Meralco ‘sweetheart deals’ P1.55/kwh more expensive, says solon | Inquirer Business

Meralco ‘sweetheart deals’ P1.55/kwh more expensive, says solon

/ 01:41 PM May 24, 2018

A hefty P1.55 per kilowatt-hour increase in electricity rates will greet customers of Manila Electric Company (Meralco) under power supply agreements (PSAs) that Meralco earlier awarded without bidding to its sister companies, subsidiaries and affiliates, according to Bayan Muna Rep. Carlos Isagani Zarate.

The increase will be on top of price spikes induced by the Tax Reform for Acceleration and Inclusion (TRAIN) law, he added.

Zarate disclosed Thursday that the escalating electricity cost debunks Meralco’s claim that it contracted the least cost of electricity under the questioned PSAs.


“Contrary to Meralco’s pronouncements, power rates under these obvious Meralco sweetheart deals are exorbitant. If the Energy Regulatory Commission [ERC] approves these contracts, they are sure to further induce a sharp increase in Meralco power rates,” Zarate warned.


According to him, the continued hike in the cost of coal and the sharp depreciation of the peso against the dollar, among others, will be factors behind the expected increase in these Meralco contracts.

“Due to the high price of coal and the peso’s weakening, average generation charge under the seven PSAs will cost us Meralco customers P5.22/kwh. This is P1.55/kwh more than what Meralco wanted us to believe in the PSA applications and in its earlierHouse presentation,” he said.

“The P5.22 rate is onerous and unconscionable considering that some non-Meralco- affiliated power generation companies [gencos] now offer electricity way below P5/kwh. Some even offer electricity at P2/kwh,” he added.

“But Meralco does not want to consider these other offers because these offers come from non-affiliated gencos. Meralco insists on keeping the PSAs with its own gencos, despite stiff opposition from consumer groups, because of greed. Through the PSAs, it expects to gain windfall profits by double-booking income as a genco and as a distribution utility,” Rep. Zarate added.

The seven Meralco PSA applications were earlier submitted to two (2) House of Representatives committees that looked into the contentious Meralco power deals. Based on these applications, the cost of generating electricity in the contracts would supposedly average P3.67/kwh only.

“But Meralco used deceptive assumptions to arrive at the supposed P3.67 average rate in the PSAs,” Zarate said. “In the applications, for instance, Meralco assumed that prices of the benchmark Newcastle coal would average only around US$50 per metric ton, while the peso would trade against the US dollar at P46:US$1,” Zarate pointed out.


“As of March 2018, however, Newcastle coal prices doubled to US$100 per metric ton, even hitting US$109/MT just last May 18. Meanwhile, the peso retreated to as low as P52 against the US dollar and remains weak to date,” Zarate pointed out. All powerplants contracted to supply Meralco with 3,551 megawatts of electricity under the seven PSAs will run on coal, while the US dollar will be the reference currency in importing coal for these contracted power plants.

Zarate used the prevailing price of coal and the peso-dollar exchange rate as of March 2018 to calculate the generation cost under the PSAs.

Based on his calculation, the P1.55 will cost millions of Meralco customers P54.54 billion in additional charges per annum. For the 20- to 21-year duration of the long-term power supply contracts, Meralco customers will shoulder P930 billion in additional power rate expenses.

“It is our hope that ERC officials would finally see the light of day and reject all these PSAs pending before the Commission for the sake of millions of Meralco customers,” the lawmaker said. “The ERC should force Meralco to bid out these PSAs.”

Meralco awarded the PSAs without complying with the ERC’s competitive selection process (CSP). Designed to get the least cost of electricity for consumers, CSP requires distribution utilities like Meralco to get two offers for supply of electricity before awarding a PSA.

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CSP was supposed to have been launched on Nov. 7, 2015; but months after the program started, the ERC delayed its start to April 30, 2016. The questionable delay allowed Meralco to file with the ERC at the last minute the PSAs negotiated outside CSP. But the PSAs have drawn stiff opposition from consumer groups and spawned court cases, as well as a House investigation.  /muf

TAGS: Business, electricity rates, Meralco, power sector, power supply agreements

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