Electric Consumers’ 12New Year’s Wishes on ERC

David Celestra Tan, MSK
30 December 2017

We hope that the OMB findings on infractions of the five ERC Commissioners in evidently facilitating Meralco’s evasion of the CSP deadline, will lead to somethings better not only to changes in personalities but also in the regulatory soul of the Energy Regulatory Commission.

It’s a New Year and we hope again for better treatment of consumers by the ERC.

  1. We wish that new ERC Chair Agnes Devanadera will be an agent of positive change for a more balanced and efficient ERC with a clear sense of regulatory purpose, and for her to be judicious and cautious as she starts to immerse herself in this complex and treacherous power sector. (Actually it is not that complex if navigated with the right heart and moral compass).
  1. We wish the ERC had been awakened from its regulatory stupor and hypnotized capture as an institution and will resolve to remain free and discover the wondrous life fulfillment of standing up for truth, justice, and the rights of the long exploited 100 million Filipinos.
  1. We wish the ERC Commissioners and their OIC’s will discern that there can be a happy balance between assuring that capitalists providing electric delivery services can be assured of fair return on their investments and protecting the interest of the electric consumers and the country’s energy competitiveness. That the capitalists (and ERC) will realize that it is to their long term interest to treat customers with respect and that the way to win their loyalty long term is to provide good value in services. Not in overcharging them through their captured regulators. Electricity, especially its distribution, is after all a public service that is essential to the daily lives of our people and economy. 
  1. We wish the appointing party, the Office of the President, will step in and avoid the paralysis at the ERC by bestowing it with quorum of three through the deferment in the suspension of the two least guilty of the four suspended commissioners while he is looking for proper replacements. (Except however for these extended commissioners to be not involved in evaluating the Meralco midnight contracts).
  1. We wish the ERC will find a win-win resolution to the eight (8) Power Supply Agreements totaling 4,015mw awarded by Meralco to power generation projects controlled by its sister Meralco PowerGen where the CSP deficiencies of about 2,000mw are resolved to assure the country has additional power supply by 2021 and for the remaining 2,015mw to be subjected to open competitive bidding. And for it to similarly resolve with transparent guidelines the estimated 300mw of PSA’s signed by electric cooperatives and filed with the ERC from November 6, 2015 to April 30, 2016.
  1. We wish the ERC will commit to the pursuit of truly least cost power by assuring true competition and to the assurance of future supply by opening the power generation sector to independent generators and preventing monopolization and cartelizationFor it to start hearing MSK petition Case No. 2017-007 on cartelization and to clearly define the rules on determining concentration of market power in generation. For it to establish clearer rules on when swiss challenge CSP’s would be justifiable, an area that is being abused in the off-grid areas resulting to disadvantageous PSA’s that increase missionary subsidies in the billions.
  1. We wish the ERC will stop the overpricing of power by eliminating the inequities of the PBR rate making methodology or Performance Base Rate making and the systems loss loopholes that had been enabling Meralco to make an unconscionable 25% return on equity for a franchised distribution utility monopoly that had been granted by the state.
  1. We wish the ERC as a quasi-judicial body will be more quasi for the public interest and less blindly judicial in its processes that had been making it consumer unfriendly. We wish ERC will free itself from being enamored as a judicial institution and pursue not only the letter of the Epira Law and its guidelines and resolutions, but temper its decisions with a spirit for public interest. The what for consumer interest to be as important as the how of its judicial processes.
  1. We wish for the ERC to become more efficient and timely by strengthening itself on areas that it needs to regulate and shedding those areas that it does not need to regulate.Towards efficiency and transparency, for it to issue clearer guidelines for applications.
  1. We wish for the ERC to strengthen its bureaucracy by enhancing its ability to recruit, train, and retain needed right-hearted talent and professionals. 
  1. We wish new Chair Agnes Devanadera will infuse the ERC with a code of conduct to avoid its Commissioners and officials from being compromised specially by the vested interests.
  1. We wish for the ERC to be blessed by President Duterte, as the appointing authority, with the right commissioners who would have the professional competence and heart for the consumers, not beholden to the vested interests, and committed to the pursuit of the ERC’s mandate to assure sufficient supply of power at fair, reasonable, and least costs.

We wish for the President as he goes about making his choices, to be guided by His Infinite Wisdom, to realize this rare and crucial opportunity to finally right the course of this wayward Agency that has been neglecting our people and country for so long. We cannot let down our future generations and curse them with the legacy of a power industry lost in its own disarray, forever enticed and captured by the vested interests, and incapable of looking after the public interest. 

(And we hope in the process he does not recycle old ERC people who messed up the Agency in the first place).


Happy New Year to all!

Thought for this Giving Season: “To the world you are one man, to one man you are the world”


Matuwid na Singil sa Kuryente Consumer Alliance Inc.

MERALCO POWERGENS 3,551mw Power Supply Contracts – Are they Midnight? Are they not Sweetheart? Are they Cartelization?

David Celestra Tan, MSK
27 December 2017

Meralco and their supporters are going to great lengths to deny that these contracts are midnight and that they are not sweetheart deals?

  1. What is a Midnight contract or appointment?

A contract or appointment is Midnight when it was signed in the last hours before the authority of the approving party expires.  In other words it is designed to beat a deadline which is the expiration of the authority of the signing party.

In the case of the seven (7) power supply contracts that Meralco signed with seven companies all controlled 49 to 51% by its sister company MeralcoPowerGen, they were signed only on April 26 and 27 and filed with the ERC at 7am on April 29, 2016, just the day before the new deadline set by the ERC for the implementation by the ERC.  April 30, 2016 was the last day Meralco had a right to sign power supply contracts without going through a competitive bidding called CSP.

We do not need to be too literal that to be called midnight they needed to be filed with the ERC in the Midnight of April 30, 2016.  The act involved the clear effort to rush the signing of the contracts and the beating the deadline for the filing of the ERC application to beat the April 30, 2016 deadline.

Just to give you an idea, many power generators and electric cooperatives had appealed to the ERC for the power supply contracts they signed before the original November 6, 2015 deadline but they needed time to get all the board approvals and preparing the complex ERC documentation for application.

Practitioners in the ERC know that it will take a minimum of 15 to 30 days to complete a proper ERC application before the agency considers them acceptable.  The seven Meralco contracts totaling 3,551mw of power generation projects took only two (2) days to complete. And if you look at the documentation, they are from one template with the same pricing formula. And they all passed ERC rigorous checking of sufficient of documentation in form and substance.

These seven (7) contracts were clearly rushed to beat the April 30, 2016 deadline. Clearly bonafide Midnight deals.

  1. What is a sweetheart deal?

With slight variations, a sweetheart deal or contract is one signed between two parties at terms very favorable to one or both. In the case of the Meralco deals that it signed with its sister company MeralcoPowerGen, the prices and contract terms that will be passed on to the consumers were just negotiated between the two related parties.  Meralco drumbeaters had at one point claimed that they had negotiated aggressively to get the best terms for the consumers.  It is a most preposterous idea and insulting to the publics intelligence that the prices that the two related parties with the same officers and stockholders negotiated to be charged to the public, would be “least cost” and beneficial to the latter.

There is really no other way to assure the public that the prices and terms are competitive and not sweetheart than to hold a truly competitive bidding.

It is clear with all the three year efforts of Meralco to avoid a truly open and competitive bidding that they want to negotiate and corner the contracts with its sister company. The problem is it would be the public paying for the price that they negotiate between themselves. It clearly is sweetheart arrangements that are disadvantageous to the public.

The apathy of the government including the legislators to raise this issue is something that is eerie and unusual specially in this country where we make a big deal of government officials doing procurement and signing contracts with no or rigged biddings.  Many government officials have cases in the office of the ombudsman for contracting and disbursement anomalies. In both cases, it involve the peoples’ money. In the latter, it is peoples’ money that had been collected in the form of taxes and already in the government coffers.   In Meralco’s case, it is peoples’ money that are still in their pockets.

Except in the case of Meralco, the amount of the overcharge can easily be a mind boggling P12 billion a year or P240 billion over the 20 year life of the contracts. And there will be more if this practice continue to be condoned.

  1. Why is this cartelization?

The 4,015mw of contracts Meralco signed with companies controlled by its sister company MeralcoPowerGen is with 5 main partners. Aboitiz, DMCI, Global Business, San Miguel, and EGAT of Thailand. All are minority partners of MeralcoPowerGen.

Cartelization is when business groups cooperate to control the business and prices to the exclusion of competition. This can also be called oligopolization, the cousin of monopolization.

Even more scary is that these six companies already control 10,000 mw of power generation capacity and dominates both the bulk supply market and the wholesale electricity spot market.

They would control 90% of the power demand in the whole country.

If this happens, real competition is dead.  True competition is the main hope of the consumers of getting charged power that is least cost and fair and reasonable.  Without competition they have no chance.  It is for this reason that even the imperfect law, the Epira Law of 2001, tried to mandate ERC to protect the public interest.

Unfortunately we have yet to see ERC, other than Lip service, truly doing so.

It is a sad time for the Filipino electric consumers, 100 million of them.

“Evil triumphs when good men do nothing”. Consumers have been waiting for a few good men in positions of power to do something.  We have been waiting for a long time. It is a sad commentary on us as a people.


MatuwidnaSingilsaKuryente Consumer Alliance Inc.

Urgent Biddings Needed to Assure Future Power Supply. Lets Hope Old ERC Officials are Not Recycled

David Celestra Tan, MSK
22 December 2017

The suspension of the four (4) ERC Commissioners by the Office of the Ombudsman over the inexplicable postponement of the CSP policy will throw in limbo the 3,551mw that Meralco signed with sister company Meralco PowerGen that it hoped will come on line from 2020 to 2025. Or more accurately the future supply of power.

While the government is sorting this out, it is important that we don’t lose sight of the country’s need for power in the future, a total of about 2,000mw by 2021. The DOE and ERC must spearhead a backup plan to assure the building of new power plants and maybe curing the CSP deficiency of some of Meralco’s contracts.

1. In the least, the government can hold truly competitive biddings for 300 to 400mw of coal plants and similar size for LNG among IPP’s who are not members of the Meralco Cartel. Ayala, TeamEnergy, Kepco, Lopez Group, Phinma, Zamora Group, Puregold, and the Group of Greggy Araneta that is rumored to be actively getting into power. The result of this bidding can be used as a benchmark for future power supply. Meralco PowerGen should be barred from being a partner in this project to assure a truly competitive bidding. This can be administered by an independent 3rd party.

The DOE can go on a road show to invite power generation companies to come to the Philippines and participate in a truly competitive bidding.

2. The seven (7) midnight contracts of Meralco PowerGen
One thing interesting about these seven contracts with template terms is that they are all binding only upon approval by the ERC. It seemed they knew that the contracts can be questioned on CSP grounds. The other thing that is interesting is the projects where the Aboitiz group is a major partner and probably the managing partner of Meralco PowerGen, are the ones progressing fast in getting ERC approval. Redondo (300mw) and Atimonan One (1,200mw).

Another compromise option is for the Meralco partners, Aboitiz, DMCI, San Miguel, EGAT, and Global Business give up half of their signed contracts and the remaining be subjected to swiss challenge or for them to commit to reducing their rate to the benchmark bidding.

3. The Bidding will not result to lower rates if the terms negotiated by Meralco with sister company power gen in the seven midnight contracts are adopted in future CSP. Capacity payments even for maintenance period should not be allowed. No availability and no output, no pay. Procurement for fuel must be truly competitive and not from overseas sister companies like in Singapore.  Fuel consumption allowances must be verified. Etc.

4. LNG
This is an excellent time to use the buying power of Meralco to help boost the LNG projects promotion of the government instead of all of them being coal as planned by Meralco PowerGen.  Perhaps Meralco can hold a bidding for LNG fueled power. The DOE and ERC must send a strong message to Meralco the distribution utility that unless there is a true CSP, there will be no approval of projects. Let us not forget that it is the condition of Meralco’s distribution franchise to supply power in the least cost manner.

5. MVP Group
The Epira law already allows the MVP Group that owns Meralco to have 50% of their energy requirements from sister companies.  There only needs to be an assurance of market testing the prices and terms. It appeared they wanted to corner 100% of Meralco’s requirements at negotiated rates. 50% is already a lot of contracted power. 15 billion kwh a year! Let us moderate our “grid”. If they really want to invest, why not own 100% of each project instead of 49 and 51%?

6. Brownfield projects
It should not be forgotten that while the country’s existing power plants are getting old, they can still be rehabilitated and efficiently be made to provide reliable installed capacity. There could be a bidding among brownfield projects with completion times of 12 to 18 months instead of three (3) years for greenfield projects.  Most likely they can be more cost competitive. Besides, why destroy more terrain and scenery to build new plants?

7. Strategic Generating Capacity
It is also time to rethink the need of the government to own strategic generating capacity to serve as protection of consumers and calibrator of power supply and prices. The Malaya Power Complex is one and the Agus Hydro Complex in Mindanao is another. Bidding for reserve capacity can also be considered strategically.

8. Cartelization
Cartelization and oligopolization needs to be verified by the ERC and considered in the holding of the subsequent CSP’s. MSK had filed a petition with the ERC to investigate the cartelization of power generation. That was in September 13, 2017 with ERC Case No. 2017-007. It has been 100 days and we have not yet heard from the ERC. Yet almost weekly we hear about rulings and hearings on the Redondo and Atimonan One application of Meralco.

9. Locational strategy
Where should these power plants be? That is a function of where are the transmission lines and where strategically we can spread out the plants to protect from natural disasters and assure redundancy lines for power reliability?

10. OIC’s for ERC
Most likely the Office of the President will appoint OIC’s to replace the four (4) suspended ERC Commissioners so that the Agency can function while its Commissioners are suspended.  Let us hope that the ERC gets fresh faces with more regulatory soul. Let us hope ERC officials from the past who messed up the regulatory agency in the first place are not able to talk themselves into getting reappointed to ERC. (it happened in one government energy organization).   There are many knowledgeable people with integrity who are qualified to act as Commissioners at ERC. If we start with people with good hearts, their minds will follow.

Meanwhile, the DOE and ERC should call for truly competitive biddings on generation supply to assure we have sufficient power at market tested prices.

11. Hello DOE!
One thing odd about this seven (7) midnight contracts of Meralco is that the DOE has been conspicuous by their silence. A lot of people have been wondering why. The future of power supply is at stake and we wish the DOE can provide some direction on some resolution for the national interest.

12. New Chair Agnes Devanadera has her work cut out for her. But she is used to being in a hot seat and she is up to the challenge. There are good career professionals in the regulatory agency. Just need some good OIC’s who will be sources of solutions and not more problems at the Agency.

Notes on the Ombudsman Decision:
We have to be impressed with the discernment the Office of the Ombudsman displayed in evaluating the merits of the complaint lodged by the Alyansa para sa Bagong Pilipinas (ABP).  The OMB saw through the lame excuse of the Commissioners and hit it right on the head. The Commission acted as a collegial body and we will not really know who pushed for the CSP deferment to accommodate Meralco. Some decent and competent professionals are going down in flames.

Let us hope this is a start of an ERC that would be truly and honestly looking after a balance of interest between power service providers and the consumers.

Merry Christmas to all Electric Consumers!!!

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

Govt’s Right to Tax Power Comes with Obligation to Protect Electric Consumers From Exploitation

David Celestra Tan, MSK
17 December 2017

The new government tax on coal and diesel will be painful additions to the monthly electric bills of the already overcharged and overburdened Filipino electric consumers. It will add P0.12 per kwh to our power cost. But that’s alright.We the consumers will brave through it as part of our duty in nation building, just as we braved the 12% VAT imposed on power in 2004 even if the EPIRA law of 2001 exempted it. That one added a whopping 0.90 per kwh.

We respect the governments right to tax and we consumers are happy to contribute to TRAIN. (We hope though it leads to somewhere beneficial to all)

We wish however that the government will step up to its equal obligation to protect its taxpayers as electric consumers. The government apathy and nonchalance on CSP and PBR has been costing the captive consumers as much as p2.50 per kwh in the areas served by Meralco and other privately owned utilities covering 75% of the national electricity consumption.

If only the government will act on opening the generation sector to true competition (and we don’t mean RCOA) we can reduce our power cost by p1.00 per kwh. They started a CSP policy but were not really committed to it.

The government agency that has specific mandate to protect us the consumers is the Energy Regulatory Commission. On the PBR rate making methodology alone we estimate an overcharge of P0.75 per kwh. On systems loss charges 0.15 to 0.30 per kwh.

Meralco as a public service utility is making 25% profit on equity AFTER tax, way over the 12% the Supreme Court ruled in 2012 as the rightful maximum tax. When your organization MSK asked during the last public hearing on PBR why that is allowed, the ERC commissioners present went to great lengths to justify by saying the “economic conditions” is different!!! This means to them the “economic conditions” now are much riskier and unfavorable that Meralco is entitled to making 25% instead of 12% per year.

Out of curiosity we compared the economic indicators when the Supreme Court made the ruling in 2012 and now and NOW is much better with less risks. GDP is higher, interest rate is lower, Meralco’s collection rate is higher, its sales is growing 6 to 10% and there is no insurgency. Fuel costs and forex changes are passed on. Meralco is having it so good!

Coal is Meralcos favorite fuel currently and would be the fuel of all the 4,015mw of new power projects it negotiated with its sister company MeralcoPowergen to come on line by 2022 with contracts to 2050. With the sweetheart prices and contract terms they negotiated among themselves on the generation side, those sweetheart profits will be in addition to the 25% they make on the distribution side.

The government through the ERC must reform the PBR to preempt the profiteering opportunities down to the legal 12% not 25% per year.  It must enforce honestly the CSP policy and truly open the bulk power generation sector to more deserving investors. They must look into and guard against cartelization. The ERC owes it to our people.

Reducing power costs will make our business sector competitive and encourage more production and employment. Those lead to sustainably higher tax revenues.

We are okey paying those Coal and VAT taxes. But please don’t leave us out to dry for profiteers to feast on. Government through the ERC has this equal obligation. 

The private sector capitalists cannot be expected to restrain themselves and not overcharge. Maximizing profits is in their DNA. It is up to the government to draw the line and make and enforce the rules to protect the consumers.

Sadly, even when the government is trying to do something good, the electric consumers get hit hard. The DOE and ERC doled out super generous FIT rates of 9.69 and 8.68 to solar. Those means the consumers are paying subsidies of p4.69 per solar kwh for the next 20 years. Why punish us? And consumers still have to be charged for the ancillary services to support those solar plants.

All these do not even include the vicious cycle of overcharges and refunds in billions and billions that are in the ERC system.

The government has the right to impose taxes even on power for the country’s fiscal support. However government should not renege on their obligation to protect the consumers. That is taxation without protection.

MatuwidnaSingilsaKuryente Consumer Alliance Inc.


ExciseTax on Coal Not As Damaging to Consumers as Apathetic Implementation of True CSP Policy

David Celestra Tan, MSK
10 December 2017

Our comrades in the Pro Consumer Advocacy movement have asked why MSK is not among the protesters against the proposed tax on coal.  Well, the reason is in our view it would be Looking Up the Wrong Alley, Barking Up the Wrong Tree.

We must all prioritize our battles.  The largest damaging to consumers first.

An energy writer quoted power industry players saying that higher coal excise taxes will hurt Philippine competitiveness. The writer went on and said that these “missteps and myopic view on policymaking may just prove more damaging for the entire country”. (heavy words!) Quoted in various papers lining up against  tax on coal are DMCI’s Semirara and Meralco.

This quote from Meralco is a gem. “consumers in its franchise area have enjoyed some of the largest tariff reductions worldwide due to substantial reductions in the generation charge, as well as distribution charge and system loss charge, thus raising the excise tax on coal may take away gains from the country’s increased competitiveness”.  Very glib!

Just for the record, the drop in Meralco’s generation rates were results of the opportune drop in world fuel prices in the last three years for coal and LNG. It was not a result of any Meralco do-good programs. The reduction in systems loss is largely a result of the drop in these generation rates. The reduction in Meralco’s distribution charge was a result of the expiration of its authority to charge extra to recover in the 3rd regulatory reset period an underrecovery in the 2ndregulatory period. It is not accurate for Meralco to claim credit for these “gains” that will be taken away if an excise tax is imposed on coal.

The Department of Energy estimated that the overall increase in the electricity rate to the consumers of the proposed tax on coal that fuel many of our power plants, and 100% of the negotiated power plants between Meralco and Meralco PowerGen, will be from 0.05 to 0.09 per kwh.  Given that the consumers in the Meralco area are already overcharged by as much as 1.50 per kwh, any addition can be viewed as unbearable.  And we guess you can say it is worth going to war over.

That potential increase in rate of coal generated power however is only 3% to 6% of the estimated damage to consumers of the apathetic implementation of the Competitive Selection Process (CSP) and the anomalous PBR rate setting methodology.  If the generation market is opened to true competitive bidding the generation rate could be lower by 0.30 to 0.70 per kwh than what Meralco negotiated. The so called performance based rate setting methodology is also adding about 0.50 to 0.65 per kwh to Meralcos distribution charges.  Compared to the total of P1.15 per kwh of these two, the P0.09 per kwh tax on coal will not be as damaging.

The tax on coal will go to the national coffers and used for public services. It is part of the governments Tax Reform for Acceleration and Inclusion (TRAIN) intended to raise revenue for the government. The overcharges on Meralco rates on the otherhand would go to the pockets of its stockholders, part of how they make an unconscionable 25% return on equity AFTER tax.

The tax on coal will also partially penalize the dirty polluters of the planet, a kind of reparation for damaging the environment.

We can understand the Consunji’s of DMCI campaigning against the measure because it will reduce the gargantuan profits they will make on their Semirara coal. Meralco also needs to protect against increased costs of using coal because they just signed 4,000mw of coal projects with various generating companies controlled by its sister company Meralco PowerGen.  The excise tax will increase generation rates using coal by only P0.09 per kwh.

The same companies who grouped together to effectively form a Meralco cartel in power generation are not waving the flag for consumers when they negotiated among themselves these 4,000mw of power supply without benefit of true competition that would have reduced the price to consumers by P0.30 to P0.75 per kwh.

The same companies who grouped together to effectively form a Meralco cartel in power generation are not waving the flag for consumers when they negotiated among themselves these 4,000mw of power supply without benefit of true competition that would have reduced the price to consumers by P0.30 to P0.75 per kwh.

We hope that the Congress will pass this tax on coal into law with a rider that the Department of Energy and the ERC immediately implement resolutely the Competitive Selection Process policy as a way to mitigate the impact of the tax on the consumers.

The tax on coal will not be as damaging to consumers as the ERC’s apathy towards implementing the CSP. That’s P 0.09 vs P1.15!  Is there a need to say more?

Matuwid na Singil sa Kuryente Consumer Alliance Inc.