Consumer group urges ERC to stop latest round of power rate hike

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A CONSUMER group called on the Energy Regulatory Commission (ERC) to immediately investigate the additional cost impact to consumers of the 24-day maintenance shutdown of the Malampaya Deepwater Gas-to-Power project.

Atty. Vic Dimagiba of Laban Konsyumer Inc. (LKI), a consumer rights advocate, aid they have written the Commission on even date to immediately initiate motu proprio hearings on the Manila Electric Company (Meralco) added costs. Pending said hearings, the group also asked the ERC to immediately issue a provisional authority to stop the implementation of the announced additional costs to ensure that consumers are no longer made to absorb the costs arising from the persistent gas restrictions and shutdowns of the Malampaya. The ERC can consider the LKI letter as a formal complaint, Dimagiba said.

He added that the supply contracts between the Malampaya consortium and the generation companies should also be investigated, and hold the consortium accountable for the additional costs incurred because of the persistent gas restrictions and maintenance shutdowns.

Citing news reports, Dimagiba said First Gas’ Sta. Rita and San Lorenzo can pass on the costs of using alternative liquid fuels to its customers like Meralco. “However, we have not read if the existing contracts do allow such
pass-on costs, as well as the legal basis of the pass-on costs and whether the pass-on cost is the least cost, whether there was compliance to competitive selection process or CSP in the sourcing of the alternative fuels, and more importantly, whether ERC had approved the pass-on cost with due notices and hearings.

In a letter to ERC Chairperson Agnes Devanadera and the commission members, Dimagiba highlighted the following:

• As early as September 21, 2021, he said they have alerted that the scheduled maintenance shutdown of the Malampaya from October 2 to 25, 2021 would result in a series of spikes in the generation charge of distribution utilities and electric cooperatives and would be an additional burden to consumers.

“We even proposed to the Senate Committee on Energy to compel the Malampaya consortium, and not the consumers, to bear the cost impact of the shutdown that effectively increased the cost of power from the Wholesale Electricity Spot Market (WESM) and Independent Power Producers (IPPs).”

He said they even suggested that the ERC and Department of Energy (DOE) be allowed to invoke their mandate under Presidential Proclamation 1218 or use their extraordinary power to source funds and to shield consumers from
the unwarranted additional costs.

Dimagiba claimed these suggestions had fallen on deaf ears and that LKI is disappointed in the show of indifference by all the institutions, to the prejudice of the consumers who will now absorb added costs on their power bills.

• The Meralco announced last Friday, November 12, 2021, a P0.3256 per kilowatt-hour (kWh) increase in its overall rates mainly driven by a P0.2911/kWh increase in the generation charge as a result of lesser available generation capacity in the WESM, and its IPPs’ shift to more expensive alternative fuel to ensure continuous supply and avert outages during the 24-day Malampaya maintenance shutdown.

Charges from IPPs increased by P0.8186/kWh following First Gas-Sta. Rita and San Lorenzo plants’ use of more expensive fuel to ensure supply and avert outages. The tight supply conditions in the Luzon grid also resulted in sustained high prices in the spot market and triggered the secondary price cap – which pushed WESM charges to increase by P1.7073/kWh.

“If we do not consider the Distribution Rate True-Up Refund amounting to P0.2761/kWh and the deferred collection of generation costs of about P0.52/kWh arranged with suppliers, Meralco customers would have been forced to pay for more expensive electricity rates this month. The deferred charge of P0.52/kWh will be billed to consumers on a staggered basis over a period of four months or until March 2022.

• Before the maintenance shutdown, persistent gas supply restrictions have already pushed power rates to increase in the previous months, and consumers have been bearing these costs, as First Gas – Sta. Rita and San Lorenzo opted to use more expensive alternative liquid fuels.

Such hearings, he said, were held about 4 years ago, and Dimagiba opposed when the ERC approved a one-time increase of P0.66/kWh – which was billed in three installments – in Meralco generation charge as the alternative fuel used were much more expensive than that of the Malampaya gas. “I took the position that a regular and announced maintenance shutdown should be an instance of force majeure even when the contracts then say so. It is now evident that the ERC did not learn from these hearings and glaringly shows the indifference to consumer interest.”

• As precedent, the ERC can learn from the Metropolitan Waterworks and Sewerage System – Regulatory Office (MWSS-RO) – to protect consumers from any water rate increases – when it announced the imposition of a tariff freeze until December 31, 2022, and the removal of the Foreign Currency Differential Adjustment (FCDA) from the
customer bills of Manila Water Co. Inc. and Maynilad Water Services, Inc., following the review and approval of the two concessionaires’ Revised Concession Agreements (RCA), which will take effect on November 18, 2021.

Dimagiba hopes that the ERC would consider their recommendations and provisionally stop the additional costs that burden the consumers amid the prolonged pandemic. He said the consumers should no longer be made to absorb the costs from the persistent gas restrictions and shutdowns of the Malampaya Deepwater Gas-to-Power project.

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