Posted by: empowerconsumers | April 25, 2008

Higher electric rates a puzzler

25 April 2008, Page 1

By Paul A. Isla and Butch Fernandez

THE Philippine Electricity Market Corp. (PEMC) reported that
intermittent operation and high demand for power supply from
coal-fired power plants have pushed up prices at the Wholesale
Electricity Spot Market (WESM).

The PEMC said the WESM’s final prices for the period covering February
26 to March 25 showed an average market price or effective settlement
price (ESP) of P6.72/kilowatt-hour (kWh), higher than the previous
month’s ESP of P5.73/kWh.

The Manila Electric Co. (Meralco) spot purchases of electricity
averaged P8.94/kWh, which is significantly higher than the WESM
average for this month.

During this period, Meralco was mostly buying during the peak hours
when electricity prices were high. Furthermore, Meralco purchased only
8.07 percent of its total demand from the WESM.

The higher prices for March were driven by the increase in temperature
that, in turn, pressed users to use more power and use their air
conditioners longer.

“Just like any market, prices change depending on supply and demand,
and with the onset of summer, increased temperature causes us to use
more electricity which results in higher spot prices,” explained Lasse
Holopainen, president of PEMC.

Besides the increase in temperature, there was also a marked decline
in power availability from coal plants, to 21.3-percent output in
March from 29.9 percent in February. Calaca and Masinloc were down and
others were on intermittent outage during this period as well.

“When the cheaper generators are not available, the prices rise as
well [since] we are forced to dispatch more expensive plants,” said

In any case, the electricity consumer group EmPOWER Consumers on
Thursday urged the Energy Regulatory Commission (ERC) and industry
players to explain the sharp increase in electricity rates this month.

On Tuesday Meralco announced an adjustment in its electricity charges
this month of P0.5188 per kilowatt-hour (kWh) in generation, P0.30/kWh
in distribution, P0.0759/kWh in transmission, and P0.0770/kWh in
system-loss charge.

Milo Tanchuling, secretary-general of Freedom from Debt Coalition and
convenor of EmPOWER Consumers, said in a letter to the ERC dated April
23 that the recent news on increase in electricity charges in Meralco
franchise areas is contrary to ERC’s statement early this month that
there will be no power rate increase in the next two months.

The consumer alliance recalled as well President Arroyo’s statement at
the Philippine Energy Summit early this year that her administration
will find ways to reduce electricity rates in the country-with the
situation now, that remark seems but an empty promise, the alliance added.

“In this time of food/rice crisis, when the value of people’s money
continues to diminish, a P150-monthly increase in electricity bill
further aggravates the miserable state of the Filipinos, especially
the poor. The government is accountable to the people, thus it owes us
consumers an explanation for the increase in electricity charges,”
wrote Tanchuling to the ERC.

At the Senate, Minority Leader Aquilino Pimentel Jr. also wanted an
explanation and prodded the Committee on Energy to look into the
reasons the Meralco increased electric charges.

In a statement, Pimentel acknowledged that Meralco’s latest rate
increases may be justified if one looks only at the rising cost of
crude oil which is hitting $120 per barrel but pointed out “there is
also Section 23 of Epira (Electric Power Industry Reform Act) that
obligates electric distribution utilities to supply electricity at the
least cost to their so-called captive market.”

“It may be true that Meralco’s buying electric power from National
Power Corp. and Wholesale Electricity Spot Market may be more costly
than buying it from independent power producers [IPPs] like the Sta.
Rita and San Lorenzo power plants,” he said. “The problem, however, is
that if Meralco buys electricity from those IPPs, it may be
cross-subsidizing them as these IPPs are reportedly owned partially,
if not fully, by Meralco. That would, in effect, violate the principle
that a firm that distributes electricity may not also produce it.”

Pimentel insisted there is an urgent need for Congress to review the
Epira law to spare consumers from the spiraling cost of electric power
by some legal device like mandating Napocor to impose its
rate-reduction powers on power distributors in times of emergency.



  1. Prepaid Electricity is the best option Meralco can overprice electricity without getting any complaint.

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