Faced with unprecedented protest actions over an impending record rate increase, Manila Electric Co. (Meralco) on Friday announced it would carry out the estimated P3.44-per-kilowatt-hour increase in generation charge in stages, starting this December.
Thus, the full impact of the rate increase, said to be the highest granted to the distribution utility, will not be felt this month, Meralco spokesperson Joe R. Zaldarriaga said in a phone interview on Friday.
He said Meralco had written to the Energy Regulatory Commission (ERC) seeking a deferment in the implementation of the full increase in the generation charge and would be meeting with the state regulator on Monday.
The record increase in the generation charge—a pass-through component of the Meralco bill that is adjusted monthly as prescribed by the ERC and goes directly to Meralco’s power suppliers—stemmed mainly from scheduled and forced outages of power plants all over the country and the maintenance shutdown of the Malampaya natural gas field, explained Meralco president Oscar Reyes.
Implemented in tranches
“There was a confluence of forced and regular maintenance shutdowns with other plants and these resulted in a very significant surge in the generation charge,” Reyes said at a briefing in Hong Kong on Friday by operating companies under the Metro Pacific Investments Corp. group.
Reyes said Meralco would cushion the impact of this power supply aberration on consumers by implementing the new P9.107-per-kWh generation rate—the current P5.67 per kWh plus P3.44 per kWh—in tranches.
“We will probably do it in two tranches to cushion the impact, make the second tranche [effective] during a month when the prices are slightly low,” he said.
The plan is to implement the first tranche in December and the second in January when prices tend to be slightly lower.
“By February, the billing should normalize and it should be an appropriate time to implement the balance that was not implemented,” Reyes said.
Reyes said discussions were now going on with stakeholders on how to handle these adjustments. He said the discussions mainly concerned the timing and size of the adjustments.
By next week, the billings reflecting a portion of the higher generation charges will be released, he said.
But the other components, like distribution charge, are not likely to change, he said.
Mitigating the impact
The Department of Energy said it was coordinating with Meralco on the options available to ease the impact of the increase in the generation charge on consumers.
“We’ve had initial talks with Meralco. The ERC must agree to a staggered increase, if ever,” said Energy Secretary Jericho Petilla.
Meralco has said it will meet with ERC representatives on Monday to present options on how to mitigate the impact of a P3.44-per-kWh increase on the generation charge.
ERC Executive Director Saturnino C. Juan said in a text message the P3.44-per-kWh increase in the generation charge would result in a total rate impact of P4.15 per kwh for a typical residential customer consuming 200 kWh, citing a letter from Meralco.
One way of mitigating the impact of the rate increase is by imposing a generation charge of P7.90 per kWh (instead of P9.107 per kWh) and then defer to February 2014 whatever generation cost Meralco will not be able to recover.
However, the ERC must agree for Meralco to implement the staggered increase.
Malacañang on Friday called on Meralco to reconsider the rate increase even as it called on the ERC to review the increase in the generation charge that triggered the Meralco move to increase its rates.
The call was also directed at the oil companies as the surge in power rates comes in the wake of an increase in the prices of liquefied petroleum gas (LPG), or cooking gas, and fuel.
Communications Secretary Herminio Coloma said corporate social responsibility of private corporations goes beyond giving relief and sending volunteers to typhoon-stricken areas.
Private companies must also exercise “sensitivity to the plight of the common people … who are carrying the heavy burden of loss of life, injury to their family members and the Herculean task of having to rebuild their homes and their lives,” Coloma told a Palace press briefing.
Coloma said the Aquino administration was open to amendments to certain laws, specifically the Price Control Act, to be able to extend the duration of the price freeze for sensitive products such as LPG and kerosene that is currently limited to a 15-day period.
He warned that the government would not hesitate to sanction those “abusing” the deregulated oil and power industry regime in which private players can unilaterally impose price adjustments in accordance with the movement of prices in the world market.
“They must be sensitive to the people they are serving,” Coloma said.
Coloma said a review of the rate increase is part of the ERC’s mandate, “and if they would hesitate we would remind them that it’s a duty that they should be fulfilling.”
National Association of Electricity Consumers for Reforms Inc. has already filed a petition in the ERC questioning the increase in rates.
Although the ERC is independent as a “quasi-judicial body, but within the bounds of the law, we will do what is needed to take proactive measures,” Coloma said.
On Thursday, consumers and advocacy groups picketed the Meralco headquarters in Pasig City to oppose the P2- to P3-per-kWh increase in its generation charge.
An increase of P400 to P600 in the monthly household power bills in Metro Manila and neighboring provinces using 200 kWh is just too much to bear, the protesters said.
For households consuming 100 kWh a month, the increase will translate to P200 to P300 in additional payments, they said.
On Friday, the Nagkaisa labor group joined the chorus of protests against the anticipated increases in consumer electricity bills.
In a statement, Nagkaisa said Meralco was already insured against maintenance shutdowns and power supply agreements.
“Meralco and the power producers First Gas (Santa Rita), Therma Mobile (San Lorenzo) and SPPC (Ilijan) from which Meralco buys its power are insured against possible spikes in costs. Why is Meralco passing the burden to consumers when there is insurance for forced outages?” it said.
An increase of P3.50 per kWh in the electricity bills of Meralco customers is “an unconscionable predatory move” in the face of calamities and price hikes that have already hit the nation, Nagkaisa said.
“Meralco residential rates currently pegged at P12.46 per kWh will now be hiked to P15.96 per kWh, representing a 28-percent increase,” Nagkaisa said, adding that the new rate is too high for residential accounts.
For industry, where power rates already constitute 45 percent to 55 percent of operational costs, particularly for small and medium enterprises and outsourcing companies, the rate increase will greatly affect their business viability, the labor group said.
“For the national economy, it compromises our regional competitiveness in the Association of Southeast Asian Nations and will be a disincentive to locators remaining and to the entry of foreign direct investments,” Nagkaisa said.
As for the maintenance work in Malampaya that Meralco cited as one of the causes of the increased power rates, Nagkaisa argued that Meralco should bear the loss since the maintenance was scheduled ahead of time and the cost impact should have already been factored into existing power supply agreements.
It said Malampaya was providing only a certain percentage of the power needs of Meralco, which is why the impact of the natural gas field’s downtime should not reach as high as P3.50 per kWh.
Nagkaisa also criticized the government for not using the Malampaya Fund, the proceeds from the royalties that the government receives from the natural gas field operations, to ease the impact of the maintenance shutdown.
“Why has the Department of Energy, or the Palace for that matter, not addressed the possibility of resorting to the Malampaya Fund to reduce rates and to cushion the impact, if indeed there is a problem not anticipated in the power supply contracts entered into between Meralco and the [power] generators?” Nagkaisa said.
Why the increase
Meralco explained the record increase in the generation charge as mainly stemming from the power plant outages and the Nov. 11- to Dec. 10-shutdown of the Malampaya natural gas field, which supplies the Sta. Rita (1,000 MW), San Lorenzo (500 MW) and Ilijan (1,200 MW) power producers.
Reyes, the Meralco president, explained that the scheduled shutdown of Malampaya was pushed back because of Supertyphoon “Yolanda,” making Meralco more dependent on the Wholesale Electricity Spot Market (WESM), where there was in turn a significant spike in prices because of the surge in demand.
At the same time, there were a number of power plants that were closed either due to regular maintenance or forced outage for the October to December supply month, he said.
Aside from Malampaya, Reyes said other power plants had deferred their maintenance shutdown to the latter part of 2013 to heed requests to ensure stable power supply during the recent local elections. As such, he said many shutdowns happened simultaneously.
To mitigate Meralco’s WESM exposure, it requested the operation of the Ilijan biodiesel plant and the Sta. Rita facility, which use the more expensive liquid condensate and diesel fuel. It also signed last November a power supply agreement with Therma Mobile Inc. of the Aboitiz group to stabilize power supply. With a report from Michael Lim Ubac