As I See It
Meralco’s side on power rate hike
By Neal Cruz
Philippine Daily Inquirer
First Posted 00:27:00 04/28/2008
Filed Under: Consumer Issues, Electricity Production & Distribution
MANILA, Philippines - As promised and in the spirit of fair play, here now is the letter from Meralco Vice President Elpi Cuna explaining the recent increase in Meralco electric rates. Due to its length, we were forced to cut some unimportant parts:
“This is in response to your column entitled “Power rates’ turn to rise,” (As I See It, April 23, 2008.) Allow me to clarify some of the points you raised in your column.
“First, it is not true that we owe NPC (National Power Corp.) a 50-billion-peso debt and that we admitted these debts in 2003 when we signed the settlement agreement with NPC. Nowhere in the Agreement, which was approved by the respective boards of both NPC and Meralco, is there a mention of a P50 billion debt…
[I said Meralco acknowledged a P27-billion debt in 2003, minus a P7-billion debt by NPC, for a net debt of P20 billion. This ballooned to P50 billion due to interest charges because Meralco has not paid a single peso of that P20 billion until now.—NHC]
“To allow your readers to get a clear picture of what really happened, allow me to first provide some background on our Contract for the Supply of Electricity (CSE) with NPC. The CSE was signed in November 1994 to address the concern of the World Bank that NPC did not have a contract with its biggest customer, Meralco. At that time, Meralco had already signed commitments for capacities that are now supplied by its IPPs: Quezon Power, Sta. Rita and San Lorenzo….
“There were bullish projections on the economy and electricity demand at that time and capacities were contracted to meet projected demand. Due to the Asian Crisis, however, the economy slowed down and with it, the demand for power, resulting in a period of excess capacity. Had projections on the economy materialized, there would have been no problem meeting the contract levels of CSE.
“In fact, meeting the contractual volumes had not been an issue during the first 7 years of the CSE when Meralco ‘over-purchased’ from NPC. We have pushed for higher dispatch of the IPPs not to favor them but to lower cost of power for our customers…
“Now, let me go back to the Settlement Agreement. The amount of P27 billion you cited in your column is not for penalties for contract violations to NPC but refers to the fixed cost component of the energy (in kWhs) Meralco may not be able to purchase from NPC in 2002 to 2004, which was the last three years of the CSE. Take note that the compensation to NPC is only in the fixed cost, not in the variable component, which is mainly fuel. Since variable costs are not incurred because the kWhs were not supplied, I trust you will agree with me that for NPC to collect a high amount is without basis and grossly unfair.
“In fact, Neal, as you have pointed out, the P27 billion for fixed costs has been reduced by P8 billion as compensation to Meralco for NPC’s failure to turn-over directly connected customers and provide adequate service transmission service to Meralco IPPs, resulting [in] a net settlement of P20 billion. Furthermore, since the actual volume purchased by Meralco from NPC was higher than the baseline quantities specified in the settlement, there was a further reduction in the net settlement amount to P14.3 billion, as contained in a joint submission by NPC and Meralco to the ERC. In fact, if we consider the excess purchases for the first seven years of the CSE, this amount can be further reduced to P8.14 billion.
“The Settlement Agreement ... is the subject of a Joint Petition at the ERC with both NPC and Meralco defending the Agreement and the pass-through to customers of the net settlement amount, being in the nature of capacity or fixed costs typical of any contract with a generator. Furthermore, the reduction in the net settlement amount to P14.3 billion, as provided for in the Agreement, was contained in a joint submission to ERC by NPC and Meralco.
“You said that Meralco’s systems loss charged to residential and commercial subscribers became 15.5 percent. That is completely false.
“Under the law (Republic Act 7832) we are only allowed to pass on an average 9.5 percent systems loss to our customers. [That’s what I said.—NHC] Losses to serve customers vary, with primary-metered customers incurring lower losses compared with those served at secondary who are mainly the residential and small commercial customers. Systems loss charges are thus correspondingly structured. Never has there been a systems loss recovery for any customer group at 15.5 percent.
[Why is there a systems loss charge to paying customers in the first place? Why are honest customers being made to pay for the electricity stolen by pilferers through illegal connections and jumpers? That is the risk and responsibility of the distributor. Some of its own linemen make the illegal connections. Because the stolen power is charged to the honest customers, Meralco sees no urgent need to stop the pilferage. Shouldn’t Meralco pay for its own negligence and inefficiency?—NHC]
“In fact, the cost system loss beyond the 9.5 percent cap is shouldered by the company. [The honest customers should not be made to pay even for 9.5 percent.—NHC] … Meralco has already shelled out billions of pesos in shouldering these excesses in the system loss cap. It is for this reason that Meralco is doing everything within its capacity to bring down system losses. Meralco, over the past years for example, has greatly intensified its anti-electricity pilferage campaign, electricity theft being a major component of system loss …. [In the latest power rate hike a few days ago, the Meralco statement said one of the reasons for the hike is an increase in the systems loss charge.—NHC]"
The whole point of the column was: Why will customers be made to pay for the debt of Meralco to NPC?
|
