Meralco hikes bill by P8/kwh

Malacañang sets info blitz to blunt public uproar

THE Manila Electric Co. (Meralco) on Thursday bared a staggering P8 per kilowatt-hour increase in its generation charges, but said this would not be felt yet because of the Supreme Court’s 60-day restraining order that prevented it from charging the new rates.

Anticipating a public uproar over the new rate increases, President Benigno Aquino III ordered the Presidential Communications Operations Office to mount a public information campaign to explain to consumers how the deregulated power industry operates.

Businesses have already warned that the power rate hikes would hurt industries and thousands of small- and medium-scale enterprises.

A well-placed source said the possible “unusual reaction” of the public was discussed during Thursday’s Cabinet meeting.

But when Communications Secretary Herminio Coloma was asked about it, he declined to give details on the President’s order.

“I still have to study it, keeping in mind the welfare of the general public,” he said.

In a separate interview, however, Budget Secretary Florencio Abad confirmed the order.

“We need to anticipate the reaction of the public. When Meralco announced the P4.15 per kilowatt hour, the negative reaction was already huge. How much more with this new hike announcement,” Abad said.

Abad said Coloma was tasked to “explain better” how the Electric Power Industry Reform Act or Epira works, and what the government is doing to cushion the impact of the electric rate hikes on consumers.

The P4.15 per kilowatt hour increase is the highest in the country’s history since Epira took effect.

Earlier, Meralco sought to raise its charges by P4.15 per kWh in December, because it had to pay more for power in the wake of the maintenance shutdown of the Malampaya natural gas field.

But Meralco said the total impact of the shutdown of Malampaya and other power plants raised generation costs by P3.44 per kWh in December and P4.56 per kWh in January – for a staggering P8 increase.

As in its previous bid to raise rates, Meralco said it was willing to stagger the increase over several months.

“We are sensitive to our consumers situation and plight of customers. Like what we did in December when we proposed to stagger [the increase], perhaps that will be an option that may be taken moving forward but we need to wait for position of the SC,” Meralco spokesman Joe Zaldarriaga said.

The Energy Regulatory Commission (ERC) also assured consumers that any increases in electricity rates would be staggered and would have “minimal impact.”

ERC executive director Francis Juan said if the temporary restraining order (TRO) on the implementation of the power rate hike is lifted and the increases are upheld—P4.15 per kilowatt hour (kwh) in December and P4 per kwh in January—Meralco cannot automatically recover these and will still need the approval of the regulator.

Juan said the commission would take into consideration the plight of consumers.

The ERC echoed the Energy Department worries that if Meralco is unable to collect the “correct amount” to pay its suppiers for a prolonged period, investments in power generation might be jeopardized.

Meralco head for utility economics Lawrence Fernandez said the January generation cost went up by an all-time high of P4.56 per kWh as more power plants went on scheduled and unscheduled shutdowns in December than in November.

The P4.56 per kWh generation cost increase for December will be on top of the P3.44 per kWh generation cost for November (excluding taxes and other charges of P.071 per kWh).

“The reason for the increase is still the Malampaya shutdown, which crossed two billing periods coupled with the scheduled, extended and forced outages of generation plants in December,” Fernandez said.

The Meralco official said he could not yet say how much transmission, system loss and tax charges would go up as a result of the increase in generation charges.

“We still don’t have the rest of the adjustments for January,” Fernandez said.

Zaldarriaga said the generation charge for the January bill would have soared to P10.23 per kWh had Meralco not decided to peg the generation charge to P5.67 per kWh.

“For the January billing, Meralco will bill the generation rate of P5.67 per kWh in deference to the Supreme Court TRO. However, the preliminary billings from the power suppliers and WESM indicate the Janury 2014 generation charge translates to P10.23 per kWh,” Zaldarriaga said.

The December generation rate would have been at P9.10 per kWh had the Supreme Court not issued a temporary restraining order, prompting Meralco to implement the November generation charge of P5.67 per kWh for the December billing.

Meralco said that average electricity charges at the Wholesale Electricity Spot Market, the country’s trading floor of electricity, went up to P36.0846 per kWh in December from P33.2160 per kWh in November.

Fernandez said the new price cap at the WESM was not yet implemented in the January billing.

Meralco sourced about 14 percent of its requirements from the WESM in the December supply month, 44.04 percent from its independent power producers, 41.76 percent through power supply agreements and only 0.12 percent from renewable energy.

Average electricity rates of Meralco’s independent power producers also went up by P0.11 per kWh to P6.4696 per kwh in January from P6.3538 per kWh.

Fernandez said that since Meralco maintained the generation charge at P5.67 per kWh, it “will address the balance of the uncollected pass through generation charge for both December and January billing as may be directed by the Supreme Court and or ERC,” he said.

He said Meralco has advised the ERC and the Energy Department on the preliminary generation cost of P10.23 per kWh for January.

Energy Secretary Carlos Jericho Petilla warned Meralco against carrying out the increase while the TRO is effective.

Zaldarriaga said Meralco remains unsure on how long they will not be able to collect the new rates.

“For February 2014 billing period, we are currently monitoring the situation. At the moment, the situation looks to be stabilizing with Malampaya back online including other generation plants who were on unscheduled, extended, or forced outage. We will have to wait for the actual invoices and billings of our power suppliers,” he said.

Fernandez welcomed the Supreme Court decision directing the power producers and the Philippine Electricity Market Corp. to submit their comments to the court.

“We think it will help everybody to fully understand and have the complete picture,” he said.

The power producers have yet to comment on the petition against the rate hike.

In a press briefing at the Palace, Coloma said the government will protect the interest of the public from unfair market forces.

“The President is aware of his duty to take care of the general welfare of the public. In the ultimate analysis, he is the Chief Executive responsible for the welfare of the citizenry, and we regard this matter as a significant issue involving the citizen’s welfare,” Coloma said.

“So we will do what is possible in order to protect the welfare of the citizens in this matter,” he added.

During Thursday’s Cabinet meeting, Abad said the President also tasked the Energy, Finance and Justice departments “to look at what options are available for the government to mitigate the impact on consumers and then look at accusations of collusion and predatory pricing.”

Petilla said the Palace will finalize the possible use of the Malampaya Fund and the President’s Social Fund to address the power hike.

He said, however, that it appeared that the Malampaya Fund could not be used to subsidize the rate increases.

Philippine Chamber of Commerce and Industry chairman Sergio Ortiz-Luis said exporters would be particularly vulnerable to the power rate hikes.

“They work on very tight margins because they focus more on volume. The residential sector is another story to tell,” Ortiz-Luis said.

The local business group urged the government to use the Malampaya Fund to cover the impending power rate hike “to protect consumers from paying exorbitant fees that will add to their daily burden.”

The chamber’s president, Miguel Varela, said consumers should not be left to bear the brunt of the rate hikes.

Labor groups denounced the new rate hike sought by Meralco and accused it and the ERC of price manipulation.

Anakpawis and the Kilusang Mayo Uno said the latest power rate hike was unjust.

“While we are dealing with continuing increases in the price of other basic commodities, Meralco further insults us with a rate hike,” Anakpawis Rep. Joel Maglunsod said.

The KMU condemned Meralco’s plan to hike electricity rates, saying this would add another burden to workers already suffering from low wages. – With Joyce P. Pañares and Vito Barcelo


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