Regulatory Decongestion Essential to an Effective ERC

David Celestra Tan
26 December 2014

To be fair to the ERC, the Epira dumped on it an inordinate amount of responsibilities to making the privatization and deregulation of the power sector work. In the last 13 years it has struggled under the weight of these responsibilities while also trying to find and develop itself and acquire its own soul as a regulator. While the consumers are trying to be sympathetic to their “flight”, the regulatory shortcomings have been costing all of us untold billions per year in avoidable charges and we are not seeing resolute efforts on their part to do better.

The Energy Regulatory Commission is now generally thought to be too slow in coming up with timely decisions to support power development and failing to regulate the areas that they should but regulating or overregulating where they should not be. Consumers feel their decisions tend to favor Meralco and inadequate in checking NGCP and WESM. Critics call it regulatory capture. So far “sala sa init sala sa lamig”. It has become too bureaucratic, process-centric, and too busy that it has been missing the main objectives of its existence which are to assure ample power supply at reasonable costs. The “how” became more important than the “why” and the “when”.

The ERC can become an efficient regulator, effectively safeguarding the public where they are needed, and still promoting the continued development and delivery of power supply services through timely and judicious rate regulation. There has got to be a happy balance there somewhere.

Decongesting the ERC

The ERC has been suffering from bureaucratic overload, unable to properly evaluate and hear and resolve the mountains of rate petitions and accreditation applications from the distribution utilities, electric cooperatives, power generators, transmission service providers, licensees, own-use generators, consumer groups, and rule-making decisions. It is too congested by its own making many times ignoring its own rules of practice. Every year it receives hundreds of applications and petitions, from simple COC to complex rate-resetting, Feed-in tariff rules, and capex authorizations of DU’s and electric coops. All these go through financial evaluation, public notices, public hearings both in the provinces and in the main office, the addressing of intervenor and oppositor issues, and applicant compliances, all fighting for schedules from an overwhelmed bureaucracy. They also have to deal with political pressures and powerful lobbyists and the loss of trained analysts to pirating by the big power groups.

1. Streamlining processes where it is over regulating
a. Methodology of Review of Generators Tariff to Assure Fair and Reasonableness
This might surprise many people.

Power Generation is supposed to be a deregulated industry where the returns on investment is not regulated. However, ERC is actually regulating the profits on generation ostensively because it is a charge that will be passed on to the consumers. Effectively, they are regulating a supposed unregulated sector. In determining fair and reasonableness of the generation contracts tariff, it evaluates and sets limits on how much should be the proponents return on investment. It uses Weighted Average Cost of Capital or WACC that is based on the declared capital cost and project finance structure of the generation project. They decide arbitrarily to disallow certain investment costs and operating costs and reduce generators applied for tariff. The approved tariffs result to very inconsistent levels depending on the prescience of the evaluator or how adept the applicants are in justifying the numbers Or how well they are connected. This is regulation.

The ERC can meet its duty to assure that the generation rates are fair and reasonable without crossing the line towards undue regulation and being consistent with the unregulated nature of the generation sector.

Focus of evaluation must be on whether the rate is fair and reasonable in comparison with other existing projects of similar service, fuel, and technology. This necessitates sensible and logical benchmarking. A determination of fair and reasonable price of service. Not a fair and reasonal return on investment.

A few years ago an island IPP got an ERC approval for power supply using refurbished equipment. A few months later, another IPP applied for a similar service to the same customer using also refurbished equipment. But the latter’s rate approved by the ERC was a full P2.00 per kwh or 25% higher than the first IPP with 5% more fuel consumption allowance to boot. It meant a higher subsidy from the government by P140 million a year or P1.4 billion over its 10 year term.

In yet another contract by the same electric coop, a competitive selection process was held and the announced bid was P9.38 per kwh. The contract however was signed at P12.80 per kwh, P3.42 per kwh higher, and it was approved by the DOE, ERC, and NEA! It caused an undue increase of P171 million a year in missionary subsidy for that contract alone. (You see these acts by government officials and you just scratch your head).

Had ERC been using price of service benchmarking as a consideration, they would have questioned this new application and maybe realigned them to the previous and lower IPP whose equipment was the same age and technology, save for justifiable adjustments for unique costs of the project which in no way will cause an increase in rate by 25%.

Similar inconsistencies in rate decisions abound in Mindanao and the Visayas. We are seeing inconsistencies in the rates Meralco is negotiating with its sister company generators and even in ancillary service purchase agreements of NGCP.

Processes are good and the ERC needs to have them. It should opt however for competitive processes and not bureaucratic processes. Allow the market to determine whether the rates are fair and reasonable. And we don’t mean the WESM market whose current rules are prone to manipulation and stacked against the consumers. WE mean the open bidding for power supply contracts, under which the ERC will nonetheless establish a benchmark price as the maximum bid price to protect the consumers.

b. Not all rate changes should be subject to review

Would you believe that if a distribution utility or generator would like to reduce their rate, they still need to apply with the ERC and justify why it is feasible for them to reduce their rate? Why waste the regulators time when reductions are good for the consumers? Why not consider the approved rates of the DU’s and Generators as the “maximum” with their right to reduce rates anytime they want. And they can always to go back to the previously approved maximum. This will not deter those who are in a position to reduce their rates temporarily.

The requirement of the Epira Law for the ERC to approve all rates that will be passed on to the consumers is being taken too literally. The higher rule should be whatever will be for the public interest, and lower rates is one, should be allowed and facilitated.

c. Certificate of Compliance

Another example of an area where it is over regulating is the issuance of Certificates of Compliance (COC’s) to owners of generating units for own-use generation. This takes 60 to 90 days and involves the site inspection and submission of voluminous financial and technical data.

The Epira Law mandated the ERC to be in charge of this COC but it was meant to be only applicable to generating facilities that will be part of the grid and intended to be a ministerial function where the only thing it needs to validate is whether the facility has all the required government permits to start operating.

It is not intended to require COC’s for own use generation unless that facility intended to supply to the grid or part of the ILP (interruptible load program). Can you imagine that this own-use generation is being processed through the ERC bureaucracy and go up to the Commission for approval? Its cost of generation and technical suitability is the outlook of the owner and the ERC should have no role in it. Nothing is passed on to the public or to the government.

d. Enforcement and Follow through is where ERC should make more effort to protect consumers…..That and properly regulating the regulated sectors.

If the ERC is to become true to its mandate as a protector of the consumers for fair and reasonable charges, they have to go beyond issuing rules and resolutions.

1. The downtime limits and fuel cost consumption and cost limits of power generators specially the sister companies of DU’s need to be monitored and audited. ERC can deputize independent CPA firms, who are not saddled by conflict of interests, to do these consumers audit.

2. ERC can improve the transparency in the downtimes and capacity charges of Meralco and the DU’s by requiring them to post the information in their websites so the public would have a chance to monitor their compliance to their power supply agreements specially those of sister power producers.

3. The WESM that reeks of manipulation and exploitation needs to be policed because PEMC is not able to police its own rule-making “market participants”.

(By the way, why have they not disclosed the WESM trading behavior of the IPP’s in the fateful months of November and December 2013? We just read that ERC’s investigation unit is not done yet. They say it involves 1,440 transactions in November and December of 2013. Don’t we think a whole investigation unit can analyze easily ten (10) transaction flows per day of who offered what and the behavior of their related generators contracted with Meralco? It means the 1,440 could have been analyzed in 144 days or just 6 working months.)

e. Properly Regulating the regulated Sectors…Distribution Utilities and Transmission Co.

1. The ERC needs to look deeper into the rate setting decisions it made on Performance Base Rate Setting and Systems loss allowances.

The Epira law gave them the leeway to adopt alternative methodologies. But they forgot that the law premised those to be “in the public interest”. Section 25 specifically provides that retail rates must be based on investments INCURRED. Period. No leeway for planned and projected and promised investments.

PBR is a farce and must be discontinued. It surprised us when a rep of the Philippine Institute of Development Studies told MSK reps that our proposal to discontinue PBR is too radical. Our answer? PBR is a radical injustice to consumers so if the solution is perceived to be radical, so be it!

All we need is a change in methodologies. More on this in our petition to ERC.

2. Systems Loss

We reiterate our call for tighter rules and more transparent methodologies on how much systems loss should be charged to the consumers. The consumers might be happy with an absolute maximum to anyone of 8.5% and anything lower than 7% average systems loss, the DU or Meralco can keep. This is a better form of performance based rate setting.

For electric coops, systems loss improvement programs must be set over the next five (5) years by similarly giving them performance based methods. Over time the larger coops of 25mw and up demand, can be limited to 13% with a system cap of 11.5%. anything lower than they can keep as performance bonus.

These areas for regulatory decongestion and refocusing are by no means complete. The main point is the ERC needs to review its regulatory mind-set, search for and get in touch with its regulatory soul, and decongest itself from areas where they should not be regulating or spending too much time and focusing on where its regulatory power will serve best the interest of the public. Through its rate approvals it sends profound price signals to the investors in the power industry. As gatekeeper of retail rates to consumers, it should not lose sight of its main reasons for existence which are to promote ample supply of power at fair and reasonable rates. Many times it only focuses on the former…..and their bureaucratic process.

All of ERC’s decisions must pass the ultimate test which is “does it serve the public interest”? That is key to its regulatory soul. The wise and judicious use of their time, resources, and powers must serve the greater good.

There are signs that the ERC is getting better at looking after the consumer and working towards reducing rates. The net metering system for 100kw of solar and wind is a big leap for the consumer mankind. And the secondary cap it steadfastly imposed on the WESM appear to be a make up to consumers for previously and routinely approving a shocking 85% (P4.15 per kwh) increase in generation rate in December 2013. ERC can be judicious if they want to be.

For now, the ERC must decongest itself. Service delayed is service denied.

Matuwid na Singil sa Kuryente Consumer Alliance


DOE’s “First Come First Served” Approach to RE FIT Allocation Outdated

David Celestra Tan
20 December 2014

When the subsidized rate for Renewable Energies were announced by the ERC, many green energy companies, local and foreign wanted to take advantage of such attractive rates. But the Philippines, evidently aware of the potential cost to the government or the consumers of uncontrolled RE power, established limits on how much each RE power shall be installed and subsidized.

The DOE, under the leadership of then Energy Secretary Rene Almendras, established the limits on each of the RE technologies as follows:

Solar: 50mw
Wind: 200mw
Biomass: 250mw
Mini-Hydro: 250mw
Ocean: 10mw
Total of: 760mw

During the time of Energy Secretary Reyes, there was an unprecedented amount of RE projects being accredited and given permits to develop projects. Some in a matter of weeks after application. It was like the great Louisiana land grab!

The ERC eventually approved the Feed-in Tariffs per kwh for each of the RE technologies

Solar: P9.68
Wind: 8.53
Biomass: 6.63
Mini-hydro: 5.90

Solar energy originally lobbied hard for P17.00 per kwh hence the low allocation. Can you imagine a subsidy of P12.00 per kwh for solar?

None for Ocean (bless your heart ERC!)

The difference between these rates and the average generation of each of the distribution utility using the RE energy will be the subsidy. In the Meralco area, this means, each solar energy produced will be subsidized at P4.28 (assuming a solar FIT rate of 9.68 minus the average rate of Meralco of 5.40 per kwh.)

The wind projects will be subsidized by P3.13 per kwh.

Now the question for DOE is who will be the lucky ones that will be given these subsidies?

By the time the new team of Energy Secretary Carlos Jericho Petilla arrived at the DOE, not many of the Reyes-registered RE projects had progressed much. Partly because the Feed-In Tariff rate took sometime for the ERC to approve. But mostly, many of the registrants turned out to be opportunists and speculators. The DOE announced that the best way is to allocate these subsidies on a “first come first serve basis”.

Now many RE power developers are racing against time and each other to complete their project and be declared to have achieved “commerciality”.

By all indications, solar is now oversubscribed and wind is too. Magically, the DOE announced that they will increase the allocation for solar to 500mw from 50mw, a ten-fold increase, with every kwh of energy produced receiving P4.28 per kwh in feed-in tariff subsidies. That is approximately P600 million in monthly subsidies (P7.2 billion a year and P72 billion over 10 years!) for 500mw of solar from the original P60 million a month or only P720 million a year.

The way wind projects are being announced it can reach about 350mw in two years. That would take about P322 million a month (P3.8 billion a year) in subsidies from the original P185 million a month or P2.2 billion a year. Biomass and mini-hydro are undersubscribed so far.

DOE’s “first come, first served” allocation is actually contradictory to sensible power project investments and development. Who would put in money, not knowing that you will get the FIT rate, until you finish your plant? Most solar projects are being pursued on the expectation that the target will be increased to 500mw. Power Investment is not a crap-shoot. The DOE’s first come first served approach had worked only in the beginning because there were not enough players and projects. Now that there are many, the FIT allocation or eligibility must be updated to more sensible and predictable methodology.

The DOE must now subject the allocation to competitive bidding and the lowest offers get the allocation. Solar developers must achieve a certain level of development before they are eligible to bid. Presumably before they start construction.

Competitive bidding will bring down the cost of solar power from the current FIT of P9.68 and wind from the current P8.53. The DOE must also factor in the cost of the transmission lines for the proposed location. Competitive bidding, instead of being stuck with a 9.68 per kwh, will bring down the RE subsidy from the P4.20 per kwh for solar and P3.13 per kwh for wind. Costs of solar installations are continuing to fall and the subsidies must similarly come down.

Beyond that, continuing with a “first come, first served” approach will discourage real developers because it is actually too risky. And why 500mw of subsidized solar energy? Why not 250mw only and the rest be focused on roof-top solar that may not need FIT subsidies.

Why do we always take for granted that the electricity consumers can be charged whatever and however the government and the power industry decide are chargeable? We need to keep the other eye in the cost consequence to electric consumers of the policy decisions and government rules.

Lets hope the DOE updates its first come, first serve approach and reduce the subsidies that will be absorbed by the electricity consumers as FIT-ALL. Happy holidays!

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

Ball on Sec. Petilla’s Court in Reducing Electricity Rates

David Celestra Tan
16 December 2014

It was a wonderful show of consumer sensitivity on the part of current Energy Secretary Carlos Jericho Petilla to have called for a multi-sectoral task force to look for ways to reduce electricity prices.

That task force, meeting only once a month, for six months have finally come up with a consolidated recommendations done by the Philippine Institute of Developmental Studies, a supposed Academme think tank, to be turned over to the Honorable Secretary Petilla last November 20, 2014. It was however cancelled I heard because Sec. Petilla had other more urgent things to attend to, perhaps the emergency powers.

The ideas and proposals for power cost reduction were submitted by Meralco, the IPP Association, PIDS, Government Watch, the Philippine Chamber of Commerce, NEA, ERC and Matuwid na Singil sa Kuryente Consumer Alliance which made a detailed and definitive reduction target of P3 per kwh from Meralco’s rate of P12.37 in July 2014.

Now the ball is on the court of Secretary Petilla. Is reducing power cost really high on the priority of his tenure as Energy Secretary and by the administration of President Aquino? Is putting our beloved country on the road to more competitive power a legacy that they are aspiring to leave for millions of Filipinos?

Secretary Petilla has done more in pursuing reforms for competitive power than the last three energy secretaries combined. He is at least pursuing them. An open bidding for bilateral power supply contracts called DASAP. An auctioning of RE projects. And hopefully deeper and meaningful reforms of the trading rules of the WESM of which the DOE is in charge.

I am sure at some point Sec. Petilla will be available for the hand-over of the adopted recommendations to reduce power costs in the country. He might even be able to fit it in during this busy Christmas seasons of parties and holidays.

The real issue will be what will he do with it. Will the DOE’s focus in the coming months in the use of the Presidential Emergency Power that was recently passed by the legislature? We just have to give the good Secretary the benefit of the doubt that the reason he formed the task force is so he can have some input to work with. The consumers and the commercial and manufacturing sector will be waiting.

The ball is on Secretary Petilla’s court.

But that is on the government side. MSK would like to assure its members and all Meralco consumers that it will be pursuing its own advocacies for the reduction of the rates. We will be filing a series of Petitions for changes in regulatory rules with the appropriate government agencies mainly the Energy Regulatory Commission and the Department of Energy.

Keeping our fingers crossed.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

Meralco’s Generation Rate Reduction Welcome but Temporary

David Celestra Tan
11 December 2014

We join the millions of Meralco customers in welcoming and rejoicing the recent announcement of reductions in the generation rate, and consequently the total electricity bill, in Metro-Manila and the National Capital Region.

From P5.63 per kwh five (5) months ago, it was down to P5.11 per kwh in November and now they announced it is going to be P4.94 per kwh! That’s P0.67 per kwh or 12% lower. Tremendous! A welcome Christmas gift to Meralco consumers as opposed to the cruel increases of 90% and 100% in November and December last year.

Not to rain on their parade, these Meralco reductions are fortuitous, external to Meralco, and temporary. The reductions did not come from systemic and methodical improvements in the way they procure their power, in their management and administration of their power supply agreements, in the inclusion of cheaper hydro in their generation mix, and in the improvements in the trading and market settlement rules at the WESM. These are reforms being sought by Matuwid na Singil sa Kuryente Consumer Alliance (MSK) that will permanently reduce Meralco’s generation charge from P5.63 to P4.00 per kwh.

Meralco ascribed the expected reduction to P4.94 to lower international prices of fuel, to higher power supply due to “normal operations of major power plants” (meaning less tube leaks and downtimes), lower consumption due to the cold weather, and the consequently lower prices in the WESM markets. When it went down to P5.11 per kwh in November, it was due to less downtimes from their power suppliers. This means if these external contributory forces to generation rate are favorable, the Meralco generation rate can even be lowered to P3.50 per kwh and make our country truly competitive in power costs and attract more investments in manufacturing. Without systemic reforms however, when these fortuitous events reverse themselves eventually as they would, the generation rate of Meralco would easily be back to P5.63 per kwh.

Maybe there is less manipulation in the WESM market and the secondary cap set by the ERC is having its desired safeguards for consumers. Meralco said the WESM market average price reduced by P1.70 per kwh which sufficiently offset the increases of P0.10 and P0.03 per kwh from their bilateral power suppliers.

In August and September 2014 Meralco’s reported purchases from WESM averaged 43.05 and 35.59 per kwh which were higher than the reported P23.00 and P33 per kwh in November and December 2013 when they asked for generation rate increases of 80% and 100%. Yet, in August and September 2014, Meralco’s average generation rate decreased 8.5% and 5.28% respectively instead of increasing.

The logical conclusion is Meralco’s rate is influenced more by the quantity of power it is buying from the WESM and less of the price of the WESM. And the amount of power it is buying from WESM is dependent on the energy delivery, downtime, and performance of their contracted generation suppliers.

To permanently lower generation rates, what we need are systemic improvements in how Meralco is buying, managing, and strategizing their power supply. Achieving least cost for consumers should always be their objective, not maximization of profits. This is something that the new owners of Meralco must realize. Meralco is a public service utility and distribution monopoly. Unlike the telephone business, there is no competition. They therefore must be faithful to their franchise obligation.

These they can achieve only if they buy power on competitive and arms-length basis. If they manage their power suppliers and hold them accountable for excess downtime. If they improve their energy mix by buying more from lower cost sources including hydro. If they don’t monopolize power supply with negotiated sweetheart prices and terms with their own companies. These are uncompetitive and market domination practices that are detrimental to the consumers.

We welcome reductions in power costs. Temporary and transient reductions however must not make the consumers and government policy makers believe that reforms are no longer needed because “Meralcos rate is going down”. The reduction in Meralco’s generation rate is welcome but it is only temporary.

Let us work for permanent and systemic reforms for sustainable reductions in power rates to consumers.

Matuwid na Singil sa Kuryente Consumer Alliance.Inc.

Understanding Meralco’s Systems Loss Charge

How much is Meralco charging you for the electricity they buy but lose in their distribution system either through technical or pilferage reasons?

Most people think it is about 4.7% which is the only systems loss percentage shown in the front page of your monthly electric bill and computed as a percentage of your total electric bill. That appears to be quite impressive because the ERC allows up to 8.5% under their Resolution 17 passed in 2008?

Meralco however has been charging residential and commercial consumers about 10.5% recently and it had been as high as 14 to 15% in 2010 to 2012.

What do the Epira Law and the ERC Resolutions say about Systems Loss limits?

The Epira Law of 2001 empowered ERC under Section 43(f) to adopt alternative rate setting methodologies that will result to a reasonable price of electricity. The “caps shall be determined by the ERC based on load density, sales mix , cost of service, delivery voltage, and other considerations it may promulgate.”

The ERC passed its Resolution 17 series of 2008 providing that the systems loss (technical and non-technical) that the utility can pass on to its customers shall be the actual but not to exceed 8.5% for private utilities and 13% for electric cooperatives of the total kwh purchased and generated.

A reasonable reading of provision can only mean that the pass on charge to the customers shall be actual and not exceed 8.5%, absolutely. No ifs and buts. However, ERC’s implementation apparently has been loosely interpreting this 8.5% to be an overall average for the DU, thus giving Meralco the flexibility to play with the numbers and made it legal for them to charge residential and commercial customers, which comprise more than 60% of its customers, up to 15%. On the other hand, the systems loss charge to industrial customers has been lowered to 1.5%, as long as their overall average is not more than 8.5%.

To make matters worse for the consumers, the ERC passed in 2011 its Resolution 11 to “clarify that Resolution 17 of 2008 only require the DU to submit to the ERC, through a Sworn Statement, the results of their updated annual segregated systems loss”.

Yes, “sworn statement” only. No validation for such an important charge amounting to billions a year to consumers. What a regulatory abdication! It should be noted that ERC’s own Resolution 17 said that the systems loss that the utility can pass on to its customers shall be the ACTUAL but not to exceed 8.5%. How then can ERC assure the public that Meralco is only charging the ACTUAL systems loss on a monthly basis, if it only relies on Meralco’s own statement, even if sworn?

At the back of your electrical bill, Systems Loss is shown as about P0.62 per kwh. It was as high as 0.75 per kwh in 2011. Systems loss charge must be a percentage of the generation charge. This should have been only P0.45 per kwh if we are to stay at 8.5%.

Meralco sells approximately 16 billion kwh a year to residential and commercial customers. An overcharge of 0.30 per kwh translates to P4.8 billion a year. That’s at least P24 billion excess charges for the last five (5) years. Why is that being allowed by the ERC? Well, they are saying that the 8.5% is the allowed overall systems average. What has been happening is Meralco has been reducing their systems loss charge to their industrial customers to only 1.5% to 4%. They have to recover that from the residential and commercial customers and that is why you and I, the captive customers, have been paying way more than the allowed 8.5%.

It does not look like there is any solid data and monthly process to determine whether 1.5% is the true systems loss to the industrial customers and that it should really be 10 to 15% to residential and commercial customers. It is very non-transparent.

It is the right of Meralco to charge less to industrial and higher voltage customers but why should they recover the difference from residential and commercial customers? This is a form of inter-class subsidy, something abhorred and prohibited by the Epira Law of 2001.

Meralco is now only using “delivery voltage” instead of considering also load density, sales mix, and cost of service. It is allowed to use “other considerations that it may promulgate”, to which we suggest “public interest”.

The Energy Regulatory Commission must tighten the rules and declare that 8.5% is the absolute maximum that distribution utilities are allowed to charge any customer. No one should be charged more than that. This would be a truer form of “performance based rating making” where Meralco will be made to absorb any systems loss beyond 8.5% if they don’t perform and manage their system to stay under that limit.

To the question why do they charge residential and commercial customers in high density areas of Makati, Ortigas, Metro-Manila, the same as those in remote areas in Quezon and Laguna and even Rizal, ERC itself said Meralco is allowed a uniform percentage for the same class of customers. The problem with this is Meralco can choose to neglect their distribution system efficiency and collection in the remote and sparsely populated service areas because the consumers in Makati, Ortigas, and Quezon City are covering the inefficiency. For transparency and accountability, Meralco should be made to distinguish at least two classes of residential and commercial customers and present technical and pilferage data on actual systems losses for each group to support their monthly charge.

Systems Loss is supposed to be a pass-on charge where they should not profit from their own inefficiency and inability to collect their bills. For now there is no way to determine whether Meralco is over-recovering specially from the metro residents and businesses because there is no more oversight as long as they keep their average lower than 8.5%. And they have been saying it is 7%.

Your systems loss charge is not 4.7%. It is more than 10% and it used to be up to 15%.

Practitioners in the power industry like to say the devil is in the details. In the case of systems loss charges, the devil is in the averages. Sad that the Energy Regulatory Commission that is supposed to be safeguarding the public was the one who opened the door for the devilish averaging.

MSK will file a petition to correct the inequities and lack of transparency in the systems loss rules. And perhaps seek a refund of the excess charges since 2009.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.
Next: The Case for the Junking of the Unfair and Illegal PBR

Consumers Can Better Support RE Development if Meralco Power Cost Reduced P3 per kwh

If Meralco and the concerned agencies of the government, the ERC, DOE, PEMC, JCPC, respond to the consumers aching call for reducing electricity rates by P3 per kwh in the Meralco area, the country and consumers can afford to support more FIT-ALL subsidies for renewable energies.

Currently the FIT-ALL subsidy is about P0.045 per kwh chargeable to all consumers of electricity nationwide. In the Meralco area, this would be a very well felt additional burden because residential and commercial consumers are already suffering from the highest electricity rates in Asia. This Fit-All charge will cover about 400mw of various renewable energies, Solar, wind, biomass, and mini-hydro.

There is a mad scramble among many investors, old and new, local and foreign, to launch their RE projects to take advantage of the Feed-In Tariff. Solar particularly seems very influential in getting a hearing of the DOE for a ten-fold increase of its initial target of 50mw to now 500mw.

Biomass and Wind are also racing against each other for higher fit allowances. All these are subsidies that will be added to the bill of the consumers. It can reach P0.50 per kwh the way things are going from the current P0.045 per kwh.

But then it is a charge well spent at least for cleaner energy and environment. The consumers might not mind and might easily afford even if it reaches P0.50 per kwh……but only if the excess and erroneous charges reaching P3.00 per kwh can be eliminated from the Meralco electric rates.

MSK’s campaign to reduce Meralco’s rate by this much is based on a line by line analysis of Meralco’s charges and identification of reasons why those items are bloated. The irony is 87% or 2.60 of the achievable P3.00 per kwh reduction are from pass-on charges on which Meralco is not making money . Fully half or P1.50 per kwh will come from changing the way its procures and manages its power generation supply. Only 13% or 0.40 per kwh will come from a reduction of Meralco’s undue revenue from the erroneous, and we believe illegal, PBR or performance based rate making. (Don’t you love those deceptively suiting names!)

Unless Meralco and its investors believe they are entitled to these erroneous charges, especially from their right to monopolize and self-negotiate generation charges, this rate rationalization will be a win-win and patriotic achievement for the country. Consumers can better afford more renewable energy projects.

Sen. Santiago adopts MSK findings that Meralco can drop its rate by P3/kwh

On Nov. 12, 2014 during the second regular session of the 16th Congress, Sen. Miriam Defensor-Santiago files a resolution directing the proper Senate Committee to conduct an investigation about the report that Meralco can cut its commercial and residential rates by P3/kwh. The report appeared on the Oct. 24 issue of the Philippine Daily Inquirer and contains the findings of the Matuwid na Singil sa Kuryente Consumer Alliance, Inc. (MSK). Below is a copy of the said resolution courtesy of the official website of the Philippine Senate.