Bigger and more increases loom after ERC-approved Meralco hike, IBON warns

March 8, 2017

by IBON Foundation

Photo by Philippine Daily Inquirer
Photo by Philippine Daily Inquirer

Research group IBON warned that consumers may face bigger and more rate increases in their electricity bills this summer. The Energy Regulatory Commission (ERC)’s approval of a smaller than petitioned rate hike for the Manila Electric Co. (Meralco) is still warrantless and just a portion of generation costs that the power distributor and its suppliers will pass onto consumers, said the group.

To cover fuel costs from the 20-day Malampaya gas plant shutdown, the ERC approved a Php0.6634 per kilowatt-hour (kwh) power rate hike to be implemented incrementally from March to May this year. This is lower than the Php0.9174 per kwh increase that Meralco originally applied for since the ERC used the previous month’s actual fuel costs in its calculations instead of Meralco’s projected fuel costs.

IBON noted that the approved rate hike only factored in the effect of the Malampaya shutdown on power plants that it directly supplies to. But this will certainly have an impact as well on price movements in the wholesale electricity spot market (WESM) and other power suppliers of Meralco, and will result in higher generation costs passed onto consumers.

Power generators and suppliers have previously been accused of manipulation to artificially jackup rates during major plant shutdowns, said the group. In 2014, Meralco, and its suppliers like Aboitiz-owned Therma Mobile were accused of artificially inflating prices in the WESM even after the Malampaya shutdown from November-December 2013. Meralco applied for an unprecedented Php3.44 per kwh generation charge to cover the manipulated spot market prices, which led to public outcry and an eventual Supreme Court temporary restraining order (TRO).

IBON said that the vulnerability of the public to such unjustified rate increases and price rigging can be directly pinned on the neoliberal power reforms implemented under the Electric Power Industry Reform Act (EPIRA). Aside from deregulating rates, EPIRA also privatized the country’s power plants as government abandoned its mandate to ensure reliable and reasonably priced electricity supply.

In Luzon where Meralco operates, just three groups – San Miguel Corporation, the Lopez group, and the Aboitiz group – control 70% of power generation. IBON said that such tremendous control makes alleged collusion and price rigging easier like during power plant shutdowns that lead to rate spikes.

IBON stated that Meralco’s rates also continue to be among the most exhorbitant in the region. The power distributor’s own commissioned survey in 2016 shows that its rates are the third highest in Asia. An average Meralco customer is also paying 4.5% of their disposable income for electricity, higher than the global average of 3.9 percent. ###