Corporate rationality and NGOs irrationality in electricity pricing

Last week and this week, there were a number of important developments in the Philippine electricity sector.

On April 10, Power for People Coalition (P4P) released a statement titled, “ERC nod on Meralco power deal slammed, looming power monopoly questioned.”

On April 11, Meralco announced an upward adjustment of P0.723/kWh in the April electricity rate, the overall rate at P13.013/kWh this month from P12.290/kWh last March.

Also on April 11, the National Grid Corp. of the Philippines (NGCP) acted quickly and certified the Panay Energy Development Corp. (PEDC) Unit 3 for regulating reserve. Possibly after they read this column the day before where PEDC 3 was mentioned, “Declining global energy prices and Philippines electricity pricing” (April 10).

On April 13, Northern Davao Electric Cooperative Inc. (NORDECO) announced they will go to the Supreme Court to challenge a new law (RA 12144) that allows Davao Light and Power Co. (DLPC) to operate in additional areas under NORDECO’s area.

On April 14, the Department of Energy (DOE) conducted a press conference about Meralco’s competitive selection process (CSP) with Excellent Energy Resources Inc. (EERI) gas plant.

We go straight to the facts about those five developments.

On the P4P statement, they blame the following for the power rate increase in April 2025: “power supply agreements (PSAs) between Meralco and Meralco-owned generation companies (gencos) despite the potential increase in power rates, questions over anti-competitive practices… With these PSAs, Meralco’s right hand just agreed with its left hand to empty the pockets of consumers.”

These are emotional and juvenile statements from a typical NGO. Here are the facts.

One, increase generation charge this April is due to higher costs of power, lower supply at the Wholesale Electricity Spot Market (WESM) from 20,512 MW in February to 19,611 MW in March due to unscheduled shutdowns by a number of power plants, plus higher demand last March due to many hot days.

Two, Meralco has to replace power last month from WESM by at least 290 MW baseload and 350 MW mid-merit under their PSAs with South Premiere Power Corp., San Roque Hydro and Gigasol 3 that were not yet implemented pending ERC approval. If those capacities were implemented, generation charge would have been lower.

Three, the joint ownership of Meralco Power Gen, San Miguel Global Power and Aboitiz Power on SPPC, EERI and Linseed Field has the approval of the Philippine Competition Commission as lawful and not “anti-competitive.”

Four, “empty the pockets of consumers” is an emotional statement. Philippine inflation in March 2025 was only 1.8 percent, lower than 3.7 percent in March 2024 and 7.6 percent in March 2023. In particular, inflation for housing, water, electricity, gas and other fuels last month was only 1.7 percent. People saved more money in their pockets last month, not emptied pockets.

So blaming Meralco’s PSAs for the price hike in April is wrong and fake news. All PSAs undergo CSP, meaning least cost possible for the consumers without compromising supply stability and reliability.

The reasons for the Meralco rate hike by P0.728/kWh for the April billing period have already been discussed above. In particular, WESM prices went up in March by P3.420/kWh, and charges from PSAs went up by P0.281/kWh following the expiration of the 400 MW PSA with Limay Power Inc. last Feb. 25.

Meralco’s distribution charge has not moved since the P0.036/kWh reduction starting August 2022. Then there is distribution rate true-up adjustment lowering the price by P0.202/kWh for residential customers starting April billing period.

On NGCP’s quick certification of PEDC U3, I asked Atty. Cynthia Alabanza, NGCP AVP and h ead of Public Relations Department, how NGCP responds to important power projects. She clearly explained: “The grid needs more generation capacity additions to ensure its power supply security. It also calls for higher availability and reliability for the existing power plants on which we rely. NGCP is paying special attention to all plants in the test and commissioning stage and putting them online as soon as possible….

“For committed plants in the construction stage, NGCP is focusing on providing the connection requirements… generation and transmission planning alignment remains a major concern. Solar plants, for example, can be developed in two years while new transmission lines may take five to seven years to build or even longer, depending on the line length, the line route’s complexity, and resistance from local governments and landowners.”

On NORDECO, I showed a table in my paper, “PDUs vs ECs” (BusinessWorld, Feb. 18, 2025) that blackout duration measured as system average interruption duration index (SAIDI) in power supply in 2023 for DLPC was 61 minutes but NORDECO’s was 1,256 minutes (21 hours). The SAIDI in 2022 for DLPC was 31 minutes and that of NORDECO was 10,283 minutes (171 hours or seven days).

Finally on the DOE press conference last April 14 about Meralco CSP with EERI, they informed the public of possible supply deficiency soon because EERI’s one of three units with 425 MW capacity is still not able to go online.

EERI president and CEO Yari A. Miralao issued a statement that their Units 1 and 2 with combined capacities of 850 MW “have successfully completed the testing and commissioning process and being issued the Final Certificate of Approval to Connect (FCATC)… are already fully operational and can generate power. Unit 3 with 425 MW is still awaiting the issuance of its FCATC, target to resolve concerns by 30 May 2025.”

Corporate entities like Meralco, MGEN, AP, SMGP and NGCP are rational in their pricing and quest for supply stability. Non-corporate entities like P4P, NORDECO and other ECs are irrational in their protests.