Sigh of relief

Just recently, the Manila Electric Co. (Meralco) announced a hefty slash in the utility’s deferred rate adjustments, resulting from the recent move by the Energy Regulatory Commission (ERC) to void the previous quarter’s prices at the Wholesale Electricity Spot Market (WESM).

Meralco spokesperson Joe Zaldarriaga said the utility would cut the deferred charge for its January billings to just 45 centavos per kilowatt-hour (kwh), or just a tenth of its earlier announced P4.56 rate, in response to the drastic cut in WESM prices arising from the ERC-ordered recomputation by the Philippine Electricity Market Corp. (PEMC) of the spot market’s sky-high rates during the October-December period.

For his part, Meralco utility economics chief Larry Fernandez explained that Meralco was able to effect such a significant cut because, following the ERC-ordered re-calculation, WESM prices last December fell to a per-kwh average of P8.33 from the original P36. “Kaya sumunod ang generation charge mula original na P10.23 per kwh, ay naging P6.12 per kwh,” he said.

Credit must be given to the ERC which has finally mustered the guts to wield the state’s police powers in intervening in the spot market and imposing lower, regulated electricity prices in response to the alleged move by certain independent power producers (IPP) suppliers to create an artificial shortage and whip up WESM’s record rate spikes.

Credit also goes to Energy Secretary Jericho Petilla, because everything started when he told the Supreme Court that regulators had been investigating the state-run Malaya Thermal Plant and 11 IPPs for possible violation of WESM rules that led to last quarter’s runaway prices at the spot market.

Petilla explained last month that gaps between available and expected or declared capacity on certain trading hours meant that these IPPs or generation companies (gencos) had likely breached the “must-offer” rule (MOR), which requires IPP suppliers to offer all of their respective capacities to the spot market as a way to avoid supply shortfalls and price spirals.

But rather than wait for regulators to wrap up their probe, Meralco made the right move of speeding up the process by filing a motion and manifestation before the ERC calling for a re-run or re-calculation of WESM transactions and dispatches during the November-December supply months.

It explained that it had filed this motion “on the premise that a re-run will determine the true cost of electricity and form the basis for any adjustments in the generation charges covered by these supply months.”

Meralco said this was done “after investigation at the Senate and the House of Representatives revealed certain information concerning violations of WESM rules by certain power plants, which could have materially affected WESM prices, such that the true cost of power was not reflected in the market.”

In its ruling, the ERC voided the WESM prices during the Oct.26-Dec. 25 period and ordered the imposition of regulated prices. According to the ERC, it found basis to use the state’s police powers and intervene after determining in its investigation that “the WESM prices during the November and December 2013 supply months could not qualify as reasonable, rational and competitive,” owing to the confluence of factors accompanying the tight market supply situation.

ERC at the same time directed PEMC, which operates WESM, to calculate and implement the regulated prices in the revised WESM bills of the affected distribution utilities in Luzon for their immediate settlement.

However, it noted that only the computed regulated prices for Meralco should be put hold and not settled right away, in compliance with the SC’s TRO against this utility’s P4.15 rate adjustment last December.

As soon as this ERC order came out, Meralco first vice-president William Pamintuan said that the utility saw it “as a positive development for our customers as this recalculation will reflect the true competitive cost of power for the supply months covered.”

Given that the ERC order would translate into adjustments to the generation charge, Pamintuan said Meralco was “expecting a reduction on the deferred charges for December and January bills.”

True enough, PEMC came out a week later with its recomputed WESM prices that reflected an over two-thirds slash from the original settlement rate average of P25.40 in November to just P6 and December’s rate of P28.367 to only P6.246.

Initial PEMC computations revealed that, once implemented for Meralco, its rate increases should amount to just P2.43/kwh for December—in lieu of the original P4.15—and P3.02 for January.

The ERC order has virtually absolved Meralco of responsibility for the December rate adjustment as this commission had exercised police powers to bring down last year’s WESM prices on the strength of its initial probe findings that the IPPs or Gencos alone were guilty of market abuse.

Clarification

In response to an earlier report by this columnist that a real estate company may be missing out on its payments to the Cebu city government as part of its joint venture arrangement for the former’s Citta de Mare project at the South Road Properties in Cebu, lawyers for Filinvest Land Inc. (FLI) have clarified that for the period from Jan. 1, 2010 to Dec. 31, 2013, FLI had already remitted to the city government of Cebu a total of P1.735 billion, which includes the P309.1 million revenue share of the LGU and P1.42 billion for the purchase of certain properties.

They emphasized that FLI does not have any obligation to pay the city of Cebu P500 million by the end of 2013 and that in fact, FLI had advanced its payments. They also quoted a report from SGV & Co. which stated that for Jan. 1, 2010 to Sept. 30, 2013, FLI is required to remit to the LGU only P78.84 million, while actual remittances by FLI amounted to P159.7 million.

We are airing FLI’s side for the sake of fairplay and we nevertheless apologize for whatever damage the article may have caused and that it is not our intention to malign.

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