Suspicious

"Wouldn’t it be more credible if the same kind of probe were done on other gencos?"

As a consumer advocate, I am always attentive to issues raised on power and energy. Last week, news reports of some militant party list representatives and lawyers calling for an investigation of Meralco’s purchase of costly power called for a closer look at the facts and, in this time of mis-information and fake news, warranted careful perusal.

A House resolution was filed by Bayan Muna Representatives to examine what they called ‘overpriced’ rates imposed by the Quezon Power Philippines Ltd. (QPPL) that ultimately affected the electricity bills of consumers. This is particularly interesting because for several months, Meralco has reported that retail rates are now at its lowest in years. After some research there are some interesting findings.

The investigation proponents insinuate that there might be an underhanded deal in their 25-year power purchase and transmission line agreement. What was not mentioned was that 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.”

Moreover, the implementation of the provisions of the said PPA were confirmed by the Energy Regulatory Commission (ERC), after the conduct of public hearings. ERC regulations require distribution utilities (DUs) like Meralco to submit the generation charge computations and all relevant documents to the ERC, to ensure that the calculations were in accordance with the regulator-approved contract. The ERC had already confirmed QPPL’s billings to Meralco and how these billings were reflected in the Generation Charge from the start of QPPL’s operations up to calendar year 2016. For the period 2017-2019, Meralco submitted similar documents/calculations to the ERC. Another important fact is that QPPL is not an affiliate of Meralco.

News reports also quoted Bayan Muna and consumer group Matuwid na Singil sa Kuryente saying “the price of coal used by coal plants fell by 28 percent from $69.66 in January to $50.34 in August, and that prices at the Wholesale Electricity Spot Market price fell by 193 percent from P8.49 per kWh in January to only P2.421 per kWh in August.”

This point should have considered the 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. While Newcastle prices spiked in late 2016, QPPL’s remained stable due to its annual indexing. This system also did not allow it to immediately reflect the declining spot prices.

Another point quoted the filed House Resolution saying, “Last January 2020, the QPPL rates went up from P6.5919 per kWh to P6.723 per kWh despite coal prices coming down by 28 percent during that period. Moreover, last March 2020, Meralco allegedly paid QPPL at a rate of P28 kWh, which was passed on to consumers.” 

However, 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. In 2020, partly because of its comparatively higher fuel cost and partly because of the lower overall power demand due to the pandemic, the dispatch of QPPL was lower vs the other gencos, which optically led to a higher P/kWh for QPPL. If QPPL were utilized more, its effective selling P/kWh will correspondingly decline.

The same effect happened to the natural gas-fired -San Gabriel plant when its selling price to Meralco in the Oct 2020 supply month reflected in the Nov 2020 Generation Charge was P9.99/kWh, an increase from its P6.54/kWh in the September 2020 supply month. This was due to its outage, which limited its generation output. Hence, San Gabriel’s fixed charges were spread over a smaller kWh. A technical reality that is no one’s fault.

There are other items in the House Resolution that raise similar questions on how information readily available from Meralco’s disclosures were being interpreted. This raises questions of motive and diminished the credibility of the allegations.

The impression I get 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?

The questionable bases of these allegations raise suspicion of malice. A little effort to spin some figures and words can disrupt a critical industry. But then this may be the objective.