3-phased power rate hike approved by ERC

MANILA, Philippines - The Manila Electric Co. (Meralco) will push through with its huge rate increase – but in three phases, with the biggest  hike scheduled for this Christmas season, the Energy Regulatory Commission (ERC) announced yesterday.

The ERC said it approved a staggered billing scheme for the implementation of the P3.44 per kilowatt-hour (kwh) increase in the generation charge of Meralco to cushion its impact on households.

Meralco is the country’s biggest power distributor.

Based on the approved scheme, the P3.44 per kwh hike in the generation charge would be collected in three installments: P2 per kwh this month, P1 in February and 44 centavos per kwh in March.

But with the P3.44 representing only the generation charge, a final – and possibly higher – billing figure is set to be issued by Meralco within the week.

Generation charge is the biggest component in Meralco billing. The other components are transmission charge and taxes, among others.

“Given that there are also reported increases in the prices of other commodities, Meralco’s proposal to stagger the implementation of its generation cost is timely as it will cushion the impact on electricity consumers,” ERC chairman Zenaida Ducut said in a letter to Meralco yesterday.

“The ERC therefore grants Meralco clearance it seeks to stagger implementation of its generation cost recovery by way of an exception to Automatic Generation Rate Adjustment (AGRA) rules,” she said.

A P2 per kwh increase in generation rates in December would translate to an increase of P400 in the billing charges for residential users with an average monthly power consumption of 200 kwh a month.

Meralco said it decided to charge the highest in December since an increase in rates is needed for the month and that it has to collect the balance of the rate hike in the coming months anyway.

Meralco president Oscar Reyes said the power distributor sought the guidance of the ERC on how best to implement the scheme as it seeks to mitigate the impact of the rate increase on consumers.

Energy Secretary Carlos Jericho Petilla had earlier appealed to Meralco for the implementation of the increase in three phases, saying consumers traditionally spend heavily in December and that a sharp increase in power rates would only increase their burden.

The increase in rates is due to the month-long maintenance shutdown of the Malampaya deep water gas-to-power project, which supplies natural gas to three power plants in Luzon.

The three plants sourcing power from Malampaya are the 1,200-MW Ilijan combined cycle natural gas plant owned by Kepco Philippines Corp. and the 1,000-MW Sta. Rita and 500-MW San Lorenzo natural gas facilities owned by First Gen Corp. of the Lopez group.

The plant supplies electricity to three natural gas power plants in Luzon, accounting for 2,700 megawatts. In all, these power plants provide 40 percent of the electricity needs of Luzon.

With the shutdown, the three power generation companies had to resort to more expensive diesel fuel to run their plants.

In a meeting yesterday with the ERC, Reyes said the effect of the Malampaya maintenance shutdown was aggravated by emergency outages of several plants, which led to tighter supply and higher prices at the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity.

Reyes explained that the power distributor usually tapped five percent of its requirements from the WESM but with the shutdown it had to purchase 11.5 percent from the spot market.

“With the outage of the Malampaya and other plants, we purchased approximately 11.5 percent from WESM during the supply month of November which (is) in the December billing,” Reyes said.

Petilla said the energy department would look into why emergency outages of power plants coincided with the Malampaya shutdown.

Subsidy source

In response to the impending surge in electricity rates, President Aquino said he had instructed concerned officials to find ways to ease the impact of high electricity rates, including tapping Malampaya funds as source of power subsidy.

Aquino said he gave the instructions to Executive Secretary Paquito Ochoa Jr., Secretary Petilla, Finance Secretary Cesar Purisima, Justice Secretary Leila de Lima, and Budget Secretary Florencio Abad and to the chief presidential legal counsel.

He said the government was able to provide subsidy to some members of the public transport sector before when oil prices hit an all-time high due to conflicts in the Middle East about two years ago.

This was done to prevent sharp fare increases then being demanded by the public transport sector.

“I will expect all of these people that I assigned to study it, to give me proposals, hopefully before I leave for Japan, that we can implement at the soonest possible time,” Aquino said.

Malampaya funds, according to law, should only be used for energy-related programs and projects.

Officials said the funds were intact and could be tapped if needed.

Aquino explained it was hard to commit anything right away as there were many factors that need to be considered first.

“We might have difficulty in liquidation (of the Malampaya fund), etc. So that has to be studied exactly how it can cushion: first, if it can, and how it will actually cushion,” he said. “So I’m awaiting the proposals from the secretaries I mentioned.”

ERC has the power

For Speaker Feliciano Belmonte Jr., the ERC may simply hold in abeyance Meralco’s rate increase as it is within its power to do so.

Belmonte also said an investigation to be conducted by the House committee on energy on the rate hike was in aid of legislation and meant to find out the circumstances behind Meralco’s decision to hike rates.

“The ERC definitely can (suspend the increase) because that is their job, but in the case of the House, it is to find out the facts and to see what is the basis for the contemplated increase,” Belmonte told reporters.

“On the big increases contemplated, I think there is a desire at least to find out more facts and that is through the hearing of our committee on energy,” he said. He said the panel will also tackle related pending energy bills.

The House leader, meanwhile, declined to comment on calls for ERC’s Ducut to resign after being indicted on the alleged pork barrel scam when she was still a member of Congress.

Bayan Muna Rep. Carlos Zarate, author of the resolution calling for an investigation into the rate increase, opposed the proposed staggered power rate increase.

“This is still unacceptable and the ERC/Meralco meeting seems to be a ploy to preempt the House investigation set tomorrow,” Zarate said. “At any rate we will try to get to the bottom of this proposed rate increase and we will do all we can to stop it.” With Aurea Cailca, Paolo Romero