Focus on the Global South - Philippines Programme

Metro Manila electricity consumers are up in arms this April, after finding out their bills nearly doubled. The web has become the site of choice for consumer action. One blogger wrote,

“I've been very depressed since Thursday upon receiving my Meralco bill for one month worth PHP 41,902.95 pesos. I have lost sleep and energy to do anything trying to make sense of this. How can the government allow this? I cannot understand why we have a president who doesn't care about the people. I am hoping that the next president will address this problem of oppression. Electricity isn't like PLDT and Globe where you can just switch if you're unhappy with the service. People need electricity to survive. Our kids need aircon in this heat. I want to know who is getting rich at our expense because I'm SO MAD AND I'M NOT GONNA TAKE THIS ANYMORE.”

This appears to be a widely shared sentiment, whether a household is consuming less than 100 kWh or more. Bloggers are comparing bills, and an online petition has been launched on the social networking site FACEBOOK.  

Meralco, addressing this growing number of angry consumers, explained on their website: we are only distributing electricity, it’s in generation where charges went up. It’s our suppliers, silly.

In the words of Jose P. De Jesus, President and Chief Operating Officer of Meralco,

“The rise in generation charges springs from the high cost of electricity that Meralco buys from its suppliers. These suppliers consist of the National Power Corporation (NCP), Independent Power Producers (IPP) and Wholesale Electricity Spot Market (WESM). Meralco does not add any mark-up to the cost of electricity purchased from these electricity suppliers. The generation cost, which averages about 50-60% of your electric bill, goes directly to Meralco’s power suppliers and adds nothing to Meralco’s income.” 

Generation rates increased by approximately 0.93 centavos/kWh—from P 5.817/kWh in March to P 6.7699 in April. (see table below) The increase in charges supposedly do not go to Meralco, but are only ‘pass-through’ components that go to electricity suppliers, such as Independent Power Producers (IPPs).

Of course we shouldn’t simply take Meralco’s word for it. For one, the Freedom from Debt Coalition’s POWER campaign has always maintained an alternative view. In ’10 Reasons Why Electricity Bills are High’ for instance, FDC pointed out,

“MERALCO has always claimed that it doesn’t earn from the high generation charges of its IPPs, and that it is merely passing on to its IPPs whatever it charges its customers for generation. MERALCO is telling the truth. But that is not the entire picture. For while MERALCO doesn’t itself earn from the high generation charges of its IPPs, the Lopezes do. A simple review of the financial statements of the Lopez holding company and its generation companies will show this.”

The Lopez family, a key shareholder of MERALCO, also owns Sta. Rita and San Lorenzo plants. Sta Rita’s average generation charge increased by P 1.8579/kWh, while San Lorenzo’s went up by P1.4919/kWh, according to Meralco’s computation. Generation charges on the Wholesale Electricity Spot Market (WESM) also increased by P 1.9783/kWh. MERALCO attributes billing charge hikes primarily on WESM prices.

Clearly, groups such as FDC are not only pinning the blame on one family. They point to several interrelated factors and conditions, including inherent weaknesses of the Electric Power Industry Reform Act (EPIRA) and resulting flaws in the WESM, the failures of privatization, and the pitfalls of oligopoly control over essential services. In other words, expensive power rates should be viewed as a bigger contradiction. More than just scrutinizing the fine print in our electricity bills, it must be traced back to conditions that characterize the power industry in the country.

“EPIRA has spelled out the provisions to create competition in the industry but on the contrary the law actually institutionalized oligopoly in the system where the market is dominated by a small number of players who are able to collectively exert control over supply and market prices. EPIRA provisions are in fact founded on oligopolistic market structure which is ironically inconsistent with its primary objective to promote competition in the power sector,” according to FDC.

Short of saying, it’s the oligopoly, stupid, groups such as FDC underscore the importance of empowering and organizing consumers. Empowered consumers serve as a counterforce to corporate excesses and profit-centered service provision. Rather than confine action to routine monthly complaints, electricity consumers must be provided the space to participate in decision-making processes that affect them, in order to reclaim and transform the power industry. Formations such as EmPOWER Consumers and National Association of Electricity Consumers for Reforms (NASECORE) are among existing formations that push for more meaningful consumer interventions in the industry.

The Generation Charge is a pass-through component of the Meralco bill. The level of the Generation Charge is adjusted on a monthly basis as prescribed by the Energy Regulatory Commission in its Order dated October 13, 2004 under ERC Case No. 2004-322 approving the "Guidelines for the Automatic Adjustment of Generation Rates and System Loss Rates by Distribution Utilities" or the AGRA.

   COMPUTATION of the GENERATION CHARGE for April 2010*    (Applicable for Customers Not Under TOU, CCP, and Ecozone)
             Based on March 2010 Generation Costs

Source		(A) GWH (million kWh) Purchased	(B) Energy Share (%)	(C) Basic Generation Cost (PhP)	(D) Other Cost Adjustments (PhP)	(E = C+D) Total Generation Cost for the Month (PhP)	(F = E/A) Average Gen Cost (March 2010) (PhP/kWh)	(G) Average Gen Cost (February 2010) (PhP/kWh)	(H) Incr / (Decr) (PhP/kWh)
NPC and WESM
NPC**		759.02	34.14%	4,313.87	(101.85)b	4,212.03	5.5493	5.4664	0.0829
WESM***		389.56	17.52%	4,729.67	(304.01)c	4,425.66	11.3607	9.3824 A	1.9783
Subtotal		1,148.58	51.66%	9,043.54	(405.86)	8,637.68	7.5203	6.6709	0.8495
IPPs	Dispatch a
QPPL	96.05%	302.20	13.59%	1,341.57	(0.64) d	1,340.93	4.4372	5.4799	(1.0426)
Sta. Rita	61.70%	432.45	19.45%	2,923.30	-	2,923.30	6.7598 e	4.9019 B	1.8579
San Lorenzo	96.04%	339.52	15.27%	1,998.06	-	1,998.06	5.8850 e	4.3931	1.4919
Subtotal	78.39%	1,074.17	48.32%	6,262.93	(0.64)	6,262.29	5.8299	4.8292	1.0007
Philpodeco		0.29	0.01%	1.16	-	1.16	3.9688	4.6651	(0.6963)
MMPC		0.13	0.01%	0.87	-	0.87	6.4692	6.4655	0.0038
TOTAL		2,223.17	100.0%	15,308.50	(406.50)	14,902.00	6.7030	5.8520	0.8510
Generation Rate Adjustments
Pilferage Recovery							(0.0274) f	(0.0275)	0.0001
High Load Factor Rider							0.0220	0.0147	0.0073
TOU Differential							0.0022  g	0.0024	(0.0002)
Amortization of March 2010 under recovery							0.0700	0.0000	0.0700
Generation Charge Billing Month ----->							6.7699    April 2010	5.8417    March 2010	0.9282

Notes:

* based on March 2010 supply month preliminary bills of power suppliers

** includes NPC TSC, Assigned TSC (Masinloc, Makban, Pagbilao, Sual and Calaca) and residual from NPC special programs

*** based on March 2010 preliminary bill and other WESM adjustments; WESM purchases were 14.5% of Net System Input.

 

 

a - The dispatch figures shown are the capacity factors of the IPPs' power plants.

b - for GRAM, ICERA, Franchise and Benefits to Host Communities, and NPC Station Service

c - for Market Fees and other billing adjustments

d - adjustment for transmission line fee

e - The rise in IPP’s overall generation cost was due to the increase in First Gas' cost of fuel due to the use of condensate as a result of the scheduled maintenance of the Camago-Malampaya pipeline which started last February 10, 2010 and lasted until March 13, 2010.

f - represents the amount of PhP60.8 million pilferage recovery returned by Meralco to its customers

g - calculated based on the formula provisionally-approved by the ERC on June 27, 2007 in ERC Case No. 2007-111 RC

 

 

A - In accordance with ERC's Provisional Approval dated March 10, 2010. WESM purchases in excess of 10% of the total energy supplied to regular customers were priced at NPC rate

B,C - In accordance with ERC's Provisional Approval dated March 10, 2010. First Gas fuel costs were supressed and based on natural gas prices only.

    Actual generation cost sourced from Sta. Rita was Php2.8billion @ Php6.0286/kWh

    Actual generation cost sourced from San Lorenzo was Php2.2billion @ Php5.7664/kWh


[1] (http://www.facebook.com/pages/Protest-against-MERALCO-electricity-price-hike/108570395847404?ref=mf)