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Lower power rates expected

Richmond Mercurio - The Philippine Star
Lower power rates expected
Meralco linemen examined the electric meter base at a post along Quezon Avenue in Quezon City on Wednesday (September 14, 2022).
STAR / Jesse Bustos

MANILA, Philippines — Consumers are expected to benefit from the Energy Regulatory Commission (ERC)’s reset of power transmission rates, with households consuming 200 kilowatt hours seen saving as much as P47.52 in their monthly electricity bills.

Sen. Sherwin Gatchalian, vice chairman of the Senate committee on energy, said a reset of power transmission rates by the ERC, which has been delayed for 10 years, could provide some respite to consumers.

Gatchalian yesterday said the ERC’s review of the National Grid Corp. of the Philippines (NGCP) rates is likely to lead to lower transmission rates, citing a 2018 study commissioned by the National Transmission Corp.

While the current power transmission rates take into account a weighted average cost of capital (WACC) for NGCP at 15.04 percent, the study said that the WACC for NGCP should be at 6.4 percent.

The lower WACC should translate to lower transmission fees passed on to consumers.

The study showed that the average reduction would be P0.1141 to P0.2376 per kWh, which would translate to monthly savings of P22.82 to P47.52 for a household consuming 200 kWh a month.

“ERC’s review of transmission rates is long overdue. I have long been following up on this from the ERC. I’m confident that this would lower transmission rates and ultimately residential bills,” Gatchalian said.

Recently, the ERC promulgated Resolution No. 8 amending the rules for setting transmission wheeling rates (RTWR), which triggers the process of resetting transmission rates of the NGCP.

A new RTWR means, among others, that the current WACC of the NGCP will be revised after more than 10 years.

ERC Chair Monalisa Dimalanta, in a briefing last Monday, said that initial figures point to a lower transmission rate applicable for the fourth regulatory period.

Dimalanta said the commission targets to complete within the year the review for the fourth regulatory period covering the years 2016 to 2022 so that the rate impact would be felt by consumers by January 2023.

Hearings and review for the fifth regulatory period, meanwhile, will be conducted by next year, with rates for the regulatory period targeted to be issued by the third quarter of 2023.

Gatchalian said the ERC’s reset of transmission rates would also establish consumer trust that what they are paying for is an accurate amount.

“Once there are new rates, consumers’ doubt will be removed and they will have confidence that what they are paying for their electricity is correct,” he said.

“This is also crucial for new transmission lines and facilities. This provides an incentive for the NGCP to invest in new infrastructure as it guarantees they will recover all investments in new facilities,” he added.??

Enough supply

SMC Global Power, the power unit of diversified conglomerate San Miguel Corp. (SMC), has given assurance that Manila Electric Co. (Meralco)’s energy supply will not be disrupted even after their joint petition for temporary relief had been denied by the ERC.

“Despite the present challenges, we will never withhold our available power capacity to the detriment of the country and the consumers,” SMC Global Power said in a statement yesterday. “In the meantime, we will do everything we can to make sure Meralco’s energy supply is not disrupted.”

Meralco vice president and head of utility economics department Lawrence Fernandez told The STAR that SMC is continuing to supply Meralco under both power supply agreements (PSA) with South Premiere Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC).

This comes even as SPPC and SMEC, administrators of the Ilijan and Sual plants, respectively, had earlier issued notices of termination to Meralco of their PSAs effective Oct. 4, should the temporary relief they were requesting not be approved.

“However, given the circumstances, we will continue to explore other legal remedies to allow us to sustainably provide for the increasing power needs of our country while meeting our obligations to our various stakeholders,” SMC Global Power said in its statement.

The ERC, in an order promulgated last Sept. 29, denied a joint petition by Meralco, SPPC and SMEC for a temporary adjustment in the prices of their PSAs signed in 2019 to recover fuel costs amid the unprecedented spike in fuel prices.

The temporary rate hike was sought to allow the Sual and Ilijan facilities to not only recover some P5 billion in losses, but also ensure their fixed-rate PSAs are maintained over the longer term and continue to mitigate the soaring cost of electricity for consumers.

“We regret the ERC’s denial of our joint petition with Meralco for temporary relief on our 2019 PSAs, not so much for our own interest but more for the consumers,” SMC Global Power said.

“The temporary relief would have enabled us to preserve few of the last remaining fixed-rate PSAs of Meralco that are responsible for keeping power rates in Metro Manila low compared to other parts of the country, amid surging global fuel prices,” it said.

The company said that based on Meralco’s own computation, which was validated by ERC’s regulatory operations office (ROS), the interest of the consumers would have been best served with the approval of the petition.

“The ERC-ROS itself confirmed that the commission does not have any other data or information that could contradict or disprove the computations and simulations submitted by Meralco. We believe these numbers speak for themselves,” SMC Global Power said.

“The ERC, armed with such data, knows too well that denying the petition will not only cripple us, but more importantly, burden consumers who will have to face higher electricity bills,” the company added.

Both SMC Global and Meralco have previously warned of even higher power rates should their petition for a temporary rate hike be disapproved, as the power distributor will be forced to source out up to 1,000 megawatts from the Wholesale Electricity Spot Market prices, as well as enter into pricier emergency power supply agreements.

For its part, Meralco said last Tuesday that it would exert all available remedies to prevent termination of its PSAs with SPPC and SMEC.

ELECTRICITY

ERC

NGCP

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