The Consumers Dilemma that is Atimonan….The Riddle that is Energy Mix. (Part 2)
David Celestra Tan, MSK
3 October 2018
Part 2
To see things in their whole perspective as a package of 3,551mw power supply contracts for Meralco’s own sister company Meralco PowerGen and their cartel partners, let us compare the ERC applications of the Seven (7) midnight contracts. Let us remember that Meralco is trying to tell the ERC and its electric customers that these seven contracts will result to lower rates.
- The US$ exchange rate was uniform among the 7 contractsat P46.07. And the coal price was the same at $50.38 per ton and shipping cost at $5.90 per ton. Yes including the contract of St. Raphael with Semirara as partner whose coal fuel is local and only a few hundred kilometers from Batangas. (Why?)
- To compute their delivered rate to Meralco substations, The Line Rental charge used varied from 0.1082 per kwh for Semirara, P0.50 for Redondo Subic, P0.30 per kwh for the two San Miguel projects, and Global business declared P0.2438 per kwh. Oddly, Atimonans claimed line rental is only P0.091 per kwh!
- As to claimed rate impact, Atimonanis claiming a savings of P0.7799 per kwh, Redondo is P0.1327, Semirara is boasting a savings of 0.2589, SMC1 0.4678 and SMC2 P0.3484. Globals 600mw in LaUnion is claiming a savings to consumers of 0.5308.
But here is the oddity. In computing their claimed savings, Redondo, Atimonan, Semirara, and SMC2 used a WESM price of P7.064 per kwh as comparison. However, SMC1 used a WESM rate of P8.4869 and so did Global LaUnion. Where did the P8.4869 come from? And that’s the comparative number they used to claim a rate savings of P0.4678 per kwh for SMC1 and P0.5308 per kwh for Global.
As we said, the appropriate comparison of avoided cost should be Meralco’s average generation rate which in April 2016 was P3.8813. I believe if we have all the data we will see that these seven (7) Meralco PSA’S would have adverse cost impact to consumers instead of savings. It is evident that Meralco regulatory officers just played with the numbers so they can claim lower rate impacts to consumers of these projects.
The evident trickery and deception do not help Meralco’s image as a public service company that has no compunction about hoodwinking the public and the sympathetic ERC that their rates are “reasonable”. Kawawanamantayo!
The Riddle that is Energy Mix
The Philippines needs a carefully crafted energy mix or combination of sources of power supply and technologies. We need that both for energy security and least cost power. We need an optimal combination of coal, natural gas, hydro, geothermal, diesel. and renewable energy. We need local and diverse foreign sources of fuel. The task of crafting and implementing this energy mix policy is with the Department of Energy.
Now the MVP Group with their enormous Meralco market power (and enticing lobbying power at ERC) preempted the right of the DOE to guide the energy mix. The seven (7) midnight contracts are all coal for 3,551mw and 4,005mw if we add the 400mw expansion of QPPL Mauban, another controlled generator of Meralco PowerGen. The energy off take for 20 years of the 8 projects is equivalent to 28,065,021,139 kwh a year, more than 80% of Meralco’s projected energy needs after 2020. And that is guaranteed. If Meralco happen to be overcontracted, they will pass on the minimum payments to us the consumers.
We cannot rely totally on Coal which comes mainly from Indonesia and Australia. The Department of Energy lately has been trying to develop the terminal infrastructure for Liquified Natural Gas (LNG). And many groups are interested. Even the fabled MVP is reported to have an LNG play in the old BNPP site in Morong, Bataan.
The question is who is going to buy the energy output of any LNG projects? Meralco is already tied up with 80% of their energy needs to coal for 20 years.
If the DOE’s LNG initiative will make meaningful progress and LNG will be an appropriate component of our energy mix, some of Meralco’s 4,005mw PSA will need to be converted to LNG. Perhaps, Mr. Ramon Ang of SMC can be convinced to convert his two 528mw PSA’s to LNG and so can the Global’s 600mw in La Union. That 1,656 mw initial off-take can provide the needed impetus to a faster realization of our LNG dream.
Meralco and Aboitiz together control about 80% of the energy needs of the country. Obviously they have to be made to open their markets for a more competitive and balanced energy mix. Otherwise these LNG initiatives are just exercises in futility or for peanuts. But who will make them? It will take a resolute national government to make these things happen, for people and country.
Back to the Dilemma that is Atimonan
It is not really just the Atimonan One that is at stake here. It is a test of whether there is hope that the ERC will acquire the self-discipline to be faithful to their mandate to a balanced protection of both the stakeholders (investors) interest for security and fair return of their investments in power delivery services and the consumers who are entitled to true least cost power. Least cost power is not just a definition. It is a process. There cannot be least cost power until there is true competition to arrive at least cost.
Even broader than that, the resolution of the anomalous Seven (7)midnight contracts of Meralco will define us as a people, our maturity to responsibly handle the duties of democracy, our ability to govern and implement our own laws, our morality and integrity to resist enticements and to put the interest of our people and country first.
As far is the ERC is concerned it has a long road to go back to being the true regulator looking after the public interest. That road starts with the rate they will approve for Atimonan One and how they will resolve the seven (7) Meralco midnight contracts.
Let us hope that in their haste to approve Atimonan One, that the ERC will not fall for the Meralco trickeries.
Meanwhile, we as consumers can use the power that we have. That is to reduce our electric consumption by 25%, starting with your airconditioners. Higher temperature, reduced hours. It not difficult to stop flipping the switch.
God bless all of us.
MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph
P.S. A friend of ours commented that rates of Atimonan One is like siopao. SabiAsado, yunpala bola-bola.
