This is in reaction to Manila Electric Co. (Meralco) spokesperson Elpi Cuna’s letter “Meralco is one with consumers.” (Inquirer, 7/16/07)
It is generally true that the generation charge is merely a pass-on charge, meaning not a single centavo of it goes to distribution utilities like Meralco. But Cuna should explain the implication of Meralco’s 9 percent equity and Philippine First Holding Corp.’s (FPHC’s) 51 percent equity (both Lopez-controlled companies) in First Gas Power Corp., which manages the Sta. Rita and San Lorenzo power plants.
It is this cross-ownership between the Lopez-controlled Meralco and the Lopez-controlled First Gas that distorts the true meaning of these pass-on charges. Cross-ownership has allowed Meralco and PFHC to feast on the “take or pay” provision in their supply contracts with their own independent power producers (IPPs), by forcing consumers to pay for electricity they did not use.
This was aggravated further by the Meralco IPPs, which posted rates higher than those of state-owned National Power Corp. (Napocor) — from March 2003 to December 2005 as per records of the Energy Regulatory Commission (ERC). In the first month alone of the implementation of Meralco’s unbundled rates (March 2003), the generation charge passed on to consumers averaged P3.40 per kilowatt-hour (kWh), with the Meralco IPPs charging P4.21/kWh, while the ERC-approved rate for Napocor was only P2.46/kWh. Yet, distribution utilities are obligated to source the cheapest power supply. Meralco’s July 2006 generation charge was P5.21/kWh when Napocor’s ERC-approved rate was only P4.93/kWh.
This went on until Meralco decided on its own to source almost 50 percent of its power demand from the Wholesale Electricity Spot Market (WESM). But this raised new problems for consumers because even the power rate of the “non-IPP” WESM, which shot up to P10/kWh in February this year, is being passed on by Meralco to its captive customer.
Thanks to a Supreme Court decision (in August 2006) that nullified the automatic recovery of these charges, the ERC was compelled to conduct public hearings on rate adjustments, thus allowing consumers to come in as intervenors/opposers to these petitions.
However, with the amendment of Sec. 4 (e), Rule 3 of the implementing rules and regulations of the Electric Power Industry Reform Act, which effectively removed due process, we are back to the automatic recovery of power purchase adjustments (PPA). Thanks to Meralco pushing the automatic cost adjustments, our July generation charge is now up at P5.67/kWh from P4.42/kWh.
This issue boils down to rates that consumers pay through the restored automatic generation rate adjustment mechanism. So, let the facts speak for themselves. From the time Meralco implemented its ERC-approved unbundled rates in March 2003, the power rates have been consistently moving up.
Cuna’s response can hide the interests of the Lopez-controlled Meralco in the generation business, but he can’t hide them forever from the general public.
PETE L. ILAGAN, president, National Association of Electricity Consumers for Reforms, 680 Quirino Ave., Tambo, Parañaque City