Meralco’s Windfall Profits In Lockdown Months of P2.1B a month? The Truth in Numbers. (Part 2)

Meralco must Reduce by 30% its Charge on Additional Covid-19 Consumption.

Part 2

David Celestra Tan, MSK
4 June 2020

In our previous article, we observed that the alarming rise in the May billing of Meralco was due more to the increased kwh consumption quantities that they are billing instead of a rise in their per kwh rate which went down P0.2438 per kwh from 9.6276 in April to P9.3793 in May.
We also observed that the month to month changes in the eight (8) months studied mirrored the fluctuations in their Generation rates.

We pointed out that Meralco’s purchases of power for the three cooler months of December to February averaged higher at 2.693 billion kwh than the 2.565 billion in the hotter months March, April, and May, which is contrary to Meralco’s claim. It is plausible that the drop is due to the lower consumption due to the lockdowns that started in the middle of March as Meralco had been claiming.

In the previous year 2019 however when there was no lockdown, the average consumption for the similar 3 months from December 2018 to February 2019 was also higher at 2.592 billion kwh compared to the following summer of March to May 2019 of average 2.505 billion kwh,

These numbers are contrary to Meralco’s claim that the demand for power is lower in the cooler months than in the summer months.

Estimated and Averaged Billing is Normal Meralco Practice

It appears that this 3 month averaging and estimated billing is being practiced by Meralco as a normal billing procedure if not for all consumers at the same time as they did in March and April, maybe on rotation basis. Is this practice approved by the ERC and considered in Meralco’s P0.3377 per kwh metering charge totaling P878 million a month?

Is it possible that Meralco’s  narrative of “consumption is lower in the cooler months and higher in the summer months” is actually intended to condition the minds of consumers who will be hit with higher summer billings?

These are indicative macro numbers. But things don’t seem to add up. The real measure of Meralco’s fair and accurate billing is in the individual monthly statements they are asking the consumers to pay for. It will be up to each consumer to be vigilant in checking their bill.

Meralco’s Generation Rates

The cost of buying the power supply from the generators are supposed to be passed on to the consumers. Meaning there should not be any profit for Meralco. Additionally, as the franchised distribution utility Meralco has an obligation to procure sufficient power in the least cost manner.

Our analyses showed that most of the fluctuations in Meralco’s monthly rate have been results of the fluctuations in the generation charge. And the changes in the generation charge in turn should be mainly results of changes in the import costs of coal, Meralco’s dominant power supply source.

If Meralco is being true to the terms of their franchise they would seek a mix of power supply that provide energy security for their consumers and also would work to assure the power they buy are at least cost. Three years ago when Meralco asked the ERC for a P0.94 per kwh one month increase in its generation rates because the Malampaya gas would be down for maintenance and Meralco’s natural gas generating contractors would be buying substitute, and more expensive distillate fuel, your organization intervened and had the opportunity to ask a few questions.

In cross examination, it became obvious that Meralco was just taking whatever fuel charge their power generators were billing without bothering to check if the charges are fair, true and accurate. They were just passing it on to the consumers. . Clearly they were not making any effort to protect the consumers.   We were shocked. Co-intervenors with MSK were Cong. Ted Casino of Bayan Muna and Atty. Dimagiba of a new consumer group named Laban Konsumer.

Meralco’s generation charge had been in a downtrend from a high of P5.1967 per kwh in December 2019 to P4.6632 in March and P4.3848 per kwh in May. The reductions are not really due to some mercurial efforts of Meralco but more results of the downtrend in coal prices.

The New Castle coal price index was $66.18 per ton in December and remained almost in that level until March before the lockdowns. It dropped to $58.55 per ton in April and further down to $52.49 per ton in May. It is expected to go lower than $50 per ton, the lowest it would be in the last 5 years.

This may mean Meralco’s generation rate and consumer rates would be lower. However that doesn’t mean your electric bill will be lower. They have those kwh consumption that they claim you consumed from March, April, and May. Watch your Bills.

But wait. This one gets better….or worse for us.

Meralco’s windfall profits during this Covid-19 Calamity period?

Let us recap. At this stage we know a few things.

1) As Meralco’s data showed, despite the Covid-19 and lockdown calamity, its power purchased remained the same and in fact grew by 2.6% from last year 2019.
2) We also know that Meralco’s residential customers had stayed and worked at home and Meralco consequently is billing them the higher consumption of 200 to 400% as many complainants had said.
3) It is a matter of record that Meralco had purchased 2.558 Billion kwh in April and that their systems loss is 7.99%. We can therefore calculate that in that month, Meralco’s kwh energy sales was 2.3559 Billion.
4) We also know that large commercial and industrial customers had shutdown and therefore did not consume much electricity.
5) Since Meralco’s sales remained the same, it means most of the energy sales that used to go to these large commercial and industrial customers were instead consumed and sold by Meralco to the residential customers that they are now trying to bill, resulting to the increase in their bill by 200% to 400%.

Rate Differential

Now here is another interesting part. Using January 2020 data, Meralco’s rate to residential customers consuming 500kwh was P10.6593 per kwh. Large industrial customers with a demand of 750kw we estimate would be charged P7.4173. We can assume this is the average. In other words there is a 30% rate differential between the two customers.

Sales Differential

Let us assume that Meralco’s sales of 2.3559 billion kwh for April would have been consumed 20% by small and lifeline consumers (0.471 Billion), 40% by residential and commercial customers (0.942 Billion), and 40% by large industrial and commercial customers (0.942 billion).

Windfall Profits from Selling more to the Residential Customers

Let us further assume that of the 0.942 billion kwh that would have been consumed by the large industrial and commercial customers, the reduction in consumption was only 75% or 0.7065 billion and they still consumed the 25%. Since Meralco’s total sales did not actually drop during this pandemic period, this 0.7065 billion kwh or 706,500,000 kwh were then consumed by the residential customers. (Do you follow mga Pare ko?)

You know to what conclusion this is leading us. We can only assume that this 706,500,000 kwh is the one being billed additionally by Meralco to the residential customers. Except now, they are charging at about 30% higher rate. Since Meralco’s rate for 500kwh customers is P9.9537 per kwh for May 2020, the higher rate differential at 30% is P2.986 per kwh. The windfall profits of Meralco on higher sales to residential customers can reach P2.109 Billion pesos a month!

What is fair to do for the consumers?

It behooves the government, the legislators, the regulators, the policymakers, and Meralco itself and the MVP Group that controls it, to look into this and not allow the windfall profits under this calamity period. It would be unconscionable. We appeal to Meralco to voluntarily give this reduction in the name of fairness, morality, and humanity.

Meralco should be required to bill residential customers for the higher consumption at 30% lower rate of P6.9676 per kwh instead of the full residential rate of P9.9537 per kwh.

Why should Meralco be allowed to profit from the suffering of our people?

Next in Part 3 we will analyze Meralco’s buying numbers from the different power suppliers. Sister companies, generator partners, and independents.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph