Are Meralco Rates Lower? Yes. Are they Fair and Reasonable? No! Plus the Hoodwink of IEC’s Power Cost Reports.
David Celestra Tan, MSK
19 January 2017
Meralco consumers and the whole world are being inundated by Meralco’s pronouncements trumpeting the reductions in Meralco’s power rates. In one recent release they implied that the reduction is P0.31 per kwh compared to a year before in January 2016.
1. Are Meralco’s rates lower? Yes. No Argument.
Based on the rates of middle range consumers of 500kwh, In December 2011 it was P11.2346 per kwh with generation charge of P4.7439 per kwh. In December 2016 it was down to P 9.5658 per kwh (15% lower) and P 3.9351 per kwh (17% lower) respectively. While Meralco attributes this to lower world oil and coal prices, they cannot help themselves but try to take credit for it and sing their praises. Note though the fuel prices went down 40% during this period and WESM dropped about 40% also. Well it’s their public communications job especially if the whole media budget is paid for by Meralco consumers and approved by the ERC.
A columnist of the MVP Group owned Philippine Star (also owners of Meralco) wrote about Meralco’s reasonable rates on November 22, 2016. First he cites a “recent” study of the supposed independent consulting firm, International Energy Consultants (IEC) of Perth, Australia but did not mention that the “recent” study was May 2016 and data was actually January 2016 or almost a year earlier.
Consequently, it was claimed Meralco’s distribution charges are only 17% of Meralco’s rate. It is actually 31% considering that Meralco’s supposed distribution revenue consist of distribution charge, supply charge, and metering charge totaling 2.98 per kwh of the total rate of 9.5658 per kwh. The deceptive claim is unfortunate.
The column credits Meralco’s “increased competitiveness of supply contracts”. In the IEC report they credited Meralco’s “aggressive negotiation of power supply contracts”. One wonders how Meralco can boast of aggressive negotiation of supply when its generation rate dropped only 17% in a period when the world fuel prices went down 40%.
I don’t know if it is just me but the subliminal message is that Meralco can be trusted with negotiating aggressively with power generators in a time when there is an issue on them having negotiated 3,551mw of power supply with sister company Meralco PowerGen. Negotiate aggressively with yourself? Wink wink.
But the kicker is the column’s claim that Meralco’s rate reduction is due to “substantial decreases in Meralco’s own distribution charges and systems losses, implying an improvement in the distribution utility’s actual operations”. Heavy case!
In a January 2017 Meralco press release announcing the further reduction in its rate this month, Meralco claimed that its “distribution, supply and metering charges remained unchanged for 18 months since registering declines July 2015”.
Let us remember that Meralco’s “substantial” reduction in distribution rate of 0.188 per kwh in July 2015 was due to the expiration of their permission to recover in the the 3rd regulatory period of 2012 to 2015 a supposed under recovery from the 2nd regulatory period of 2008 to 2011. The reduction was not a result of an “improvement in the distribution utility’s actual operations” as Meralco’s spin doctors are trying to project.
In fact in cross examination during the hearings on the propriety of Meralco’s 0.188 per kwh reduction, MSK discovered that Meralco was overrcovering the underrecovery by P2.39 to P5.0 Billion. MSK subsequently filed a petition with ERC for refund from Meralco. We have yet to hear from the ERC.
2. Are Meralco’s rates fair and reasonable? No.
Meralco’s rates are still not fair and reasonable because they still contained many improper charges on Systems loss of 10.2% instead of the maximum 8.5%, PBR methodology that allows them to charge consumers for projected investments instead of actually incurred, and its generation charges are not yet contracted competitively and not least cost.
If these anomalous charges are rectified we estimate Meralco’s rate would be lower by P1.00 to 1.25 per kwh.
Meralco’s rates are lower but it is mostly a result of lower world fuel prices. Our neighbors’ rates are similarly lower for the same reason. Since we have these anomalous charges, we will never catch up and be at par with our neighbors in production and business operating power costs.
3. IEC, Meralco’s favorite Consultant
Apparently it is already part of Meralco’s public hoodwinking strategy to publicize twice a year the supposed independent study by the International Energy Consultants (IEC) of Perth Australia that tend to support Meralco effort to convince the 30 million Filipinos in the National Capital Region that its rates are fair and reasonable. Next time you read about an IEC study being quoted by Meralco and their drumbeaters, remember IEC in its disclaimer admits to the following:
“This Report has been prepared by International Energy Consultants Pty Ltd (“IEC”) for Manila Electric Company (“Meralco”). IEC has no duty of
care to any other party, except to Meralco.
“we can provide no guarantees regarding the accuracy or completeness of any figures, analyses, conclusions or recommendations, especially where such data has been sourced from third parties”
“IEC does not guarantee any statement made in this Report and neither
IEC nor any of our employees accept any liability for any loss, damage or expense by any party, as a result of their reliance on any material
contained in this Report.”
That’s right mga kababayan! the IEC report is paid for by Meralco, IEC does not guarantee its accuracy, and it will not accept any liability for loss or damage if any party relies on the report!!
Just like most public hoodwinking, the conclusions being made are half-truths. And we Meralco consumers are being asked to pay for this report that is not worth the paper it is printed on. Yet Meralco is additionally spending millions publicizing and having their columnists attribute to it.
Well, at least IEC is being honest on the worth of its report but we cannot say the same of Meralco.
These are actually in Meralco’s website but who bothers to read the fine print?
We wonder about two things.
1. Should the ERC continue to allow Meralco to spend on these public deception and charge them to the consumers?
2. Should the ERC not pass another resolution for “Truth in Distribution Utility Claims and Disclosures” just like they have rules on truth in advertising? Or at least reprimand Meralco for deceptive claims?
Yes Meralco’s rates are lower but No they continue to be not fair and reasonable and would be for the foreseeable future.
And how was your new year?!!
Matuwid na Singil sa Kuryente Consumer Alliance Inc.
Matuwid.org
david.mskorg@yahoo.com
