Why there is a need to Investigate the QPL and Meralco Billings for 2020?
David Celestra Tan, MSK
1 December 2020
Your organization MSK wrote about its findings on the Quezon Power Philippine Ltd’s (QPPL) hard- not- to- notice disparity in billings compared with Meralco’s other coal power suppliers this year 2020.
We had known that since 2000 that QPPL is the most expensive coal power supplier to Meralco. That cannot be denied because it’s a matter of public record. In the year 2019, they were only 9 to 12% higher than other coal generators. It therefore surprised us that in 2020, QPPL’s rate averaged P6.73 per kwh compared to the average of all the other coal power suppliers of Meralco for the same period at P4.20 per kwh. That’s an astounding 52% or 40% more than normal over the years. Any self respecting consumer group will be concerned and it does not matter whether the contract was signed 20 or 50 years ago. There must be something wrong.
Records show that up to September 2020, Meralco bought 1.601 billion kwh of power from QPPL at the average P6.73 per kwh resulting to an approximate premium of P4.05 Billion.
QPPL’s evident explanations were propounded through two columns, one by Mr. Orlando Oxales, writing for Manila Standard, and Mr. Bienvenido S. Oplas Jr, of Business World. Let us try to address the points raised in the columns.
A. QPPL Explanations as relayed through Mr. Oxales in column “Suspicious” Nov 30 2020
1. Oxales “the Power Purchase Agreement (PPA) between Meralco and QPPL was approved by the regulator. In the Energy Regulatory Board’s (ERB) decision on Case No. 94-217 dated July 16, 1995, the ERB found that, “In view of the fact that Ogden’s power rate is lower than the NPC rate, applicant Meralco will not only diversify its sourcing of power from NPC but will also benefit from the project’s competitive cost of power. Thus, it can be concluded that the cost is just and reasonable.”
MSK: The fact that the pricing formula and contract were considered just and reasonable and approved 25 years ago, does not mean it is being implemented and administered properly now. The issue now is in 2020 QPPL’s rate is 52% over other coal suppliers. In fact it ranged from 51% to 82%. There could be many reasons why. In the way the new QPPL is computing it, the way the index worked, the way the fuel is being priced, in the way it is being paid even if they are not available to run? A lot of things that cannot be determined unless there is an investigation or audit. The fact that there is 52% differential that Meralco consumers are paying, should trigger a regulatory agency to look into to protect the public interest. To assure that they are not being overcharged properly. The owners of QPPL are now partners of Meralco in another project in the same location we have to wonder more.
There is P4.05 billion differential for nine (9) months. Shouldn’t we now all be concerned?
Until there is an audit, we will never know. Auditing is one of the safeguard that the government owes to the public.
2. Oxales “QPPL is not an affiliate of Meralco”
MSK. Not directly it is true. But QPPL’s owner EGAT of Thailand is the 49% partner of Meralco in the neighboring San Buenaventura Coal power plant. There is a partnership relationship.
3. whole historical data based on the Newcastle Spot coal price index which will show that going back a few years, QPPL’s coal prices were lower
MSK: The issue is the price differential of P4.05 Billion in the year 2020.
4. On the P28 per kwh QPPL rate in March 2020, the answer was
“ QPPL’s effective selling price is also affected by its level of dispatch or utilization. A higher dispatch or utilization will mean that QPPL’s fixed charges can be spread over more kWhs generated, which will optically lead to a lower P/kWh.”
MSK: favorable dispatching and getting paid nonetheless is one way to favor a partner to the detriment of the consumers.
5. The impression…is that the data gathered by the critics, which can be found in Meralco’s website postings and disclosures, were craftily selected to fit their narrative. The focus on QPPL is strange. Wouldn’t it be more credible if the same kind of probe were done on other gencos?
MSK: We analyzed the prices of all of Meralco’s coal power suppliers. That’s how we saw that QPPL’s price premium skyrocketed to 51 to 82% over the others compared to 9 to 12% the previous year. We wrote about QPPL because their prices were strangely high. The coal fuel costs of all the generators may not be the same but their price trend should be the same. The results of the data correlations drive our narrative. We call it what it is.
6. The questionable bases of these allegations raise suspicion of malice
MSK: Everyone is invited to go over the 5 years of consumer advocacy issues we have raised in our matuwid.org website. We stand by our record for issue and fact based advocacies. Facts and numbers don’t lie. Our numbers and correlations are of public record and can be fact checked.
B. QPPL Answers through Mr. Oplas Column
7. One, the QPPL share is only about 9% of Meralco’s total power purchase. Two, while QPPL prices are generally higher than the Wholesale Electricity Spot Market (WESM) prices and overall generation charge, there are months and years where QPPL’s prices are lower, like in May 2018 and May 2019. Three, despite big oil-coal tax hikes under the Tax Reform for Acceleration and Inclusion (TRAIN) law of 2017 that pushed upwards the cost of oil-based and coal plants, the generation charge has been declining in 2019 and 2020(see Table
MSK: We are sorry these are not the issues. The concern is the 52% average premium that Meralco is paying QPPL in 2020 from the historical average of 9 to 12%. P4.01 Billion worth that have been charged to the Meralco consumers.
All coal plants are paying the TRAIN taxes.
8. So the BM “study” is twisted to produce two false assertions.
One, that there is overcharging because the PPA of QPPL-Meralco is a sweetheart deal — wrong. The PPA was approved by the Energy Regulatory Board (ERB), the precursor of ERC, way back in 1995 or even before the EPIRA (Electric Power Industry Reform Act) of 2001. No PPA or power supply agreement (PSA) by Meralco and all other private distribution utilities, past and present, can proceed without public hearings and ERC approval.
MSK: We agree but these are not the issues. See answer No. 1 above.
9. Many self-styled greenie and socialist-leaning organizations like BM are inconsistent in their anti-fossil fuel lobby because they only demonize coal plants, but not gas plants or even diesel plants.
MSK: BM and MSK’s concerns being enunciated are not about the environment, renewable energy or even coal as a fuel. We compared coal vs coal for valid apples to apples comparison. The issue only is on the 50% higher charges of QPPL for similar coal power.
10. MSK: The actual average price of QPPL from January to September 2020 was P9.1455 per kwh instead of the P6.73 per kwh that we used in the computations.
This was because of the P28.4416 per kwh that Meralco paid QPPL in March 2020. We used the lower average price.
These are price differentials that denied the Filipino consumers the benefits of the 28% lower coal prices and the 193% lower WESM price. Because of QPPL’s anomalous high prices, the reduction in the generation rate to consumers came only to 16%.
For now, we only know that the rates being paid by Meralco to its partner EGAT OF Thailand (owner of QPPL) and being charged to the Filipinos are scandalously high. BM and MSK are asking for an investigation to find out the truth and the underlying reasons so corrective measures can be undertaken in fairness to the consumers. We owe it to them.
Matuwid na Singil sa Kuryente Consumer Alliance Inc.
david.mskorg@yahoo.com.ph
matuwid.org
