Rate unbundling no guarantee of lower power rates — Meralco

The rate unbundling, filed with the Energy Regulatory Commission (ERC) by the Manila Electric Co. (Meralco) and other utility distributors, emerged as a hot issue in the long drawn debates over the controverial purchased power adjustment (PPA).

But the biggest question remains: Will consumers benefit from this measure designed to make electricity costs more detailed, and eventually translate to reduced power prices?

Perhaps only in our electric dreams, it would.

The basic objective of rate unbundling is to ensure transparency and keep power prices reasonable in a competitive environment.

Meralco, however, has said it never claimed that the unbundling would reduce power prices. At best, it would provide transparency to consumers and enable them to see how much of the amount they pay goes to generation, transmission, distribution and supply.

Even though rate unbundling is required by law for utility distribution, it’s not the way billing works in this country. The law requires that distributors provide consumers with the invoice that separates the cost components of electricity into transmission, distribution and supply.

However, these costs are lumped together as one charge under the current billing system. They show up in the power bill simply as a "basic charge."

Meralco officials also said Filipino consumers won’t immediately enjoy the benefit of lower power rates. They said power rates will be lower only when competition intensifies, which they don’t think will happen until the privatization of the National Power Corp. (Napocor) is completed in 2005.

"Competition won’t take place before the onset of what is called open access, where consumers are granted the privilege to choose where they can get power from," said a Meralco official who sought anonymity.

About 140 utility distributors have filed for the rate unbundling, but Meralco seemed to be the only company that’s taking the heat in the PPA controversy. That could be attributed to its status as the nation’s largest power distributor, serving almost three million consumers.

"Everybody is interested in what will come out of the Meralco billing after this unbundled rate filing," said outspoken businessman and consumer advocate Raul Concepcion.

"The bottom line is whether the Meralco billing will be higher or lower after the unbundling," he added.

Out of the utility distributors and cooperatives that have filed for rate application, the overwhelming majority have asked for rate increase. One company asked to increase its rates threefold, while most others asked for more than 100 percent increase. Meralco itself has asked for an increase of 30 centavos per kilowatt-hour (kwh).

There are insinuations that the unbundling program gives Meralco and other utility companies an opportunity to increase prices by inserting the increase in their filing. Officials involved in the review said that is not possible, citing the ERC regulation requiring utility companies to prepare their rate application to comply with the uniformed filing standard.

The ERC is the chief regulator of the power industry and the sole judge in the power price petition. It is authorized by law to prohibit utility distributors from passing on unreasonable cost of purchased power to consumers.

Because of its jurisdiction over the power industry, the ERC has the responsibility to review any cost adjustment by Meralco and other companies. This is to monitor errors in computation and make sure their utility companies calculate their charges based on the formula approved by the ERC.

Energy Secretary Vincent Perez was quoted as saying that Meralco’s proposed unbundled rates were "excessive and unjustifiable," hinting that there was much left to be desired in terms of transparency despite the unbundling.

"Achieving transparency in the presentation of retail rates to consumers is an important step toward the development of competitive markets for energy service," Perez said.

"Without transparent unbundled rates, consumers will not have adequate information on which to base their purchasing decisions when open access is instituted," he added.

However, one should not link the rate unbundling issue to power rate increase. From the distributors’ perspective, power rate increase will help them shoulder the increase in fuel cost, the effect of the peso depreciation and the removal of cross subsidy.

PPA is an automatic cost adjustment for payments made to independent power producers. IPPs need to import fuel to support their operations and pay for the imports in foreign currency. The depreciation of the peso against the dollar has pushed their costs higher.

Perez has said Meralco is guilty of trying to take advantage of consumers by sneaking the hidden charge into the bill.

"The ERC has yet to issue a decision on the petition filed by the utility companies, hence any conjecture that electricity rates will go up is premature," he said.

"The ERC is seriously studying every application, taking into account the welfare of consumers and the viability of the companies under a liberalized power industry," Perez said.