It is easy for consumers to blame the Manila Electric Company (Meralco) for the impending monster increase, albeit staggered, in electricity rates.
After all, it is Meralco that sends us our monthly electricity bill.
Fortunately, the recent hearing by the House energy committee on the electricity rate hike has put in the proper perspective this issue, and has reminded government to do something fast about the power supply situation.
Meralco distributes or retails electricity which it buys from power generators. It generates income from electricity distribution charges so that whether the company buys the power it distributes at a cheap or expensive price doesn’t matter as far as its bottomline is concerned.
And so during the House hearing, Manila Rep. Amado Bagatsing hit the nail on the head when he said that the Department of Energy (DOE), rather than Meralco, should be the one explaining the electricity rate hike to the lawmakers and the public because it was essentially a power generation problem” and not a transmission or distribution problem.
The increase in electricity rates is brought about by the Nov. 11-Dec. 10 maintenance closure of the Malampaya natural gas field it supplies to along with the unscheduled shutdown of nine private power producer plants, namely San Lorenzo, Masinloc 1, GN Power 1, Masinloc 2, Ilijan 1, Ilijan 2, GN Power 2, Calaca 1 and Calaca.
It has been pointed out that Meralco sources 40 percent of the electricity that it distributes among its consumers in Metro Manila and most parts of Luzon from the Malampaya facility.
So with 40 percent of its source gone, Meralco had no option but to look for power elsewhere, lest it leaves its customers literally in the dark.
Meralco had to fill the supply deficit this month by buying from the Wholesale Electricity Spot Market (WESM), which because of the low power supply situation had to sell at a high price.
Meralco had anticipated the rate spike arising from the scheduled Malampaya shutdown, hence the company’s public announcements months back that its consumers should brace for slightly higher prices over the December-January period.
But the high WESM price resulting from the unscheduled, simultaneous shutdowns of the private electricity suppliers came as a surprise even to Meralco.
So if there is anything that has to be investigated, it is why these private power plants all of a sudden conked out, all at the same time.
Earlier suspicions about an artificially-created supply shortage took center stage in the public hearing when lawmakers raised the possibility that these private power companies had conspired to synchronize their repairs in order to dramatically cut supply and make a killing from the subsequent electricity price spike in the WESM.
DOE Undersecretary Raul Aguilos told the legislators that Secretary (Jericho Petilla) has ordered an investigation to see whether there was indeed some collusion among power suppliers.
Aguilos noted that the DOE had been anticipating an increase of only P1.58 per kwh with the scheduled maintenance of several power plants, but added that the repair work on the nine others and the month-long maintenance shutdown of the Malampaya field raised the generation to be collected by Meralco to P4.15.
Rep. Carlos Zarate, who had co-filed with fellow Bayan Muna party-list solon Neri Colmenares the House Resolution No. 588 that paved the way for the rate hike’s inclusion in the earlier-scheduled Tuesday meeting of the House energy panel, told the committee that it should first investigate this conspiracy theory before acting on a pending House resolution backing the use of Malampaya funds to subsidize the rate increase.
Zarate said, “It appears may unscheduled shutdown parang nagkakasundo sila mag-shutdown ito nagtulak para ang Meralco bumili sa WESM.”
When it was the turn of ACT party-list Rep. Antonio Tino to ask if “possible ba something fishy” in the simultaneous repair works on the nine power plants, Aguilos replied. ““Yes, it is possible. Pinapatawag namin ang concerned power suppliers.”
Power generation companies are capable of manipulating supply and prices because of the tight supply in WESM, which is a result of the fragile energy supply not only in the metropolis but in the rest of the country as well.
As reported by the DOE in its Philippine Energy Plan for 2012-2030, the Luzon grid alone needs an additional capacity of 10,500 MW over the next 15 years or so.
This means that the energy situation would get worse before it gets better unless, first, the ongoing power generation projects are put on the fast track; and, two, the government finds a much better way of convincing the private sector to put up more power projects sooner than later.
During the same hearing, Meralco president Oscar Reyes informed the lawmakers that the utility has taken measures to mitigate the impact of the Malampaya shutdown, but added that a longer-term solution is needed to stabilize supply and prices, and this is to increase the Luzon grid’s capacity.
No major power plant has been built in the Luzon grid since 2000 except for the 600-MW GN Power, as all the existing facilities are vintage 1990s, Reyes, adding that the real solution to ease the pressure on the generation charge isadditional capacity, additional baseload, and additional peaking plants.
Meralco also wants to be part of the solution by going into power generation itself.
Through its subsidiary Meralco PowerGen Corp. (MGen), the power distributor has just sealed a joint venture (JV) with Thai firm Electricity Generating Public Co. Ltd. (EGCO) on next year’s 460-MW expansion of the 460 MW Mauban coal-fired plant in Quezon.
MGen has also entered into a joint venture with Aboitiz Corp. and the Taiwan Cogeneration International Corp. on a $1.28-billion 600 MW coal-fired plant at the Subic Freeport in Zambales.
MGen has also just recently acquired a 20 percent stake worth P7.15 billion in the Metrobank Group unit Global Business Power, which runs nine power facilities in the Visayas, two of them in Iloilo and Toledo cities. This partnership marks Meralco’s foray into the power business outside Luzon, especially in Mindanao, which has for long suffered daily rotating blackouts owing to low energy supply.
However, the current legal drama saddling the Subic power project of the PowerGen-led RP Energy consortium is partly to explain for what ails the WESM, which is the steep prices resulting from the country’s lack of adequate power reserves.
Given the ban by the Electric Power Industry Reform Act (EPIRA) on government investments in the cash-intensive power generation business, domestic supply thus relies solely on the number of power facilities that private investors are building—or not—in Luzon and elsewhere.
But not many foreign investors are doing so amid perceptions that doing business here is too risky, especially with so-called pro-ecology groups opposing power plants that produce non-renewable energy (NRE) sources like coal, even if cutting-edge global technology has already put an end to dirty coal.
RP Energy’s coal-fired plant, which was supposed to produce 600 MW of electricity for the Luzon power grid by 2016 suffered a legal setback as the No-to-Coal-Central Luzon alliance together with left-wing groups Bayan Muna, Kabataan, Gabriela, Anakpawis and Kalikasan asked the court to invalidate the environmental compliance certificate (ECC) and lease development agreement (LDA) that the consortium had already been issued, respectively, by the Department of Environment and Natural Resources (DENR) and the Subic Bay Metropolitan Authority (SBMA).
In addition to its foray into power generation, Meralco has also undertaken two more pro-consumer initiatives aimed at benefitting its over five million customers, and these are its Smart Grid Roadmap and Prepaid Electricity System.
Meralco is partnering with General Electric’s Digital Energy business and Trilliant on a smart grid roadmap, which initially calls for a prepaid metering system that will enable consumer-households to better manage their energy consumption.
These firms are making use of advanced technology to let consumers effectively track and manage their electricity usage and bills.
Meralco is likewise launching in mid-2014 its prepaid retail electricity project anchored on an e-load system similar to how prepaid phone subscribers are able to avail of SMS and voice-call services depending on the amount of money they pay in advance to their telcos.
The company is now pilot-testing in Rizal this prepaid system, which it eventually hopes to offer on a commercial basis to consumers using an average of 200-200 kilowatt-hours (kwh) and who can avail of prepaid loads in denominations of P200, P300, P500 and P1,000.
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