune time and provides a significant boost to our efforts to strengthen the country’s energy security.”

Important to these reforms is the ongoing engagement between MCC and the Energy Regulatory Commission (ERC).

Recent discussions have centered on regulatory modernization, digitalization, and tariff analysis. Specifically, the program targets “longstanding bottlenecks in the power sector,” including rate resets, power supply agreement (PSA) approvals, and capital expenditure (capex) applications.

Go told Manila Bulletin earlier that the threshold program “serves as a critical stepping stone toward qualifying for a future MCC compact program,” which involves much larger, five-year grants aimed at poverty reduction.

This initiative serves as a follow-up to the recent announcement that the MCC board approved the Philippines’ threshold program in June. The grant is now awaiting the necessary approval from the US Congress, which is anticipated by August, with formal negotiations and the signing of the agreement targeted for September.

This push for energy reform is particularly vital as the country continues to grapple with high power costs and an energy crisis exacerbated by global supply shocks, such as the conflict in the Middle East and volatility in the Strait of Hormuz.

Historically, the Philippines last secured a full-scale MCC compact grant worth $434 million during the Benigno Aquino III administration, which focused on infrastructure and community development. The country’s first threshold program, implemented from 2006 to 2009, focused on fiscal policy and anti-corruption efforts, successfully exceeding all nine of its performance targets. - Derco Rosal