Power rate hike looms as Malampaya schedules maintenance shutdown

Meralco rates
Bigest electric distributor firm Meralco has a record of overcharging consumers and entering into questionable supply deals with sister companies. (File Photo by Bulatlat)

Power generation companies have been assured their incomes even when they don’t have to deliver much power, as when they themselves are in scheduled shutdown, or when another source is supplying energy to the distributors.


MANILA – Because they continue to leave Filipino consumers vulnerable to dubious power rate hikes, the Energy Regulatory Commission (ERC) should have been liable for various cases by now. This is the gist of the statements sent to the media by Bayan Muna Partylist Rep. Carlos Zarate and the consumer group Alyansa para sa Bagong Pilipinas (ABP) today, Dec. 23. They are both reacting against the looming power rate hike early next year as a result of the scheduled shutdown of the Malampaya natural gas facility.

Yesterday, Energy Secretary Alfonso G. Cusi said consumers will experience an estimated P1 per kilowatt-hour increase in electricity due to the Malampaya gas-to-power facility’s maintenance shutdown.

The Malampaya natural gas facility is scheduled for maintenance from January 28 to February 16 in 2017. Its shutdown has often been cited by power generators as a cause of power rate hikes because it leads to electric supply deficit. This time around, the forecasted deficit is 700 megawatts. In December 2013, power generators and Meralco, the country’s biggest power distributor, inked a supply contract that resulted in an unprecedented power rate hike and a flurry of investigations into the deal. The said hike was stopped by consumers groups. Bayan Muna Partylist succeeded in securing a restraining order from the Supreme Court.

But three years later, another scheduled shutdown is being cited as cause for another big power rate hike.

ERC ‘dilly-dallying’ to blame, said consumers groups

Bayan Muna Rep. Zarate said until now, three years since the questioned insider trading between power companies, the ERC still has not released the final report of its investigation of the said anomaly.

He asked if it is the ERC’s tradition to NOT do its job.

Zarate traced the ERC’s inaction on the controversial overpricing issue to former ERC Chair Ducut. He said it is now apparently being continued by the current board.

“With this kind of board leadership no wonder that corruption charges are being leveled at them left and right,” said the Davao-based solon.

Jose Vicente Salazar, the current chairman of the ERC, was implicated in corruption cases recently. He is now on a one-month leave of absence following President Duterte’s order for all ERC commissioners to resign.

“The ERC can be charged under RA 3019 or the Anti-Graft and Corrupt Practices Act Section 3 Paragraph E for injury to the public and Paragraph F for failing to resolve a pending matter before them,” said Rep. Zarate.

Power companies still reaping mega-profits

Power generation companies have been assured their incomes even when they don’t have to deliver much power, as when they themselves are in scheduled shutdown, or when another source is supplying energy to the distributors. The ABP said that even during the Malampaya shutdown, power generation companies continue to get paid for their capital recovery fee and fixed costs. These are costs that the country’s energy laws have allowed the power companies to pass on to end-consumers.

ABP said Meralco listed these downtimes as load factor rates. ABP explained that the kWh rates of Meralco’s independent power producers such as First Gas, San Miguel, Quezon Power, Masinloc and Therma Marine historically go up several times a year by up to 20 percent during their downtime periods because they are still paid the same fixed capital recovery fees even if they operated less and delivered lower kilowatt hours of energy.

But in the case today when the same companies might have to really supply energy because Malampaya will be on a scheduled shutdown, it appears that they will be paid higher rates.

The ABP likened the practice to slicing the consumers in two ways. “First the consumers still get charged for the capacity fees paid to the generator during maintenance and second, they can be hit with higher WESM prices due to the reduced power supply in the market.”

WESM is the Wholesale Electricity Spot Market, the Philippines spot market for trading of electricity. This is where power distributors source their energy supplies. Here was where, in 2013, they were alleged to have conspired to jack up the cost of power from their underutilized plants during the Malampaya shutdown.

ABP said guaranteeing payments for these power producers even when they do not provide power is anti-consumers. They described it as compensating a “non-performing ghost employee.”

They called for changes in contract structures to financially disincentivize unnecessary shutdowns. It suggested some systemic and regulatory reforms “to cure the anti-consumer provisions of power supply contracts.”

In Congress, Bayan Muna Rep. Zarate said the matter has dragged for far too long. He warned that the people do not want to be taken hostage by the collusion of energy players while the regulatory body tasked to guard them is not only dilly dallying but may also be involved in covering it up. (https://www.bulatlat.com)

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