Why Public Interest Deserves the Investigation of Meralco’s Power Purchases from QPPL at Excessive Rates
David Celestra Tan, MSK
27 December 2020
It may be due to the holidays or the Covid19 pandemic but it has been months since your organization raised the alarm about the excessive power generation rates that Meralco has been paying Quezon Power Ltd and passing them on to the consumers. We officially filed a complaint with the ERC but they have yet to act on it.
While we are waiting, let us muse about Meralco’s power purchases from QPPL at excessive generation rates. In November they charged P6.2045 and in December P6.5607 per kwh. 47.6% and 58% higher than Meralco’s average generation rates of P4.2018 and P4.1516 respectively.
A. Are the QPPL rates Excessive and should they be investigated?
Let us start with the facts.
1. Are the QPPL rates excessive? For 11 months of 2020 except March, Meralco paid QPPL an average rate of P6.5336 per kwh. If we include March when Meralco paid QPPL an astronomical rate of P28.4416 per kwh, the average would be P8.3592 per kwh.
For purposes of this discussion let us just use the lower average of P6.5336. Comparatively, Meralco paid all its other coal power suppliers an average of P4.1136 per kwh or 58.83% higher. In terms of pesos, that is a premium of P2.4200 per kwh for the 2.18 Billion kwh that Meralco bought from QPPL for 2020. That is P5.2778 Billion higher price paid to QPPL for 2020 alone and charged to the consumers as part of the generation charge.
These data came from the monthly generation report made by Meralco to the ERC as part of the support data to justify its monthly generation charge to the consumers. We only summarize and did the logical derivations. The interpretations are in the eyes of the beholder. Meralco wants to say the rates are legal, We consumers are saying ouch, the rates are excessive.
If one generation supplier is charging Meralco and the consumers 58% higher rate, even compared to coal power plants that were built in the same general period in 2000 and whose tariff rates were approved by the ERC at the same period methodology, should we not be concerned? Why the consistently aberrant rate of this one supplier? Should it not be our duty to seek an explanation to insure that the public is not being overcharged? After all we are talking about P5.2778 billion premium price for the year 2020 alone! What had made QPPL so special to Meralco that they deserve that 58% premium?
Meralco and QPPL’s response.
2. Meralco gave their usual go-to answer whenever there are issues that they cannot or do not wish to answer. They point to the ERC, who they said had determined that the Quezon Power contract was “fair and reasonable” and approved the rate in 2000, 20 years ago. Therefore the Quezon Power rate is legal. That seems Meralco’s argument.
3. Many things had happened in the last 20 years. Surely it should trigger some regulatory curiosity if one particular power generator skyrockets in power charges compared to the others. What’s going on with QPPL? What was in their tariff formula that resulted to this aberrant increase by 58%? We cannot be fatalistic and consign the consumers to continuing excessive charges. An abusive rate today cannot be ignored even if the abuse had been happening for 20 years. In the least, we got to look into it.
It might be technically legal but may not be moral
Meralco’s normal smug answer is it was approved by the ERC and therefore legal. Why does Meralco seem so confident that the ERC will never seriously investigate them and in fact would come to their defense?
4. We have accepted the fact that from time to time the monthly rates per kwh of these generators can spike due to their allowed maintenance shutdown and they are still paid their full their capital recovery and fixed costs like the P28.44 per kwh in March. But those provisions are similarly accorded to the other generators.
5. For 2020, QPPL’s rate ranged from a low of P4.9543 in June and the horrendous high of P28.44 per kwh in March. Therma Luzon in Pagbilao had a low of P3.0055 in October and a high of P6.7812 in December. San Miguel Sual had a low of P3.8197 and a high of P4.1496 in October.
6. The other cost factor that can send a generators rate spiking is the cost of fuel. In this we assume similarly that fuel is a pass on charge and all the coal power generators supplying to Meralco are buying their coal mostly from Australia and Indonesia and to a minor extent in the Philippines. So why is QPPL’s rate soaring? Is it not prudent in the public interest to check if the coal price procurement and indexing in the case of QPPL turned out to be onerous for the consumers? Is ignoring this pushing the government dangerously close to the borders of inexcusable negligence?
7. Granting that in looking into this anomalous rate, we will find that indeed the rates were legal according to the tariff formula approved by the ERC 20 years ago. Should we, in the public interest, not try to learn from this “in aid of legislation” to make sure this clearly onerous result will not hit the consumers again in the future? We thank the party-list groups like Bayan Muna who at least filed a bill calling for an investigation into these serious overcharging. Let us hope the Congress leadership will not pigeonhole an investigation. This is an instance where it can truly be “in aid of legislation”.
8. The QPPL rate rocket ship has been a P5 billion nightmare for the consumers. Don’t we even want to learn from it?
9. The current owners of QPPL, EGAT of Thailand, can claim that they just bought the plant and the juicy power supply contract from Energen Bechtel et al of the USA. We had high expectations from EGAT because Thailands power cost is way lower than the Philippines. Why was QPPL’s average premium in 2019 over the other coal power generators only 11 to 12% and now in 2020 it shut up to 58% of P2.42 per kwh? What in QPPL’s ERC-approved tariff formula account for this one year skyrocket?
Is this related to EGAT becoming the partners of Meralco in the nearby 480mw San Buenaventura Super HELE coal project?
When it comes to the protection of public interest we should not be leaving any stones unturned. RA 9136 or the EPIRA Law mandates it.
Let us hope that after the holidays and pandemic, the government can finally look into it. Prayers.
Happy New Year to all!
MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph
