Posted by: empowerconsumers | March 13, 2008

Electricity consumers call Meralco power rates hike non-transparent,


EmPOWER Consumers

13 March 2008

As Meralco consumers face yet another increase in their electricity bills this month, EmPOWER Consumers, an alliance of electricity consumers in the country, has demanded anew for the scrapping of automatic generation rate adjustment mechanism (AGRA), prohibition of cross ownership, and independent review of the operations of wholesale electricity spot market (WESM). The group believes that AGRA, cross ownership, and WESM are instrumental in the non-transparent and possibly unjust power rates increase.

Meralco will reflect in its charges this March the almost 20-centavo per kilowatthour increase in generation charge. This will mean a total increase of about P45/kwh to P67/kwh for those consuming 200 to 300 kilowatthours a month.

According to EmPOWER Consumers, the AGRA mechanism being implemented by the Energy Regulatory Commission has treated electricity consumers as mere recipients of notices and announcements of increases in the generation charges as no public hearing nor consultation with them takes place anymore prior to the implementation of the increase or adjustment in rates.

The group added that even the so-called ERC review of the charges under AGRA will not help, if at all, in averting or preventing possible abuses by utilities. “It is very seldom that ERC finds over-charging in the generation charge and that the refund to be implemented after discovery of over charges, if there were any, does not truly return the true cost of money paid by the people based on the experiences in past refunds by Meralco,” the group said.

EmPOWER Consumers also belied Meralco’s claim that generation charge is a pass through charge and that nothing goes to Meralco. The group explained that such may be true for distribution utilities that do not buy electricity from their sister generation company. But because the Electric Power Industry Reform Act (EPIRA) which governs the power industry in the country allows for cross ownership between generation and distribution companies, the Lopezes who control Meralco are able to benefit from the transactions between Meralco and its electricity suppliers that are also Lopez-owned.

The group emphasized that cross ownership between generation and distribution and all other subsectors in the power industry must be prohibited to prevent price collusion, manipulation, and market abuses. “Surprisingly, even when Meralco only gets 10 percent of its electricity requirement from WESM, the overall generation charge to be collected from the consumers has still increased. Meralco can actually get cheaper electricity if the interest it truly protects is that of its consumers and not of its owners who have also stakes in the generation sector.”

The Lopezes through the First Pacific Holdings Corporation have about 18 percent ownership in Meralco while the government only has a little more than 20 percent through the government financial institutions that have investments in the utility. The Lopezes may now already have about 34 percent ownership of the country’s biggest distribution utility if the buyout of its partner in First Philippine Union Fenosa that have a 9.1 percent share in Meralco and buyout of the 6.6 percent of the issued shares of Meralco from the Meralco pension fund had pushed through. The Lopezes also get some 40 percent of its electricity from sister companies First Gas Sta. Rita, First Gas San Lorenzo, and Duracom.

Lastly, the consumer alliance raised the issue of unresolved price manipulations in WESM that happened in 2006. “Because of price manipulations, the prices of electricity have shot up in 2006 from less than P3/kwh to about P5/kwh. How sure are we this time that such abusive behavior in WESM does not exist anymore and that the prices of electricity traded there are real and not manipulated when there was a dramatic increase again in electricity price from P3.40/kwh to about P6/kwh like in the past?”

The group demanded for an independent review to be undertaken in the 2006 price manipulations and also on the current electricity trading system to, at least, erase the doubts of the consumers.

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