It Will Take a Village to Reduce Meralco’s Rates

By David Celestra Tan

MSK has studied and identified the various charges that have been adding up to high electricity rates for Filipinos in the Meralco franchise area that serves 72% of the electricity needs of Luzon island. These are the basis for our Ibaba ng P3 Campaign. Essentially what we have done is get past the justifications of Meralco and unravel the mystery out of these high rates line by line. We have taken the first small consumer step by filing a petition with the ERC to pass a resolution mandating the open competitive bidding for power supply contracts that will be passed on to the consumers. There will be more rule-change petitions that MSK will file.

We have a long way to go however before those small steps become giant leaps for consumers, who have long been ravaged by the power industry system that is supposed to serve them well. Obviously, MSK cannot do it by itself. It can only act as catalyst for reform and show the way. It will take a village to reduce Meralco’s rates.

First, the Meralco’s residential and commercial consumers, its captive customers, must want the reduction and be willing to go beyond complaining and to take action. The ERC must take cognizance and pass the competitive contracting resolution, improve the transparency of systems loss charges, and the reasonableness of the PBR rate making methodology. So far it appears indifferent.

The Department of Energy will have to provide enlightened policy direction and energy mix strategies. Most urgently it needs to improve the trading rules of the WESM specially the “market settling price”, the must run unit (MRU) policy, and market manipulation safeguards. The DOE must further recognize and work to close the loopholes in the law that have been allowing the monopolization and domination of the generation sector specially Rule 11 Section 4 of the Implementing Rules and Regulations of the Epira Law.

Our Senators and Congressmen must rise up to the challenge and amend the law to close the loopholes and amend the IRR accordingly. They must be willing to cleanse the Epira Law of 2001 of its anti-consumer flaws. They must rectify the consumer betrayal of Republic Act 9511 which erroneously threw in the Systems Operator authority to NGCP as part of its transmission line concession. We must rationalize transmission line charges while we still can. NGCP’s P0.95 per kwh charge includes P0.36 per kwh for ancillary services that have been of doubtful benefit to consumers.

The BIR and Department of Finance must be willing to rationalize the VAT taxation of power. The E-Vat Law of 2004 added P1.30 per kwh to our electricity bill. The DOE and JCPC must give Napocor a longer term missionary electrification mandate so that it can adopt more cost effective solutions to island power generation. Costly Temporary Rental generators are proliferating all over the islands. The DOE must be judicious in administering the missionary subsidies and discourage unscrupulous competitive biddings and power supply contracts. All these result to high Missionary subsidy that has added P0.19 per kwh to Meralco consumers and rising. So are the stranded contracts and assets of PSALM. They too will be hitting the consumers with more universal charges.

The big players in the industry, who are mostly diversified conglomerates, must similarly cooperate and recognize that it is to their long term interest to help the country become energy competitive, strengthen the economy as a whole, and improve the purchasing power of the consumers. They cannot strangle the geese that lay the golden eggs for their various businesses in shopping malls, real estate, telephone services, water, transport and etc.

Malacanang will have to provide the leadership and set the tone for a national resolve to reduce power costs. We are aspiring for Asian Economic Community integration but our power cost will be a big handicap. High power cost is an Achilles’ heel of the BPO and Call center industry which drives professional employment, middle class demand and the real estate boom. It is still two years before a new leadership comes in after the May 2016 elections. Let us hope the current government will not let the consumers down and do enough to put the country on the road towards rationalized power cost and competitive rates, a lasting patriotic legacy.

And there is the most important which is Meralco itself. It must embrace least cost power as its mantra as a public service utility. It is within its right to develop a cost efficient energy mix and subject its purchases of power to competitive bidding instead of negotiating with itself and monopolizing the power generation supply of Meralco. It must rid itself of this conflict of interest and do business in arms-length basis. It is within its capability to shepherd and manage the contractual obligations of its power suppliers specially the uptime and reliability obligations of their power plants. Meralco only needs to want to.

In the P3.00 per kwh feasible reduction in Meralcos power cost, fully P2.20 or 73% is within Meralco’s own control and capability to initiate and achieve. (generation cost, systems loss and distribution charges). They only need to find it in their hearts to be true to their mandate as a public service provider. Meralco’s Filipino management and executives must view this as a patriotic duty. Least cost is part of its public service obligation. In the power cost reduction village Meralco is the center.

Reducing the Philippine power cost especially in the Meralco area by P3 per kwh is an achievable dream. We however as a people must want to and cooperate and row in the same direction. MSK hopes it is showing the way towards rectifying this unintended conspiracy against the Filipino consumers.

We have identified eight (8) varied areas for reform. It will take some doing even for all of us working as a village to reduce Meralco’s power rates.

If not us, who? if not now, when? Otherwise we have no right to complain, bear the consequence of our own apathy, and reconcile with the unkind deed of consigning our own children and country to a future of overpriced power. Sad.

Maybe we all can find enlightenment, courage, and epiphany in the Pope’s visit.

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David Celestra Tan is a CPA and a founder and former president of the Philippine Independent Power Producers Assn. He is a co-convener of Matuwid na Singil sa Kuryente Consumer Alliance Inc. (MSK) which is dedicated to working for reforms and rule-changes in the power sector to reduce power cost and make the country energy competitive. Follow the issues in the matuwid.org website. Comments can be sent to david.mskorg@yahoo.com.ph.