It’ll take a village to cut Meralco’s rates

The Matuwid na Singil sa Kuryente Consumer Alliance Inc. (MSK) has studied and identified the various charges that have been adding up to high electricity rates for Filipinos. These are the bases for our “Ibaba ng P3” campaign.

Essentially, what we have done is get past the justifications of Manila Electric Co. and unravel the mystery of these high rates line by line. We have taken the first small consumer step by petitioning the Energy Regulatory Commission to pass a resolution mandating the open competitive bidding for power supply contracts that will be passed on to consumers. There will be more rule-change petitions that the MSK will file. But we have a long way to go before these become giant leaps for consumers.

Obviously, the MSK cannot do it by itself. It can only act as a catalyst for reform and show the way. It will take a village to reduce Meralco’s rates.

Power consumers must want the reduction and be willing to go beyond complaining and to take action. The ERC must take cognizance and pass the competitive contracting resolution, and improve the transparency of systems-loss charges and the reasonableness of the performance-based rate-setting methodology.

The Department of Energy will have to provide enlightened policy direction and energy mix strategies. Most urgently, it needs to improve the trading rules of the Wholesale Electricity Spot Market, especially the “market settling price,” the must-run unit policy, and market manipulation safeguards. The DOE must further recognize and close the loopholes in the law that allow the monopoly and domination of the generation sector, especially Rule 11, Section 4 of the implementing rules and regulations of the Electric Power Industry Reform Act (Epira) of 2001.

Our lawmakers must rise to the challenge and amend the law to close the loopholes and amend the IRRs accordingly. They must be willing to clean up the Epira, including the rectification of the consumer betrayal of Republic Act No. 9511, which erroneously gives the systems-operator authority to National Grid Corp. of the Philippines (NGCP) as part of its transmission-line concession. We must rationalize transmission-line charges while we still can. NGCP’s charge of P0.95 per kilowatt hour includes P0.36 per kWh for ancillary services, supposedly including reserves.

The Bureau of Internal Revenue and Department of Finance must be willing to rationalize the value-added taxation of power. The E-Vat Law of 2004 adds P1.30 per kWh to our power bill. National Power Corp. must be given a longer-term missionary electrification mandate so that it can adopt more cost-effective solutions to island power generation. Temporary rental generators are proliferating all over the islands using expensive technology. The DOE must be judicious in administering the missionary subsidies and discourage scrupulous competitive bidding and power supply contracts. Missionary subsidy has added P0.19 per kWh, and rising, to Meralco consumers, among others.

The industry’s big players, mostly diversified conglomerates, must cooperate and recognize that it is to their long-term interest to help the country become energy-competitive, to strengthen the economy as a whole, and to improve consumers’ purchasing power.

Malacañang will have to provide the leadership and set the tone for a national resolve to reduce power costs. We are aspiring for Asean Economic Community integration, but our power cost will be a big handicap. High power cost is the Achilles’ heel of the business process outsourcing and call center industries, which drive professional employment, middle-class demand, and the real estate boom.

It is still two years before a new leadership comes in. Let us hope the current administration will do enough to put the country on the road toward rationalized power cost and competitive rates.

And then there is the most important part: Meralco itself. It must embrace least-cost power as its mantra as a public service utility. It is within its right to develop a cost-efficient energy mix and to subject its power purchases to competitive bidding instead of negotiating with itself and monopolizing power-generation supply. It is within its capability to shepherd and manage the contractual obligations of its power suppliers, especially the uptime and reliability obligations of its power plants. It only needs to want to.

In the P3-per-kWh feasible reduction in Meralco’s power cost, fully P2.20 (73 percent) is within its own control and capability to initiate and achieve. It just has to find it in its heart to be true to its mandate as a public service provider. Meralco’s Filipino management and executives must view this as a patriotic duty. Least cost is part of its public service obligation. In the power cost reduction village, Meralco is the center.

Reducing the Philippines’ power cost especially in the Meralco area by P3 per kWh is an achievable dream. But we as a people must want to achieve it and row in the same direction. The MSK hopes it is showing the way. We have identified eight areas for reform. It will take some doing even for all of us working as a village to reduce Meralco’s power rates.

If not us, who? If not now, when?

David Celestra Tan (david.mskorg@yahoo.com.ph) is a CPA and a founder and former president of the Philippine Independent Power Producers Association. He is a coconvener of the MSK, which is dedicated to working for reforms and rule changes in the power sector to reduce costs and make the Philippines energy-competitive.