Whats Anomalous About Meralco’s Charging the Public with Negotiated Rates Without CSP?And the DOE Doling Out FIT Subsidies?

David Celestra Tan, MSK

27 November 2016

Under our Anti-graft laws the Office of the Ombudsman had indicted many government officials for misappropriating government funds. From procurement, improper expenses, and misuse of pork barrel.Former President Arroyo had been accused of plunder. Several legislatures are still in jail because of misuse of government funds. Someone I know was removed from office because of a P136.00 disallowed expense receipt.

All of these are because of improper use of taxpayers money. In other words, use of money that is coming from the pockets of the Filipinos as taxpayers.

Meralco’s anomalous refusal to subject their procurement of power supply to a true competitive bidding or CSP and their insistence to negotiate power supply and prices with their sister companies and charge them to the Filipinos as electric users is like insisting on dipping with impunity into the pockets of Filipinos any amount they want.

What right does Meralco have to do that to the Filipinos? They are holders of a public service franchise for the distribution of electricity. They are already guaranteed a fair return on their actual investments. All their costs are covered and they are even allowed to pass on to the consumers any damage they get from natural calamities. Their franchise even require them to supply power in the least cost manner. And to not abuse its market power and all evil deeds.

Generation rates are supposed to be only pass on charges. And yes it is true that Meralco is only passing on to the consumers what they pay for their generation purchases. They claim they are only acting as collectors and do not make money on it. That is technically true as Meralco the electric distributor. But honestly not true because they negotiated the generation services with their own sister company. You wish Meralco should stop insulting the intelligence of Filipinos by stopping this charade that they don’t make money on generation. The company’s name is even MeralcoPowerGen.

Sure the people get electricity in return but that is the same with the people getting the use of the roads and services that were anomalously procured. This is the main issue.

There is no excuse to overprice the public. And this cannot be debated. The only way to assure the charges are fair is through truly competitive bidding as required by government procurement to protect the people.

If the government goes through a legislative process before it can dip into the people’s pockets by imposing TAXES, why should a private company, and a foreign owned one at that as amply supported by author Rigoberto Tiglao, be allowed to charge the Filipinos any amount they want?

Sure they claim the ERC as regulators “protect the public by rigorous regulatory scrutiny” but table evaluations will not substitute for the prices from a truly competitive bidding. As an example, in the 455mw Mauban coal expansion called San Buenaventura project, the negotiated contract was P4.32 per kwh. The ERC, after presumably rigorous evaluation, reduced it to 4.26 per kwh or 1.4%. Comparatively, eight (8) electric cooperatives in northern Luzon aggregated their small power requirements into a 135mw bidding and got P3.78 per kwh. That is P0.48 per kwh lower than the ERC approved rate or 11.3%. or a whopping P1.18 Billion a year overprice. (See our previous article on “Competition Beats Regulation”)

And these are the price difference on the officially declared generate rates. There are hidden costs to the electric consumers from the sweetheart provisions and contract administration between Meralco and these coal project companies all controlled by MeralcoPowerGen.

What is worse is these overpricing and arbitrary negotiated charges to the public are being done in the provision of a public utility service, a basic necessity that the public need to buy. The regulators are there to safeguard the public from being abused by the private sector.

The Anomalous Refusal of DOE to conduct biddings for SOLAR Renewable Energy Projects

There was a time when the government needed to provide impetus to encourage the development of renewable energies like solar and wind. The DOE and ERC approved a subsidized Feed-In Tariff (FIT) rate for solar of P9.68 per kwh, a subsidy of P4.68 per kwh. They did better in the 2nd round of FIT by reducing it to P8.68 per kwh, a 10.2% reduction. Then for the 3rd round they proudly claim to be recommending P7.70 per kwh or another 11.3% reduction.

Local and Foreign Solar developers flocked into the country. Of course. During this period the cost of solar panels and technology came down by at least 75%. And you hear about middle east and south American countries holding a bidding and getting as low as $0.03 per kwh or P1.44 per kwh!

What does not make sense is why the Department of Energy kept on insisting the doling out of the FIT rates. So far the charge to the national electric users from this FIT program (mostly solar) is P.12 per kwh with a current request to increase it to P0.225 per kwh. Why doesn’t the government hold a public bidding for these solar renewable energy? The new DOE under President Duterte and Secretary Alfonso Cusi, properly alarmed decided to suspend the FIT program.

There are reportedly about 500mw of solar projects that are stranded by these misguided government policy. While it is not fair to give these solar projects the obscenely high FIT rates, it is also not fair to leave their investments hanging. Many of them have completed their projects and are generating but did not get the FIT. Some complain that the solar group identified with a Senator gets preference in getting the high FIT rates. So why not hold a bidding or RE CSP? We project that the solar bidders will match the P4.50 per kwh of coal on VAT paid basis. Then there would be NO subsidy and we get clean energy.

This is an abominable treatment of the Filipino taxpayers as electric consumers that direly need a savior. Who will step up? Who will be our Hero?

Help!

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