Cheaper

Speaking at Palawan last week, President Rodrigo Duterte threatened electricity distributors in the province with “expropriation” if they do not upgrade their services by the end of the year. We hope he carries out that threat.

One of the reasons there is much disparity in development among our regions is the disparity in the quality of electricity distribution provided by the local distribution utilities. The most glaring disparity is the price by which electricity is sold to consumers.

The cheapest electricity in the country is the one supplied by the South Cotabato Electric Cooperative (Socoteco II) to General Santos City and its environs.  By the latest surveys, Socoteco sells its electricity at only P5.46 per kWh. Davao Light sells its power at P6.87 per kWh. Meralco sells at P10 per kWh.

Sticking out like a sore thumb, Panay Electric Company (PECO) sells electricity at P13.30 per kWh. That is not only the most expensive electricity in the country. It is the most expensive electricity in the whole world.

A recent survey found that the average price (in peso terms) of electricity in the OECD countries is P4.72 per kWh. China sells at P1.53, India at P1.75 and Indonesia at P1.12 – although all three are heavily subsidizing their power sectors. In the Philippines, we sell power at zero subsidies.

Nevertheless, it is important to point out that power costs matter greatly in the competitiveness of local industries. Poor power management, along with the militant unions, caused our manufacturing to hollow out. That produced the high unemployment rates that, in turn, induced poverty.

It helps greatly that the Energy Regulatory Commission imposed a cap on systems losses chargeable to consumers. Local electricity distributors, being natural monopolies, once bled their customers dry by charging the cost of their own inefficiencies on the electric bills. The cap on chargeable systems losses forces the distribution utilities to invest in upgrading their systems.

Some distribution utilities, however, chose to pay out their profits as dividends rather than improve the efficiency of their systems. To offset the systems losses that could not be passed on to hapless consumers, at least one local distribution utility has been accused of paying an allied power producer that supplied no power at all to the system.

If this is proven, the local distribution utility ought to be prosecuted for economic sabotage, among other crimes.

New player

There was some discomfort, as I noted in this space, about the indecent haste with which the House committee on franchises rejected extension of the franchise of Panay Electric Company that distributed electricity to Iloilo City and environs for the past 95 years. The House voted to award the Iloilo franchise to MORE Electric Power Company, a new player in the power distribution business.

The decision of the House panel was endorsed to the Senate committee on public works chaired by Sen. Grace Poe. The Senate panel unanimously agreed to award the franchise in principle to MORE last October 22, pending the submission of a convincing transition plan.

That pretty much settles the issue. Iloilo should now welcome a new player and hope it delivers on its promises.

MORE, we now know, was emboldened to bid for the Iloilo franchise by a resolution passed by City Council. The resolution listed a litany of complaints against PECO and prayed the franchise be awarded to someone else – for the sake of the city’s progress.

The resolution cited the following grounds to oppose extension of PECO’s franchise: a) a history of overcharging customers based on cases filed by cause-oriented groups; b) PECO’s remaining balance of P631 million from overcharging that the ERC ordered refunded; c) continuing customer complaints over erroneous meter readings; and, d) the distribution utility’s lack of transparency in its operations.

In contesting the franchise, which end January next, MORE identified its strategic goals as: a) minimization of franchise-wide outages; b) improvement of the distribution system’s reliability; and, c) customer satisfaction.

MORE plans to invest P700 million over the next three to five years to improve the efficiency and reliability of the distribution utility’s operations. It commits to closely observe the recommendations of the Singaporean consultancy firm WSP. The study was commissioned by the Iloilo Economic Development Foundation to help address the problems that stymie the city’s progress.

The WSP study recommends a complete reconfiguration of the distribution network. That network, after all, was laid out nearly a century ago.

The study estimates about P500 million will be needed immediately to replace old control and relay panels at the Jaro and Luna substations, install modern digital systems to improve customer and billings services and acquire Supervisory Control and Data Acquisition Systems in all five substations.

Although the recommendations were made way back in 2010, PECO failed to fully implement them. This explains why Iloilo’s power distribution lags way behind those of Davao, Cebu and the NCR.

By contrast, MORE promises enough financial muscle to modernize Iloilo’s distribution system. The company, with an initial capitalization of P2 billion, is an affiliate of the giant ICTSI group that is modernizing two ports in Iloilo. It is in their interest that the modern ports being built will be supported by a modern power distribution system.

In addition, MORE is deploying an expert team to lead in the rehabilitation of the Iloilo power distribution system. In the first months of the coming year, the new player will be assuming control of the distribution system under the observant eye of the city council.