Viewpoint: Reducing Rates for Electricity in Mindanao

by David A. Tauli
Mindanao Coalition of Power Consumers

Lately, we have heard proposals, mostly foolish, coming from the Department of Energy and from the Mindanao Development Authority that supposedly will reduce the rates for electric power supply in Mindanao. Even if the proponents were wiser, none of the proposals will result in significant reduction of power rates unless the main cause for high rates in Mindanao is addressed: incompetent, if not corrupt, power supply contracting by distribution utility companies in Mindanao.

In the sordid history of baseload power supply contracting in the electric power industry in Mindanao in the past decade, the one good episode was the power supply agreement in 2013 between the Power Supply Aggregation Group Corporation (PSAGCOR) of the Association of Mindanao Rural Electric Cooperatives (AMRECO) and the GN Power Kauswagan (GNPK) of the Ayala group of companies.

All other power supply agreements for baseload power between distribution utility companies and generating companies in Mindanao have been just one form or another of moro-moro, all show and no substance.

It was only early this year 2016 (in the power supply agreements for the generation of the Malita coal power plant of the San Miguel Consolidated Power Corporation) that the electric cooperatives resumed honest-to-goodness least-cost acquisition of baseload power supply, conforming with the EPIRA requirement that “the contracting and procurement of the equipment, assets and services have been subjected to transparent and accepted industry procurement and purchasing practices to protect the public interest”.

But that was a fluke, resulting only because the electric cooperatives have become wary of continuing to flout the EPIRA requirement for least-cost acquisition of power supply, and because the SMCPC did not fear facing competition for baseload power supply for the electric cooperatives. Unless legal charges are carried out against the electric cooperatives involved in the Apo IPPA Scam and in the Coal Power Plant Scam, the errant electric cooperatives will resume their incompetent (if not corrupt) ways of “negotiating” power supply agreements without carrying out legitimate least-cost acquisition.

The power supply agreement between PSAGCOR and GNPK resulted in an effective rate of around 4.16 pesos per kilowatt-hour. All other PSAs (excepting again the Malita coal power plant of the SMCPC, but including all coal power plants embedded in the distribution systems) have an effective rate per kWh of 5.00 pesos or more. The power supply agreements for power supply from the SMCPC coal power plant in Malita also resulted in a price of around 4.16 pesos per kWh.

The Department of Energy of the government of President Rodrigo R. Duterte has placed the reduction of power rates in the Philippines as one of its key objectives. However, based on recent pronouncements of the DOE as to how they are going to attain that, there are only two chances that it will happen while PRRD is president: fat and slim. It is clear that no serious thinking has gone into the pronouncements coming from the Department of Energy concerning the electric power industry in the Philippines.

But even if the DOE seriously considered the available opportunities to reduce electric power rates, any program they will carry out will prove futile for reducing rates unless the main obstacle to having fair and reasonable prices for electricity were removed: the regulatory capture of the Energy Regulatory Commission by the corporations (mainly MERALCO and the generating companies) that it is supposed to regulate.

One day, hopefully while PRRD is still president, we may have an Energy Regulatory Commission with honest and competent commissioners. When that happens, power consumers in Mindanao can petition the ERC to bring down the rates of the power supply agreements for baseload power to the levels that could have been attained if the distribution utility companies carried out legitimate least-cost acquisition processes. Then, and only then, would we see the reduction of the rates for electricity in Mindanao. – See more at: http://matuwid.org/viewpoint-reducing-rates-for-electricity-in-mindanao/#sthash.mMqCHgmX.dpuf

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Meralco forms RES subsidiary

by Lenie Lectura
01 December 2016 from Business Mirror

THE Manila Electric Co. (Meralco) has established a subsidiary that will serve as its retail electricity supplier (RES).

The utility firm said on Thursday it filed an application for RES license on November 29 with the Energy Regulatory Commission (ERC).  Its RES unit shall be known as Vantage Energy Solutions and Management Inc.

“As a distribution-utility affiliated RES, Vantage Energy intends to promote retail-energy services, which include wholesale contracting, energy trading and sourcing, marketing, selling and aggregating electricity, billing, collection and the provision of other value-added services to contestable customers [CCs],” Meralco said in a disclosure to the stock exchange.

Meralco had said filing an RES license application was one of the options being considered, following  the temporary restraining order (TRO) issued by the Supreme Court (SC) on October 10 prohibiting all orders, resolutions and decisions rendered by a Regional Trial Court in Pasig City.

Meralco filed with the same local court a TRO and/or writ of preliminary injunction against the issuances of the Department of Energy (DOE) and the ERC, particularly assailing Sections 2 and 3, Article I of the 2016 Revised Rules Governing the Issuances of Licenses to RES and Prescribing the Requirements and Conditions therefor; the Revised Rules for Contestability; and, the Resolution Imposing Restrictions on the Operations of Distribution Utilities and RES in the Competitive Retail Electricity Market.

On July 13 the same court granted Meralco’s petition. The ERC and the DOE filed their respective petitions for certiorari and prohibition before the SC. Later on, the SC acted on DOE’s petition.

Aside from filing a RES license application with the ERC, Meralco said then it was also looking at “examining the legal remedies,” possibly filing for an appeal, considering the TRO that has been issued.

When sought for comment if Meralco was still pursuing this, Meralco Senior Vice President Alfredo Panlilio, in a text message, said “legal procedure still ongoing.”

Based on the rules, an end-user with an average monthly peak demand of at least 1 megawatt (MW) is mandated to enter into a retail supply contract (RSC) with an RES by its mandatory contestability date of December 26. The deadline, however, was later moved by the ERC to February 26, 2017.

Subsequently, an end-user with an average monthly peak demand of at least 750 kilowatt (kW) is mandated to enter into an RSC with a RES by its mandatory contestability date of June 26, 2017.

The lowering of the threshold to cover an end-user with an average monthly peak demand of at least 500 kW is set on June 26, 2018, subject to the review of the performance of the retail market by the ERC. 

The ERC has also decided CCs who fail to finalize an RSC with an RES shall have the option to be served by the distribution utility as a supplier of last resort.