13 M consumers face brownouts, rate hikes – ERC

Published August 11, 2019, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2019/08/11/13-m-consumers-face-brownouts-rate-hikes-erc/

Rotational brownouts and higher electricity rates may await millions of Filipinos in the areas being served by more than hundred power supply agreements (PSAs) that were invalidated with finality by the Supreme Court (SC).

After the Energy Regulatory Commission (ERC) failed to convince the SC to reverse its ruling nullifying the PSAs, an estimated 13 million of electricity consumers in various parts of the country should brace themselves for higher power bills.

The power regulator, however, said they need to file a motion for clarification with the SC on how the decision shall be executed.
“The high court’s decision will result in possible immediate termination of 99 affected PSA contracts which will result in the cessation of power supply that are serving 13 million electricity consumers,” the ERC said.

With terminated PSAs, the affected DUs can no longer be served with electricity supply, hence, that will result in highly probable rotating brownouts for their customers.

Geographically, the power sector regulator indicated that with the junked PSAs, 9.371 million consumers in Luzon will suffer probable service interruptions or brownouts; 1.767 million in the Visayas; and 1.978 million end-users in Mindanao.

The option for the distribution utilities and electric cooperatives with nullified contracts will be to source from the Wholesale Electricity Spot Market (WESM), but the unintended consequence for their customers will be higher electric bills.

“In the advent of the said scenario, a total of 743 megawatts will have to be sourced from the electricity spot market,” the ERC said – and that will be at the scale of 370MW for Luzon; 86MW in the Visayas; and 287MW in Mindanao.

Nevertheless, the ERC emphasized that the rates in the spot market are manifestly higher in the range of P5.00 to P8.00 per kilowatt-hour; while the cost of the invalidated contracts had been priced lower at P3.00 to P6.00 per kWh, stressing then that “the increase in generation charge maybe inevitable.”

ERC Chairperson Agnes T. Devanadera qualified though that, “We will comply with the directive of the Supreme Court. We only need to seek guidance through a motion for clarification on how to implement their decision particularly on the rates and the continued supply of electricity to the affected public utilities.”

Overall, there are at least 106 contracts affected by the SC ruling; and the ultimate mandate of the final arbiter of the law is for these supply procurements to now go through competitive selection process (CSP) or bidding.

The SC verdict had not just junked the seven controversial PSAs of Manila Electric Company (Meralco); but it had also invalidated 99 more contracts underwritten by other private distribution utilities (DUs) and electric cooperatives.

As stipulated in the high court ruling, “all PSA applications submitted by the DUs on or after June 30, 2015 were required to comply with the CSP in accordance with 2015 DOE (Department of Energy) Circular.

The SC similarly rendered that the power purchase cost after compliance with the CSP “shall retroact to the date of the effectivity of the PSA, but in no case earlier than 30 June 2015, for purposes of passing the purchase cost to the consumers.”

With the final judgment already handed down by the high court, Laban Konsyumer, Inc. President and former Trade Undersecretary Victorio Mario Dimagiba indicated that the “ERC and DOE should really sit down and agree with the stakeholders,” with him airing his observation that “no such public meetings had been announced after the Supreme Court decision.”