History repeals itself
Believe it or not, our favorite Meralco wants to go back in time. Frustrated by the Supreme Court in its attempt to collect an additional P6 billion from its 5.3 million customers, Meralco is asking the ever-acquiescent ERC (Energy Regulatory Commission) to cancel the trading results in the electricity spot market a few months ago.
The trading results led to its controversial record-breaking P4.15-a-kilowatthour rate increase. A few months ago, Meralco bought some rather expensive electricity in the spot market known as WESM for distribution to 31 cities and 80 municipalities in its franchise area. As a result, Meralco announced that it would impose the highest power rate increase in the history of this country, to be charged to its customers in their December 2013 and January 2014 bills.
But now, in the middle of the Supreme Court hearing on petitions to disallow the Meralco rate increases, our favorite Meralco suddenly wants ERC to repeal those WESM trading results. To determine the new power rates, Meralco wants the ERC simply to order another trading session in the WESM in the future to determine the prices of the electricity it bought from several power generation companies in the past.
In the cerebral game of chess, such a move by Meralco may be known, in the vernacular, as “teka-teka” defense—you know, similar to the command “undo” on your computer. From what I gathered, Meralco has filed a “motion with manifestation” before the ERC, asking for a “re-run” of its WESM transactions in November and December last year.
According to Meralco, ERC has the authority under the Epira (Electric Power Industry Reform Act) to grant the “teka-teka” request, adding that Meralco only wants to form a new basis for the rate increases in December and January. Meralco promised the ERC that the re-run (i.e. “undo” command) could tell another story, perhaps a different version in determining the “true cost” of the electricity that it bought from the power generation companies last November and January. Meralco also indicated that the re-run might be necessary because of the alleged violations of WESM rules, regulations and protocol, adding that it also wanted to protect the interest of its customers.
The defense line of Meralco as it battles strong public opposition against its announcement of the highest power rate increase in our history puts the blame on the government for the spikes in WESM prices. You see, the government owns this power plant called Malaya. In hearings on the Meralco power rate increase in the Senate and the House of Representatives, it was disclosed that Malaya did not take part in the WESM in those months. Thus, Meralco has been trumpeting that the spike in WESM prices could have been averted had the generation capacity of Malaya been offered to the WESM and actually dispatched to Meralco.
Somebody seems to forget that Malaya, in the first place, has not been operating for the longest time now. Still, Power Sector Assets and Liabilities Management Corp. (PSALM) has been saying that, in the past two years, Malaya has been submitting offers in the WESM, if only to comply with the WESM “must-offer” rule, covering all power-generation companies in the country. In other words, the government-owned Malaya was just for show.
Anyway, we all know that Meralco had to buy in the spot market because of the scheduled maintenance shutdown of its biggest electricity supplier—the two plants using the Malampaya natural gas. As if to support the contention of Meralco (i.e. the government was the culprit), Sen. Sergio Osmeña III, energy committee chair, has been saying that if only 300 MW more in generation were available in the WESM in those months, the clearing price would have dropped from P33 a kwh to about P12. Incidentally, our beloved Osmeña is known in the power sector as one of those lawmakers who pushed for certain Epira provisions that seemed to favor Meralco heavily—at the expense of its customers, of course.
I mean, really, it was indeed some expensive electricity that Meralco obtained in the WESM last November and December. Still, Meralco agreed on those prices—blindly, you might say—because the Epira gave Meralco this precious gift called “automatic adjustment generation rate,” which meant that it could just buy electricity at any price that it would only have to pass on to its customers at a profit. And how fair is that?
Here is another thing that seems to be missing in all the “repeal” arguments on the highest power rate increase—courtesy of Meralco—in the history of the Philippines: Meralco itself had a hand in the spike in WESM prices. It has been revealed that Meralco has a contract to purchase 100 percent of the power generated by this company called Therma Mobile. According to word going around in the industry, Meralco itself told Therma Mobile to make an offer in the WESM at an amazing price of P62 a kwh. You know what—Meralco accepted the offer of Therma Mobile. You know what is more—Meralco did not buy power from Therma Mobile at such a ridiculous price not just once; Meralco actually accepted the fantastic Therma Mobile price 25 times.
By pressing the command “undo” in the WESM transactions, do you think that the ERC will even consider that the amazing story of “cooperation” between Meralco and Therma Mobile will most unlikely repeat itself? One thing about ERC is that it seems to be hiding a lot of things from us. In the House, for instance, one congressman asked ERC for a full report on why it approved the Meralco rate increase. After 20 long days of waiting, the House got a short report from ERC. In effect, ERC told the House that the reasons for its approval of the Meralco rate increase were just too long and complicated to be put in a report to the House.
