David Celestra Tan, MSK
September 8, 2017
Most Filipino consumers know that every month their electricity bill takes a significant part of his budget. And he better pay up or his lights will be cutoff.
One side of his brain is revolting but the other side is being brainwashed into believing that it is just life and all people are paying the same. They are also told that the reason Meralco’s rates are high is because our Asean neighbors are subsidizing their power rates.
Recently some reports are headlined that Philippine power rates are the same as Singapore as if that should be a consolation.
So let us just get to the facts. What is the truth?
The Philippines is the highest in Asean together with Singapore at P5.84 per kwh. But that is only for the Industrial Sector. Still, Thailand is lower by 8%, Malaysia by 19.35%, Indonesia by 71.58%.
For Commercial customers, the Philippine rate for 2015 was P7.49 per kwh and Singapore was only 3% lower. Thailand was lower by 28.3%, Malaysia by 33.64%, and Indonesia by a whopping 71.30%.
For Residential customers, The Philippine rate is the highest ay P8.90 per kwh and Singapore is lower by 18.32%, Thailand by 38%, Malaysia by 32.36%, and Indonesia by a mindboggling 85.51% at only P1.29 per kwh. That is one hell of a government subsidy.
One reason our neighbors have lower rates is because they use more natural gas generation compared to us that uses more coal. That is right, LNG. Despite this, your beloved Meralco negotiated with its sister company MeralcoPowerGen 4,011mw of power projects, all coal! Then they are unabashedly claiming that they are looking for “least cost power”.
Let us remember that in the case of Meralco, 30% of their energy sales are from Residential customers and 40% to Commercial customers. Both of these customer class are charged by Meralco at much higher rates.
Meralco’s charge to all classes of customers for generation is uniform at P4.1299 per kwh in December 2015. One reason their rate to industrial customers is the same as Singapore is because Meralco works hard and gives better deal to these contestable customers.
For example, Meralco’s systems loss charge to industrial customers was only P0.1681 per kwh or 4%. This is lower than the systems loss rate that Meralco has been boasting about at 6.47% which beats the government limit of 8.5%. Admirable on the surface.
However, Meralco’s systems loss charge to commercial and residential customers as of December 2015 was P0.4322 per kwh or 10.46% of the generation charge which is the right way to compute it.
(Systems loss is the amount of power that Meralco purchases but lose in its system and not able to sell. Its amount must be based on the amount of the average generation rate.)
The systems loss of 6.47% being publicized by Meralco is the average for all its customers. It is being tolerated by the ERC. The law says the limit should be 8.5%. Your consumer group MSK had filed a petition asking ERC to enforce the 8.5% for all customers, not average. So far we have not heard from them.
Currently, commercial and residential customers that comprise 70% of Meralco’s sales are being charged 10.46%, much higher than the 8.5% limit. In effect, Meralco’s rate for industrial customers is lower partly because they charge them only 4% in systems loss, less than half what they charge us, the captive customers.
We believe the numbers also show that Meralco charges industrial customers lower for distribution, metering, and supply fees.
We also estimate that our Asean neighbors have much lower generation charges than Meralco’s P4.1299 per kwh in December 2015. We are sure if Meralco’s procurement for power supply that it passes on to the consumers are done on arms length manner and honestly trying to achieve least cost power as their franchise require, our generation rate will be much lower by 10 to 20%.
As long as the government is allowing Meralco and the other private DU’s to negotiate the power supply with sister companies and our rate setting methodologies are anti-consumer, the Philippines will always have the dubious distinction of having the highest rate in Asean.
Being the same as Singapore in 30% of the user base is not good enough. Our economic rivals are Thailand, Malaysia, Vietnam. And we are at a big disadvantage against them in the critical power production cost. Sadly, it does not need to be this way. Someone in the government especially the ERC just need to move for the consumers.
When will that happen? We continue to hope. That’s all we have for now.
MatuwidnaSingilsaKuryente Consumer Alliance Inc.