Living with expensive electricity

Written by Marvin A. Tort / Sway

THURSDAY, 16 SEPTEMBER 2010 13:48

Lots of interesting developments in the power industry of late, but it leaves many people still wondering whether electricity prices will ever go down. The present situation begs the following questions: What will it take for electricity to become more affordable? And, are the power industry and the government in a position to bring down prices in the future? One cannot help but think that perhaps the situation is hopeless. Despite all the public complaints against high electricity prices, it seems businesses and households have no choice but to bear the heavy burden. Even if they are not happy with their current electricity suppliers, they have no one else to turn to. Consume and pay despite the price, or don’t consume at all. Take the case of Albay province, which is reportedly facing powerless days because of the fight of its provincial electric cooperative Aleco with the government-run Philippine Electricity Market Corp. (PEMC) over the cost of electricity. Simply put, if Aleco does not pay what PEMC is charging it for power, then Aleco—and Albay—can be disconnected from the grid. In May, Aleco filed a case against state-run National Power Corp. (Napocor) and PEMC for allegedly exorbitant billings. Aleco complained that for the period January 26 to February 25, PEMC billing for electricity sold to Aleco was up 300 percent from its previous billing. Aleco complained to the Energy Regulatory Commission (ERC), and the case is pending. Back here in Metro Manila, the Manila Electric Co. (Meralco) reportedly wants to charge its customers around P18 billion from 2011 to 2015 to make up for the regulatory “delays in the implementation of [its] rate adjustments,” and “constraints” that capped its rate increases in the past. But opposition by consumer groups to rate increases are part of the regulatory process. Why should Meralco benefit from it? The company made P7 billion in profits last year, up from P2.6 billion in 2008. It doesn’t seem to be in dire need of a rate hike, but it still wants to penalize consumers for even attempting to oppose rate increases? Does this mean consumers are better off accepting what comes, rather than questioning price increases? Consumer advocacy group Nasecore is even accusing Meralco of overcharging its customers by P14.2 billion over a period of five-and-a-half years, although Meralco regulatory affairs head Jose Ronald Valles said this allegation was unfounded and baseless, claiming that the fair rate of return for Meralco has been upheld both by the ERC and the Supreme Court. While PEMC and Meralco may both be in the right, and that maybe people just don’t realize how expensive electricity truly is, with the lack of transparency and accountability in the current regulatory process, and with the power business being very technical, one finds it difficult to tell who is telling the truth. And it’s not only Aleco and Nasecore that are complaining. The Davao City Chamber of Commerce and Industry had said it was studying Davao Light and Power Co.’s decision to increase its rates, noting that the local business community was always wary of increases in power rates. This was after ERC approved on July 15 Davao Light’s application to adjust distribution rates. Davao Light earned P872.9 million in profits last year, up from P591.9 million in 2008. Its revenues also rose to P7.4 billion from P6.5 billion. One group that seems to make sense is the town council of Isabel, Leyte. In what may be seen as a proactive stance by a local government to promote the interest of its constituents, the council of Isabel passed a resolution calling on the Department of Energy to grant Isabel “financial benefits,” as required by law, for hosting the Tongonan Geothermal Power Plants. Isabel also said its constituents should no longer be made to share in the expense of transmitting Tongonan’s excess power out to Cebu, Bohol, and Luzon. Tongonan produces 800 megawatts of electricity, but Leyte and Samar consume only 200 megawatts. The rest are exported out of the Eastern Visayas region to other consumers, and yet the region still shares in the expense of doing this through high transmission charges. Isabel added that its constituents should also be exempt from power rate increases resulting from foreign currency and oil price adjustments, as may be petitioned by power generators in the area, since the Tongonan Power Plants use geothermal energy, which is not affected by these two factors. In Congress, one lawmaker claims a solution to high power rates is to remove the 12-percent value-added tax on electricity. Senate President Juan Ponce Enrile, meanwhile, wants Congress to enact a law reducing the tax or royalty on the use of indigenous energy resources in the generation of electricity. However, such solutions may not go far given the flaws of the system. How inequitable is it that provinces like Leyte and Samar, while self-sufficient in geothermal power, is still made to bear foreign-currency and oil-price adjustments? Worse, their consumers are even made to bear part of the cost of transmitting surplus geothermal energy to Cebu, Bohol and Luzon. And the unkindest cut is this: even as consumers bear high electricity prices, state-run Napocor cannot seem to get out of its financial hole. In fact, Eastern Samar Rep. Ben Evardone now alleges that more than $12 billion in proceeds from the sale of Napocor assets and loans obtained to pay for its debts are “missing.” With all this, one cannot help but again ask: What will it take for electricity to become more affordable?