Bulatlat - The Philippines's alternative weekly newsmagazine

This story was taken from Bulatlat, the Philippines's alternative weekly newsmagazine (www.bulatlat.com, www.bulatlat.net, www.bulatlat.org).
Vol. V, No. 44, December 11-17, 2005

Power Companies Slam Napocor Rate Hike In December

Power rates are expected to increase this December not only due to the value-added tax but also the government’s approval of the National Power Corporation’s application to increase power rates. At this point, even business leaders and power companies have denounced the government’s failure to lower prices of electricity.

BY JHONG DELA CRUZ
Bulatlat

In their opposition to the National Power Corporation’s (Napocor) decision to increase power rates, consumer rights groups now have an unlikely ally in the energy sector’s industry players and other business leaders.

The Energy Regulatory Commission (ERC) approved last December 6 the Napocor's application to collect its deferred generation, fuel and foreign exchange costs incurred between Oct. 2004 and March 2005.

The increase is covered by the Generation Rate Adjustment Mechanism (GRAM) and Incremental Currency Exchange Adjustment (ICERA), which will impose a combined rate adjustment of about P0.1223 ($0.0023, based on an exchange rate of P53.42 per US dollar) per kWh in Luzon, P0.0831 ($0.0016) in the Visayas, and P0.0658 ($0.0012) in Mindanao. The amounts are half of what Napocor applied in September this year.

Donald Dee, president of the Employers Confederation of the Philippines (Ecop), lamented that the government failed in lowering prices of electricity after the enactment of Electric Power Industry Reform Act (Epira) in 2001. While his statement is short of calling on the government to repeal the law, this nevertheless mirrors the stand that an angered private sector takes when government policies do not fulfill their own interest.

Political factor

The government has been bent on privatizing 70 percent of Luzon and Visayas’ generation capacity since 2003. At present, only 11 percent of the two island group’s generation capacity has sold by the Power Sector Assets and Liabilities Management (PSALM) Corporation.

The reason, according to industry players, is that investors are wary of the current political situation given that the clamor for President Gloria Macapagal-Arroyo’s ouster has not died down.

PSALM president Nieves Osorio said that the government has been “ambitious” in targeting to sell all of the Napocor’s remaining 31 generation companies (gencos) this year. To add to the seven gencos privatized in 2004, PSALM is eyeing the sale of the Bataan thermal plant this December and Masinloc plant which investor YNN Pacific Consortium, Inc. has refused to pay the $223 million upfront fee due to unresolved issues facing the government.

PSALM has postponed the complete sale of the gencos for July 2006. At that time, the “open access” scheme will be launched. As early as now, however, Philippine Electric Power Operators Association Vice President Ramon Abaya said that the scheme is impossible to implement.

Abaya said that due to what the administration is going through politically, investors will not be interested in the 32 remaining gencos.

Spot the difference

Abaya said that the government is scheming as it rushes the distribution utilities to sign up for transition supply contract (TSC).

TSCs will make distribution utilities unable to tap their own independent power producers (IPPs) other than NPC-led IPPs.

The Napocor threatened to close some 93 distribution utilities if they do not sign up for the TSC. Moreover, the TSC signing is a take-off for the wholesale electricity spot market (WESM), industry players claimed.

Psalm had difficulty in getting the consent of its creditors like the Asian Development Bank (ADB) and the World Bank (WB) for debt and asset transfer. After all, the TSC from distribution utilities is necessary for the WESM and “open access” to happen.

Engr. Ramon Ramirez of Samahang Nagtataguyod ng Agham at Teknolohiya (Agham, a group of scientists and technologists) said that the WESM is like a stock market where buyers of electricity, including end-users, choose from distribution firms that offer the lowest electricity prices.

The government claims this will eradicate the monopoly in electricity industry and heighten competition among retailers because those companies or consumers who use up one megawatt of electricity can participate in the “open access” where resellers are allowed to use the lines of those already existing distribution utilities.

Ramirez said WESM will only succeed in a market where true competition prevails. “Only a handful controls the gencos and distribution utilities. When the WESM becomes operational, consumer will ultimately suffer from unregulated prices of electricity.”

Sham discounts

“Lifeliners” are those who are supposed to benefit from a P0.30 ($0.0056) discount when they consume electricity below 100 kilowatt-hours (kwh) monthly.

According to EPIRA, those who consume above the lifeline rate shoulder subsidize the lifeliners. “We used to contribute P0.0761 ($0.0014) until ERC increased it to P0.1049 ($0.0019) last month. Now we contribute P0.1082 ($0.0020) to the lifeliners,” said Ramirez.

“Unlike the jeepney drivers who absorb the P1.50 ($0.0281) discount in transportation fare for students and senior citizens, Meralco or the government does not absorb the discount but collects from the consumers using more than 100 kwh to recover the loss,” he said.

The government and big companies make it appear that they are the ones giving the discount and absorbing the loss. Meralco has been reported to be losing some P1.5 million ($28,079.37) in recovery for the lifeline subsidy.

Thus, from December 2004 to November 2005 the residential consumers had an increase of P0.4991 ($0.0093) per kwh in their power bill, added Ramirez.

“Compared to previous month, our November 2005 effective power rates increased by P0.22 ($0.0041). It is now P7.82 ($0.1464) compared to P7.60 ($0.1423) for those in the 101 to 200 kwh consumer class category. It is higher for the upper consumption categories of 201-300, 301-400 and 401 and above kwh.”

More increases

Ramirez warned that more increases are in store for us, noting that both Meralco and Napocor have pending petitions for power rates hikes.

The remaining interclass discount of P0.2139 ($0.0040) will be removed, as it only can last three years from the implementation of EPIRA. Worse, the reformed value added tax imposed last November will be reflected in the December 2005 billing.

Meralco will increase its electricity rates by P0.73 ($0.0137), from P3.50 ($0.0655) to P4.57 ($0.0855).

Abaya stressed that the EPIRA law does not state that lower electricity prices will take place.

For his part, Ramirez said that the victories of the people over manipulations of big distribution utilities may be few but significant.

In 2003, Meralco’s over four million consumers won the overcharging case against the firm when the Supreme Court ruled in favor of petitioners. The firm according to the decision committed some 28 billion in surcharge and ordered it to return to the consumers.

On the unbundling case filed by peoples’ organizations led by the Bagong Alyansang Makabayan (Bayan, or New Patriotic Alliance), the Court of Appeals ruled that Meralco’s unbundling scheme, earlier approved by the Energy Regulatory Commission, be forfeited. The court also noted the ERC’s abuse of discretion.

Ramirez said, “If the distribution utilities will be converted into cooperatives belonging to the people, then the gains can be distributed in dividends. This can become additional income for poor families or be discounted to lower power charges” he said. “This is more realistic compared to the government’s illusion for lower electricity prices under the EPIRA or by easing to level the playing field for industry players dominated by giant corporations through the law.” Bulatlat

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