Numbers Don’t Lie. Meralco Generators Charge LESS When there is no Cross Ownership. Therma Luzon of Aboitiz Should be Generator of the Year 2020!
Part 3
David Celestra Tan, MSK
2 November 2020
Cross ownership between a distribution utility like Meralco and its power generators was supposed to be prohibited by the Epira Law. But the lobbyists succeeded in putting many language loopholes in the law to circumvent it. And anything not circumvented they just simply watered down in the Implementing Rules.
The reason is simple. DU’s specially the size of Meralco will not try hard enough to secure the truly competitive rates for consumers if they are negotiating from sister or partner generators or have a stake one way or the other.
The disparity in the generation rates that are passed on to the consumers can be seen clearly from Meralco’s official data. And the amounts are mind-boggling in billions.
1. The Quezon Power Ltd (QPL) had been the most expensive coal power supplier to Meralco since 2000 with premium prices ranging from 9 to 15% higher than other coal power suppliers. But when the new owners of QPL also became a partner of MeralcoPowerGen in the 480mw San Buenaventura Coal expansion in Mauban, QPL’s premium went up to 52% from January to September 2020 this year to the tune of more than P4 billion. This despite world coal prices in the low $50 per ton.
Meralco’s PR response to this issue is their classic non-answer hoodwinking. It is like asking your marketer “bakit sobrang mahal ng ampalaya at talong at nasaan ang sukli. Ang sagot, “mura naman lumalabas ang pinakbet!”.
2. The coal power from the 480mw Masinloc Power Plant had been a competitive supplier of power to Meralco supplying power at the P3.50 per kwh range even when coal New Castle price index were at $68 to $100 per metric ton. Until San Miguel Power, that had emerged as the biggest partner of MeralcoPowerGen, purportedly acquired 100% of Masinloc in March 2018.
For the months August 2018 to February 2019, Masinloc’s rate skyrocketed to P10 to 16.45 per kwh. It appears the Masinloc plant was shutdown for rehabilitation during this period but Meralco, the utility, chose to pay San Miguel the fixed capacity fees nonetheless, way beyond their 45 day downtime allowance. This is an illegal charge and something Meralco had not paid to the previous owner AES Corp.
3. Meralco’s truly independent generators.
a. SEM-Calaca
Over the years that your organization had been tracking the generation charges of Meralco, one generator that had been most competitive and beneficial to the consumers was consistently SEM-Calaca coal plant of the DM Consunji Group. In 2015 their rate averaged P3.2709 when coal averaged $58.85 per ton. In 2016, P3.4657 per kwh with coal at $66 per ton. In 2017 their rate was P3.8620 per kwh with coal averaging $88.51 per ton. In 2018 when its contract expired at the end of the year, SEM-Calaca still averaged P4.3409 even when the coal index was $107.02 per mt.
SEM-Calaca had been typically lower by 38% to 168% than QPL!
According to Meralco’s website, SEM-Calaca’s supply contract expired last December 25, 2018. Since then this low cost supplier whose price had averaged from P3.27 to 3.86 per kwh had not been on Meralco’s list of suppliers. Unfortunately they were swallowed by the Meralco CSP system. The output of the Calaca plant is probably now added in the mix of either San Miguel or Ayala and now being sold at P4.2366 per kwh.
b. Therma Luzon in Pagbilao by Aboitiz
Among Meralco’s power generators, this Aboitiz plant continue to be the remaining shining armor for the consumers with consistently low rates though higher than then SEM-Calaca.
TL In Pagbilao has so far averaged P3.6849 per kwh, 148% lower than Quezon Power Mauban. And amazingly even lower than Meralco’s much publicized modern plant with its super critical, high efficiency and low emission technology, San Buenaventura Power which rate had averaged P4.0451 per kwh, Meralco’s new coal power benchmark rate. The more than 20 year old Pagbilao plant is beating the 1 year old SBL by almost 10%.
That is partly due to the plant operation and maintenance efficiency of the Japanese consortium.
Both the Aboitiz Group and Ayala Group were apparently outmaneuvered by San Miguel in cornering the partnership business with MeralcoPowerGen. Aboitiz also took over the 600mw GN Power in Bataan after the Ayala Group unloaded it to go green.
c. San Miguel Sual
San Miguel won the bidding for the IPPA to market the power output of the Sual Power Plant in August 2009.
During the years that the cozy relationship between San Miguel and Meralco had not yet blossomed, the 1200mw Sual Coal Plant had average prices of P3.9173 per kwh in 2014, P4.2271 in 2015, P3.8086 in 2016.
Starting in 2017, San Miguels prices for Sual jumped up to P5.1114 per kwh 20% higher. In 2018 it was P6.7068 and in 2019 P5.8605 per kwh. Partly due to coal prices that stayed in the $100 per ton range.
So far this year 2020, San Miguels price has been at P4.0533 per kwh also partly due to the world coal prices coming down to $59 per ton.
Conclusion
The Numbers don’t lie. Prices from power plants where there are cross ownerships or partnerships by MeralcoPowergen tend to charge much higher prices. Quezon Power was 52% higher than the average coal suppliers. Conversely, truly independent power plants like Pagbilao that is marketed by the Aboitiz group had consistently been lower. Even the 1200mw Sual plant whose IPPA is owned by San Miguel, has been selling lower rates of P4.0533 per kwh this year 2020, less than half what QPL has been charging.
Power generators evidently can supply at lower rates if pushed by competition and without benefit of special treatment from Meralco the buyer (on behalf of the consumers). In a deregulated market and democracy, the system needs to rely on a vigilant regulatory agency to protect the public interest. The private sector will always try to get away with maximizing profit whenever allowed to do so.
The excessive charges of QPL in 2020 and San Miguel for Masinloc in 2018
have been hurting the consumers in the multi-billions a year. What is scary is why they seem so blatant and open about it, seemingly confident that the ERC will not detect nor pay attention.
These rate data are irrefutable evidence on the evils of cross-ownership and should jolt the government policy makers, the Department of Energy, the JCPC, the Philippine Competition Commission, and the ERC, on the serious threat and peril to consumers and country of Meralco’s defiant move to corner the power generation supply for their sister generators and partners.
When will they awaken? When will Meralco honor the service conditions of their electric distribution franchise?
Keep Safe Everyone.
MatuwidnaSingilsaKuryente Consumer Alliance Inc.
david.mskorg@yahoo.com.ph
matuwid.org
