Meralco can still lower power rates - UP study

MANILA, Philippines – The Joint Congressional Power Commission (Powercom) urged the Energy Regulatory Commission (ERC) yesterday to draw ideas from a study prepared by the University of the Philippines on ways to reduce the high power rates in the country.

UP College of Engineering professors Rowaldo del Mundo and Edna Espos presented the study at the Powercom public hearing yesterday.

Rep. Luis Villafuerte said the Powercom gave the ERC 15 days to submit its comments on the study.

Sen. Edgardo Angara, for his part, reiterated his call for the Senate to speed up debates on the proposed amendments to the Electric Power Industry Reform Act (EPIRA).

Angara wanted amended or removed outright the provision that authorizes power firms to pass on to consumers charges not related to electricity generation.

“If we do not provide our people with some measure of support, more and more people will be pushed to the brink of poverty,” he said.

The UP study shows that a reduction of P2 per kilowatt-hour on power rates is possible through a combination of simple adjustments in regulatory policy and an amendment to EPIRA.

“Distribution utilities can have a formula to bring down power rates... The UP study and the findings of government entities showed that Meralco was buying from its own IPPs at higher prices rather than from Napocor during off peak hours,” Villafuerte said.

Villafuerte said the study also recommends that ERC monitor the distribution utilities’ power purchases and check if such purchases are beneficial to consumers.

Angara said the onerous provisions in EPIRA, particularly the Purchased Power Adjustment, explain the prevailing high power rates in the country. He said power firms are allowed to pass on the PPA to consumers as “universal charge.”

PPA is one of the automatic cost recovery mechanisms allowed by the ERC for utilities such as the Manila Electric Co., electric cooperatives, and other power distributors, to recover costs of power purchased from generators such as the Napocor and IPPs, not recovered by the basic rate.

“This means that consumers are still burdened with paying an automatic monthly adjustment to basic electric bills to recover the changes in the cost of power purchased from private producers in the form of PPA,” Angara said.

“The PPA is broad enough to allow power generators and distributors to pass on to consumers the cost of their mistakes and inefficiencies as well as the burden of the onerous contracts entered into by the National Power Corp. and distribution utilities with independent power producers,” he said.

“This should not be the case. Consumers should be required to pay only for their electricity consumption. The risks should be, as in any business venture, accounted for by producers,” he said.

A bill filed by Angara seeks to lessen electricity rates through refinancing of stranded costs and renegotiating of IPP contracts, limiting PPA charges, and promoting transparency in the electric sector to encourage real competition.

Group disputes study

Ernesto Pantangco, president of the Philippine Independent Power Producers Association (PIPPA), cited inaccuracies in the study such as its “wrong conclusion” on the rate of return for Sta. Rita, San Lorenzo and Quezon Power, three generating plants identified with the Lopez-owned Meralco.

Del Mundo claimed that the study fixed the RoR for Sta. Rita at 95 percent, San Lorenzo at 92 percent and Quezon Power at 70 percent.

He noted that the figures were way above the 12-percent RoR fixed for the industry under Republic Act 9136 or EPIRA of 2001.

“The conclusion is wrong,” Pantangco said. “If this was so, then investors would be flocking to put their money in the energy sector which is not happening,” he told the JCPC chaired by Sen. Miriam Defensor-Santiago and Rep. Mikey Arroyo.

“This can be attested to by President (Jose) Ibazeta of PSALM,” Pantangco said, referring to the chief of the Power Sector Assets and Liabilities Management Corp., the entity created by RA 9136 to oversee the sale of the generating assets of Napocor.

Jesus Francisco, Meralco president, told the joint committee that the power distributor’s RoR is only 6.9 percent.