Revoke Meralco Franchise, Pull the Plug on EPIRA

On Valentine’s Day, the Power to the People Coalition tell Meralco, “It’s Over.”









Meralco has failed the Filipino people. They promised cheap, widespread access to electricity, yet the only thing they mustered thus far are scandalous electricity rates that they expected ordinary Filipinos to meekly comply with.

Meralco has consistently regarded ordinary Filipino consumers with the heartless, corporate greed for profit. The most recent spike in power rates proved this. Meralco made the absurd argument that it is not responsible for the record-high electricity rates simply because it had no power over the forced outages their power suppliers implemented. It became even more ridiculous when Meralco played the victim by claiming that it had no choice but to source power from the Wholesale Electricity Spot Market (WESM) for the power deficit.

Nothing could be farther away from the truth. Documents submitted to the Supreme Court showed that it was Meralco’s order to power supplier Therma Mobile, which it controls, to bid at the maximum allowable price of P62.00 per kilowatt hour no less than 25 times during that period that was responsible for the skyhigh clearing price at the WESM. In short, Meralco gamed the market to benefit itself and other power producers. By doing so it defrauded its consumers whom it is obligated to supply electricity at the least possible cost.

We belie Meralco’s claims that it was powerless over the simultaneous forced outages of its power producers. The shutdown of Malampaya for maintenance, and the shutdown of two other power plants for the same reason, were all scheduled. Meralco saw it coming, and they took the most convenient and profitable course of action. They chose to sit back, game the power industry, and make consumers pay for it all.

That Meralco systematically abused the Filipino people is but a symptom of the failure of the Electric Power Industry Reform Act (EPIRA). We must not forget that EPIRA is the main source of the problem; it put the whole industry under the gang rule of private power – from generation to transmission sectors, all the way to the cooperatives in the distribution sector. Privatization of the power industry has resulted in monopoly control, inefficient power delivery and sky-high prices, in direct contradiction to the promises EPIRA made to attain efficiency and break the monopoly in the electricity industry, and lower power prices. That Meralco’s profits have risen over 100 per cent since EPIRA went into effect in 2001, and that Meralco has the power to game the market at the expense of the people is a monstrous example of EPIRA’s failure.

13 years of Meralco’s greed and EPIRA’s exploitation of power consumers have pushed the people to a deeper level of destitution. To this, we raise our voice and declare that this abusive relations is over. We call on the government to heed the people’s call: it is high time the government revokes Meralco’s mega-franchise and pulls the plug on EPIRA.

STOP POWER RATE INCREASE!

Stop the Blackmail, Stop the Fraud! STOP POWER RATE INCREASE!

Predatory MERALCO price hike slammed by NAGKAISA

Meralco already insured against maintenance shutdowns, Power Supply Agreements cover Meralco risk with power providers

The NAGKAISA labor coalition denounced the December P3.50 per kWh rate increase as an immoral imposition and an unconscionable predatory move in the face of our massive national suffering and despair. Instead of moderating its greed, MERALCO and the generating companies First Gas (Sta. Rita), South Premier Power Corporation (Ilijan) and Therma Mobile, Inc. (San Lorenzo) – which are its cohorts – chose to further impoverish hardworking Filipinos and complicate the already difficult road to national recovery.

MERALCO residential rates currently pegged at Php12.46 per kWh will now be hiked to Php15.96 per kWh, representing a 28% increase. The new rate is equivalent to US$ 37 cents per kWh. That is the highest residential rate, bar none, in the WORLD. Its consequences for families coping with the triple whammy of NAPOLES-scale corruption, spiralling oil and LPG prices, and natural calamities are immense.

For industry, where power rates already constitute 45% to 55% of operational costs, particularly for Small and Medium Enterprises (SMEs) and BPOs, the rate increase will greatly affect their business viability. For the national economy, it compromises our regional competitiveness in the ASEAN and will be a disincentive to locators remaining and to the entry of foreign direct investments.

NAGKAISA pointed out that before a new tariff formula called Performance-Based Rate-making (PBR) was implemented by the Energy Regulatory Commission (ERC), MERALCO only made an annual net profit ranging from Php3 to Php6 billion. Under PBR in 2012, MERALCO declared a net income of Php16.25 billion. For 2013 MERALCO expects a consolidated net income of Php17 billion. NAGKAISA decried this overly-generous rate of return allowed by ERC which allowed MERALCO to earn in just one year what it used to take them 3 years to earn.

NAGKAISA also countered the MERALCO assertion that the maintenance work on Malampaya and resorting to the more expensive sources of WESM would result in a power rate increase of anywhere from Php2 per kWh to Php3.50 per kWh. NAGKAISA argues the following:

• · The scheduled maintenance of Malampaya and other plants should or was already imputed in the MERALCO rate. If MERALCO management did not prudently build this into their rate then the owners and management of MERALCO should bear the loss, not the consumers. The maintenance was scheduled way ahead of time and the cost consequences should already have been placed in the power supply agreements which MERALCO entered into.

• If there is a forced outage, MERALCO and the power producers First Gas (Santa Rita), Therma Mobile (San Lorenzo) and SPPC (Ilijan) from which MERALCO buys its power are insured against possible spikes in costs. Why is MERALCO passing the burden to consumers when there is insurance for forced outages. Again, if MERALCO did not enter into any form of insurance or contract stipulation as to who will pay for the alternative supply in case of an outage (the alternative supply in this case is WESM), then MERALCO again has acted imprudently and should bear the cost of its imprudence.

• MALAMPAYA is providing only a certain percentage of the power needs of MERALCO. Why are the entire costs of the downtime of Malampaya being borne by MERALCO consumers? How did it amount to a possible P3.50 per kWh increase?

• Why has the ERC as regulator not stepped-in to validate the current claims of MERALCO when there are Commission on Audit findings of overcollection in 2004 and 2007 in the generation charges of MERALCO? Does ERC take the manifestations of MERALCO and the generation players as gospel truth?

• Why has the DOE – or the Palace for that matter – not addressed the possibility of resorting to the MALAMPAYA FUND to reduce rates and to cushion the impact if indeed there is a problem not anticipated in the power supply contracts entered into between MERALCO and the generators?

THE TRUTH OF THE MATTER IS THAT CONSUMERS ARE BEING MADE TO ADVANCE WHAT THE MERALCO WILL BE COLLECTING FROM ITS INSURERS EVENTUALLY. When MERALCO entered into its supply contracts, it inputted and covered against all projected events and the cost consequences. These costs were built into the original power supply agreement and are therefore built into the rate. Further, MERALCO insured against all risks. MERALCO IS TRYING TO COLLECT FROM ITS CUSTOMERS BECAUSE IT THINKS IT CAN FOOL THEM. ENOUGH IS ENOUGH.

NAGKAISA has warned that the Wholesale Electricity Supply Market (WESM) does not and cannot work where you have insufficient supply. Given inadequate power supply, there will be no competition to drive down rates because it will be a sellers market. NAGKAISA, as a disinterested party, had already warned the government of this in its meetings with the economic cluster of the Cabinet in April and May 2013. NAGKAISA notes that notwithstanding the notable failure of WESM to bring down electricity prices in Luzon and Visayas, the DOE is currently piloting it in Mindanao where power supply is also inadequate.

NAGKAISA warns that the general public are beginning to realize that the Palace is a defender of MERALCO by its statements that there is “regularity” to the rate increase because it was “in accordance with the law.” NAGKAISA reminds the Palace that it is not for the NAGKAISA or the Palace nor the DOE to determine regularity. That is a function that clearly lies with the ERC. It is the ERC which must determine the course of action to be taken: to set the increase aside or to cushion its impact through rate increases staggered over a longer period of time.

NAGKAISA also reminds the Palace that perhaps something is deadly wrong with the EPIRA Law and that it is time to take a second hard look on how to ensure affordable power and supply that is reliable. We reiterate our call for the creation of a Presidential Task Force to bring down power rates. The Palace should talk to disinterested parties – not the power cartel.

Finally, NAGKAISA reminds the Palace that if in its fight against corruption, it brought down an Ombudsman and a Chief Justice, it can certainly do something about a certain ERC Chairperson named Ducut. Consumer and labor representation in the ERC is long overdue.