Gov’t Can Cure Malampaya Disruption of Meralco Rates
David Celestra Tan
26 May 2015
Meralco rates go crazy and shoot up everytime the Malampaya gas supply is interrupted due to maintenance or production problems. And that happens once or twice a year. It is also used by Meralco as the scapegoat for its high rates. That and the WESM spot market prices.
In November and December 2013, Meralco’s average generation rates shot up a mind-boggling 80% and 100% respectively. Meralco tried to blame everything on the Malampaya gas maintenance and the consequent use of replacement fuel by its three power generators using Malampaya gas for 2,700mw of base-load power. Meralco non-chalantly applied with the ERC for approval to pass on the horrendous rate increase and the ERC inexplicably approved it in one hearing. Only the timely action of party-list Bayan Muna stopped it by getting a Supreme Court Injunction.
It turned out Malampaya gas supply interruption was not the only reason. The bigger reason for the increase was the similarly mind-boggling jump in the Spot market price from the Wholesale Electricity Spot Market (WESM) that averaged P28 per kwh and reaching P62 per kwh. As later reported by the PEMC to ERC, there were mysterious shutdowns of Meralco power generators and the trading windfall of their apparently affiliated energy trading companies. PEMC and ERC apparently know who actually did what but due to our political and judicial system it remains to be seen if the violators of the anti-competitive and price manipulation rules can ever be punished.
Last month April 2015 Meralco announced a P0.40 per kwh increase again because of Malampaya’s gas supply maintenance and the use by First Gas of more expensive distillate fuel and of biodiesel by Ilijan. The increase is smaller because of the big drop in world oil prices to which Malampaya gas and these distillate fuels are indexed. With Meralco’s power generators behaving properly this time, their plants are on line and the WESM spot market did not shoot up.
Meralco’s rates to residential and commercial consumers go on a tizzy everytime something happens to the Malampaya gas which is the source of 2,700mw of power by Meralco largest three generators, erstwhile sister company First Gas and Ilijan power of Kepco. Clearly, the terms of the Malampaya power supply contract needs to be revisited because this take-or pay obligation of the buyers and the no responsibility for supply interruption is so one sided against the consumers to whom all the cost of replacement fuel and power are passed on.
These favorable terms translate to windfall profits and the biggest beneficiary of the Malampaya profits is the government under its concession agreement with the Shell Group. The government is now sitting on P180 billion in accumulated profits from Malampaya and a big source of that are the payments from the consumers. It is time that the government treat its own people right. It should take care of supplying replacement power to these natural gas plants when they are not able to supply.
It is also a good time to rethink what to do with these Malampaya profits that has become an irresistible gold mine that is subject of political and government fiscal designs, good and bad. Using it to alleviate the negative impact on the consumers who are paying for this gas in the first place would be one appropriate and fair way to use this money for the greater good.
There are many maladies in the power sector that are contributing to the high total rate to the consumers in the Meralco area. A lot of them are within the power of the government to solve. It can start with making the terms of supply of Malampaya more equitable by taking responsibility for the higher cost of replacement fuel. Then it can eliminate the regular upheaval and disruption in the Meralco rates.
The government must take the lead in treating the consumers and taxpayers right.
Matuwid na Singil sa Kuryente Consumer Alliance Inc.
