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Belated reaction

HIDDEN AGENDA - Mary Ann LL. Reyes (The Philippine Star) - May 22, 2021 - 12:00am

The scorching heat we are currently experiencing is due to the fact that we are still in the so-called Philippine summer months, so-called since we do not actually have a summer season.

Unfortunately, because most of us are still trapped at home, either due to self-imposed quarantine or work-from-home arrangements, this means that our airconditioning units, for those who are fortunate to have them at home, and electric fans are working not only overtime, but also doubly hard since the hotter air outdoors makes it harder for your AC unit to reject the heat.

This is the reason why traditionally, our electricity bills are much higher at this time of the year. Which, of course, is made worse by the quarantine.

There is some good news though, especially for those in Metro Manila and other areas covered by the Meralco franchise areas.

Meralco’s electricity rates continue on a downward trend while prices for other products and services are going up. In fact, last March, Meralco’s power rates reached their record low since August 2017.

According to company officials, one of the biggest reason behind this are the successful rounds of biddings conducted by Meralco for procurement of its power supply under the legally mandated competitive selection process (CSP).

Because of the CSP, consumers are expected to enjoy total savings of around P13.86 billion per year moving forward or a rate reduction of 41 centavo per kilowatt hour.

In fact, in 2020, Meralco’s customers experienced a net rate reduction of P1.3870 per kWh, equivalent to a bill reduction of more than P277 for a household consuming 200 kWH. With this continued downward trend, largely due to new power supply contracts, Meralco’s rates today are at their lowest levels in three years.

In addition, Meralco is also going green.

The 50-megawatt solar power plant of PowerSource First Bulacan Solar, Inc. (PFBSI) has officially started commercial operations and now provides clean and renewable power to the Luzon grid. Now called BulacanSol, the newly completed plant secured a clearance to operate from the Energy Regulatory Commission (ERC) just last May 12.

Located in San Miguel, Bulacan, the P4.25-billion project is a joint undertaking of MGen Renewable Energy, Inc. (MGreen), which owns 60 percent of the project, and PowerSource Energy Holdings Corp., with 40 percent.

MGreen is the renewable energy unit of Meralco PowerGen Corp. (MGen), which in turn is the power generation arm of Meralco. BulacanSol now plays a significant role in One Meralco Group’s long-term sustainability agenda and in helping ensure energy security through clean, cost-competitive, and sustainable power.

And because Meralco’s rates are going down, businessmen in other areas of the country are clamoring for reasonable power rates in other areas being served by other distribution utilities.

For instance, the Philippine Chamber of Commerce and Industry (PCCI) has sought the Department of Energy (DOE) and the Energy Regulatory Commission (ERC)’s intervention in addressing the Cebu Chamber of Commerce and Industry’s (CCCI) call for reasonable power rates in Cebu.

CCCI, in particular, wants Visayan Electric Co.’s (Veco) power rates in Cebu to be competitive with other power distributors such as Meralco and Mactan Electric Co. (Meco).

According to CCCI, as of April, Veco’s average residential monthly rates stood at  P11.96 per kwh compared to Meco and Meralco’s average retail rate of P9.2686/kWH and P8.4067/kWH, respectively.

So if Meralco’s rates are going down, why are people like former ERC commissioner Alfredo Non complaining about higher power rates?

In fact, it was Non who was the oversight commissioner for the feed-in-tariff (FIT) and the universal charges. The country’s FIT was designed to provide a guaranteed fixed price to renewable energy investors, but unfortunately is subsidized by all on-grid electricity consumers and forms part of our monthly electricity bill. The universal charge (UC), meanwhile, is a charge, if any, imposed for the recovery of stranded debts, stranded contract costs of the National Power Corp., and other mandated purposes, which is passed on to all end-users by the distribution utilities.

During Non’s term, the FIT-All increased from four centavos to as much as 25.6 centavos per kwh, while UC went up from 4.8 centavos to a high of 48 centavos per kwh, placing a heavy burden on consumers during his time as commissioner.

To this day, the sins of FIT weigh heavy on consumers and force them to pay overly high power rates and both government and the energy sector are forced to correct the mistakes of Non as consumers clamor for an end to FIT-All.

According to Energy Secretary Alfonso Cusi, they have stopped FIT which has proven to be a big mistake as it forced electricity prices in the country upwards. He said FIT was wrong and short of robbing the consumers, adding that as a developing country, “we cannot afford to be giving FIT or subsidies  for the new technologies that are being introduced.”

DOE is now studying how to implement the removal of FIT for current contracts.

But now, in his latest filing with Malacanang, Non wants ERC to adopt a regulation that will impose an unreasonable rate of return on all utilities, including the National Grid Corporation of the Philippines (NGCP), and retroact this to past periods, even if the rates have already been approved by ERC and have become final. Retroactive rate making is, however, illegal.

As a former ERC commissioner, Non knows that the distribution rates are based on performance based regulation (PBR), an internationally-accepted rate making methodology implemented by the ERC starting 2003 for the transmission utility and 2005 for private distribution utilities. Meralco officials told this writer that under this PBR, rates undergo a regulatory reset and that ERC conducted Meralco’s regulatory reset process for the third regulatory period in 2011-2012. The reset process involves ERC approvals of inputs such as operating expenses, capital expenditure, asset base valuation, and allowed return. Meanwhile, for the asset base, ERC issued an asset handbook in 2011 that allows replacement cost as a valuation methodology.

In short, the rates imposed by distribution utilities like Meralco are not plucked out of thin air, but undergo regulatory screening and approval by the ERC based on established rules.

Non stayed for seven years at the ERC and had all the opportunity, more importantly as oversight commissioner, to resolve issues which he is now belatedly raising in media.

For comments, e-mail at mareyes@philstarmedia.com

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