Suggestions to remedy uncompetitive power rates

Received in the mail recently were several articles from Hector N. Campos, Sr., formerly a vice president at the National Power Corp. One of those that he sent contained some suggested short-term remedies to the current problem of high rates and outages, which we will feature today.

Some of the suggestions require political will to effect implementation and concerted efforts by both government and private sector. The objective of percolating these ideas is to be able to help the government, particularly the legislative and executive, and those involved in the private sector, to continue looking for solutions that could bring the power industry to a healthier state. Here are some suggestions of our reader:

“First, WESM must be suspended now to lower power rates immediately.

“Interim Mindanao Energy Management (IMEM), the WESM of Mindanao, was suspended as a result of the concerted efforts of Mindanaoans led by Congressman Rufus Rodriguez.

Useless expense

“Following this initiative, WESM can likewise be suspended in Luzon now to effect an immediate lowering of power rates. This can be invoked under the EPIRA Law that “the President has authority to suspend WESM (Wholesale Electricity Spot Market) in times of crisis.”

“The rates now the highest in Asia – and very likely to go up further when contingency power is used in the projected 2015 brownouts – and the very fact that rates went up, not go down, when WESM was created, can very well serve as a basis for suspension of WESM.

“WESM is paid about P700 million per year for its operation. Its suspension will eliminate this now useless expense.

“Second, generators should be paid at their highest quoted generating prices in July and August 2014 and pegged at this price for interim load dispatching. Generators cannot refuse getting paid at their highest quotes. This measure will lower rates, not to the P4.87/kwh pre-EPIRA level but significantly well below the current P11/kwh.

VAT on electricity

“Third, the removal or reduction of VAT on electricity.

“To support the export industry primarily and reduce the burden to the population secondarily, the VAT on electricity should at least be temporarily reduced if not altogether removed. It may be restored when the rates have fallen way below the P11 level.

“Fourth, there should be an incisive review of the unbundled power rates. The generation, transmission, and other charges do not reflect the real costs as the PPA is distributed and hidden in the various unbundled rates. It is inscrutable and not transparent.

“For example, system loss calculation, which is a highly specialized engineering calculation, is beyond the skill of most power engineers even in NPC and Meralco. How did ERC then come up with the “system loss” in 2013 being applied in billings in 2014?

“We can surmise that not having the skill to conduct the calculation, ERC may have just accepted the system losses submitted by generators and distributors. Meralco’s office use could very well be hidden in their system loss without customers being any wiser.

KISS billing

“What is Meralco’s P5/meter charge? If it is to recover the cost of the meter, it has been paid many times over. If for rent, why? For what is the metering charge of ~P0.40/kwh? Is it for reading the meter and for preparation of the power bill?

“Why is there a tax on payment of system loss? Customers are made to shoulder the cost of system loss (electricity not consumed). But why is the payment for the loss subjected to tax? Aren’t taxes supposed to be levied on income?

“Is the payment for universal charge and missionary energy being used for the purposes for which they are intended to provide electricity/improve service to missionary areas, or are they being made to pay the stranded contract costs?

“The review should be done by a highly skilled team, small in size, not beholden to generators and distributors, and provided with authority to access data from all sectors.

“The review should be guided by “KISS” (Keep It Simple Stupid”) to make the unbundled rates easily understood and transparent, no hiding of charges.”

We welcome comments from others that would validate or dispute the observations and statements made.

Champions League 2014 National Collegiate Championship

The DLSU Green Archers, last year’s national collegiate champion and third placer this year in UAAP, is considered by experts as the heavy favorite to grab the last seat in the Elite Eight of Champions League (PCCL) 2014 National Collegiate championship.

The Green Archers will face the tough JRU Heavy Bombers, NCAA’s third placer, in the first hurdle of the stepladder knockout games of the Luzon-Metro Manila Qualifying games to be held at FAITH, Tanauan City, Batangas starting Nov. 7, 2014.

Joining DLSU and JRU in the qualifying games are NAASCU and MNCAA champion CEU Pink Scorpions, NCAA 4th placer UPHSD Altas, and NCR eliminations winners St. Clare Saints and Diliman College Blue Dragons. Two seats are reserved for the North-Central Luzon and South Luzon-Bicol regional champions.

The South Luzon-Bicol games at the J.C. Lobredo Coliseum, Naga City will be completed by today. Playing are Naga College Foundation Tigers, University of Batangas Brahmans, Amando Cope College Green Serpents, and Computer Communications Development Institute Wildcats.

The North-Central Luzon regional games being played at Lyceum North Western University gym, Dagupan City will have a champion by Nov. 5.

Teams already in the Elite Eight phase are newly crowned UAAP champion National University Bulldogs, NCAA champion San Beda College Red Lions, CESAFI champion SWU Cobras, the FEU Tamaraws, Arellano University Chiefs, USC Warriors and Vis-Min qualifier University of Visayas Green Lancers. One seat is reserved for the Luzon-Metro Manila Qualifier.

The Champions League (PCCL) National Collegiate Championship is sponsored by media partners, ABS-CBN and Philippine Star, Phoenix Petroleum, Molten Balls, Fil-Oil Flying V Sports, Fog City Creamery and Foccacia. Tickets are available at SM Tickets online.

Visit www.CollegiateChampionsLeague.com and join for free the ongoing survey to pick the teams that will advance to the Sweet 16 Finals from the regional championships and qualifying games. Those who will pick correctly the teams will receive gifts from Champions League (PCCL) sponsors. 

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.