The Department of Energy can’t entice enough power producers. Controlling the tight supply those few producers make electricity retailers automatically pass on to customers their costly rates.
Worse, the Energy Regulatory Commission favors producers while feigning to protect consumers. Caught in the middle are electricity distributors and cooperatives.
The case of San Fernando Electric Light and Power Company illustrates the dilemma. ERC ordered Sfelapco to refund customers a staggering P654.4 million for supposed “excess charges” from January 2014 to December 2020. ERC wants the refund done by this mid-month.
The P654.4-million “excess charges” never went to Sfelapco. It merely collected the amount over seven years for its supplier Aboitiz Power Renewable Inc.
ERC also fined Sfelapco P21.6 million for passing on to customers APRI’s generation cost without the regulator’s consent. Yet it was ERC that foot-dragged all these years on the approval. It finally acted only because, with APRI’s supply deal lapsed, Sfelapco got new supplier GN Power Dinginin, also of Aboitiz.
All that time Sfelapco stuck to the law’s dictum of “least-cost to consumers,” it told ERC. Its monthly charge – generation cost, distribution mark-up, taxes – was the lowest among eight in Pampanga. With new supplier GN Power, generation cost will jump 50 percent through no fault of Sfelapco. It went through the proper Emergency Power Supply Agreement, as ERC wanted. Still, its new total rate would be second-lowest of the eight.
When Sfelapco’s original deal with APRI expired in 2012 it studied other supply rates and concluded that APRI’s was lowest. ERC then had not yet required open bidding, or Competitive Selection Process.
Sfelapco went by the old rule which was to continue with the Power Supply Agreement until formally approved by ERC.
In its ruling, ERC said Sfelapco should have bought from the Wholesale Electricity Spot Market. WESM supposedly had lower rates most months of the seven years. That’s mere hindsight.
Sfelapco rightly avoided WESM because “volatile and risky.” ERC knows that WESM consists of the same costly generators. What ERC can’t grasp is that buying from WESM is like betting blind. A distributor who buys from WESM today knows only the previous month’s indicative price and not the actual price he will be charged tomorrow. It can run afoul of the least-cost rule.
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DOE is remiss not only in getting enough generators but also in developing new energy sources. Malampaya, DOE’s sole but dwindling natural gas source, shut down for two-week maintenance in February.
Smart of Meralco, Malampaya’s biggest user and Luzon’s biggest distributor, to avoid WESM dependence. Foreseeing huge supply shortfalls, it rushed a Competitive Selection Process. When that failed due to no bidders, it signed emergency deals.
Had Meralco not done so, customers would have been stuck with WESM sky-high rates during summer peak demand.
Meralco had to buy from coal- and bunker-fired generators. Prices of coal and bunker have quintupled due to global shortage triggered by Russia’s 2022 invasion of Ukraine. But Meralco had no choice. The peso also has depreciated against the dollar, the currency of world fuel trade.
Meralco’s replacement electricity supply rose 55 centavos per kilowatt-hour in March. That brought its overall power rate for households to P11, although it kept steady its old distribution charge.
The increase would’ve been higher had Meralco not haggled with power suppliers to defer parts of the increase. Also to stagger collection in May and June. Customers would’ve howled even if generation rates merely pass through its billings and do not go to its coffers.
When Malampaya closed, bulk of Meralco’s supply still came from Sta. Rita and San Lorenzo gas plants which quickly shifted to other fuels. But San Gabriel and Quezon Power also stopped for preventive maintenance simultaneous with Malampaya.
Meralco momentarily had to buy from WESM – until it got emergency suppliers onboard. One of two is San Miguel Corp.’s South Premiere Power Corp. Only one year, rate fixed at P1.75/kWh for capital, but variable for fuel cost that changed monthly.
To recall, SPPC and another San Miguel generator used to be Meralco’s second and third lowest of nine long-term suppliers. Both running on coal, they supplied electricity at only less than one-third the present rate. Then came the Ukraine War and world coal prices went haywire.
To stanch San Miguel’s multi-billion-peso bleeding from skyrocketing coal rates, it and Meralco begged ERC for six-month relief via temporary 26-centavo increase. That would’ve been least-cost to consumers, ERC’s technical staff computed.
But as if wanting San Miguel to keel over, three of five ERC commissioners rejected the plea. As expected, San Miguel got court consent to end the long-term contract. Meralco lost two cheap suppliers.
Now under the mess that ERC created, Meralco must rack its brains to continue its least-cost duty.
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