New power rates out; not low enough, say critics

By Riza T. Olchondra 
Philippine Daily Inquirer 
5:50 am | Wednesday, March 19th, 2014

MANILA, Philippines—Recomputed electricity spot market prices in Luzon, including the franchise area of Manila Electric Co. (Meralco), may drop nearly 80 percent lower than those originally billed to distribution utilities. However, this may not be low enough to spare consumers from the huge rate increases last December and January that stemmed from simultaneous shutdowns of power plants while the Malampaya gas pipeline was shuttered for scheduled maintenance. 
ERC order Philippine Electricity Market Corp. (PEMC), which operates the Wholesale Electricity Spot Market (WESM), said on Tuesday that it had recalculated rates for November and December 2013, which resulted in proposed record rate hikes in Meralco bills in December 2013 and January 2014. 
In compliance with the Energy Regulatory Commission (ERC) order of March 3, PEMC said it set the new spot market rates at P6.007 (76.35 percent lower) than the P25.404 per kWh for the billing month of December. For the billing month of January, the applicable PEMC rate was changed to P6.246 (77.98 percent lower) than the original P28.367 per kWh. 
The recalculated spot market rates, which PEMC and the ERC refer to as “regulated rates” as opposed to “market rates,” may not necessarily mean a refund for Meralco customers, officials said. 
P2.43 per kWh However, it could at least result in a lower increase than the record P4.15 per kWh increase in generation and related charges that Meralco sought and that the ERC approved in December. 
The rate increase is covered by a temporary restraining order issued by the Supreme Court that ends next month. 
According to PEMC’s initial estimates, the original proposed increase of P4.15 per kWh for December may become roughly P2.43 per kWh and the original proposed hike of P5.33 per kWh for January may drop to P3.02 per kWh. 
However, Energy Secretary Carlos Jericho Petilla said it was Meralco that would have to compute how much its spot market exposure was for December and January, and then apply for its new proposed rates at the ERC. 
“We are waiting for the invoice that PEMC will submit to us and then we will come up with new rates based on recalculation. Then we have to inform and advise the ERC. The process dictates that we reflect whatever the order of the commission will be. Based on reports, it appears the rates are lower but as to the final figure we can’t give one yet,” Meralco spokesman Joe Zaldarriaga said in a phone interview. 
PEMC president Melinda L. Ocampo said in a statement that PEMC was to issue the WESM bills Tuesday using the regulated prices, with the exception of Meralco’s November bill. 
“Thereafter, we will file our report to the ERC.” Meralco’s November bill is reflected in consumers’ December bills, which was the subject of the Supreme Court TRO. 
Significant reduction ERC Executive Director Francis Saturnino Juan said in a text message, “Charge reduction of Meralco will be significant.” 
Juan cautioned, however, that the quasi-judicial body would have to wait for Meralco’s computation of the WESM impact on the pass-through generation charge and related taxes before making any further pronouncements or orders concerning price. 
The WESM price reduction may also have an impact on Meralco’s bills from bilateral supply contracts, Juan said. 
Meralco’s own power suppliers sometimes source power from the spot market to meet their contractual commitments.
Bayan Muna expressed disappointment with the latest PEMC computation. 
Far from satisfying Rep. Neri Colmenares said the recomputation was far from satisfying considering that there should have been no power rate increase in the first place because Meralco, the generation companies and other power players, according to him, had colluded to jack up the price of electricity. 
“In fact, aside from not increasing the power rates they should be penalized for their collusion and market manipulation,” he said. 
Colmenares said the recomputation was still subject to the final say of Meralco. “Meaning this computation can still be jacked up by Meralco, which is truly absurd. It is like asking a criminal what reward it wants,” he said. 
Voided On March 11, the ERC voided its earlier approval of the staggered implementation of the P4.15 per kWh increase by nullifying WESM prices in December and January, and ordering spot-market administrators to recalculate their prices for the period. 
The ERC said the WESM prices last year seem to be “unjustified” and “not competitive,” considering the many plant outages and “under-offers” of power capacity during the supply period. The ERC also ordered PEMC to issue a new billing to Meralco seven days from March 11. 
Juan said the ERC had found basis to intervene in the market after determining that the WESM prices during the period could not qualify as reasonable, rational and competitive due to the confluence of factors accompanying the tight supply. source