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In the dark over electricity prices

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CONSUMERS are generally in the dark about how the power rates they are being charged by Meralco are being determined.

So, no information often means no worry, unless the consumer loses the wherewithal to pay and runs the risk of disconnection.

Thus, when Meralco announced its latest rate hike effective February — 57 centavos per kilowatt-hour, which means about P114 additional each month for a wage worker’s house — the silence from the usual groups, mostly in the Left spectrum of the political scale, has been taken to mean acquiescence, a quiet acceptance of what has become routine.

Few are aware that there’s such a thing as a competitive selection process, or CSP, which decides whether we pay higher or lower electricity costs.

CSP, however, is far from being competitive, a misnomer in fact. There is a permanent equation that CSP cannot brush off — higher fuel costs equals higher generation costs equals higher billing for consumers.

Mandated

CSP is mandated by law, but the law failed to foresee the full control that is handed to power distribution utilities, in this case Meralco, on how to implement its spirit — competition for supply of fuel for electricity that Meralco will distribute.

In other words, Meralco has full control in implementing CSP simply because it wallows in one thing that the law failed to expressly prohibit — discretion.

This is especially true in the use of natural gas for fuel of power plants competing for contracts to supply electricity to Meralco.

Meralco can always say it was just implementing Energy Regulatory Commission rules and is pushing a fuel formula that is binding to the power plants.

But it sweeps under the rug the fact that other factors determining liquid natural gas (LNG) costs are pass-through, or borne by consumers. One is freight costs, which aren’t fixed but rises or falls depending on market forces.

This is how pass-through costs are borne by consumers as power plants exclusively using LNG are held hostage by LNG suppliers — they don’t want to pay higher, don’t operate.

World prices

Almost admitting that it couldn’t care less about world prices, Meralco says it has no way of predicting future gas prices.

Meralco has also placed every Filipino at the mercy of LNG traders who could, given the small volumes of gas the Philippines imports compared to countries like China, South Korea and Japan, easily just stop delivering gas to the Philippines and sell it to others.

A more important question is what Philippine company would be willing to fund the hundreds of millions of dollars needed to drill an exploratory well and the hundreds of millions of dollars more needed to drill a development well, if they know that gas-fired power plants would just buy their fuel from abroad?

These call into question the Department of Energy’s Philippine Energy Plan for 2020-2040’s ability to deliver on its promise of “secure, sustainable and resilient energy.”

25 percent

Around 25 percent of the country’s energy is expected to be delivered through natural gas.

This will likely grow as natural gas-fired power plants are the obvious replacements to the country’s aging and obsolete coal plants.

If more than a fourth of the country’s energy comes from natural gas, one can immediately see the potential destruction that can be wrought where that gas is subject to the unpredictable price and supply shocks built into the very nature of imported LNG.

A new source of LNG is the Reed Bank near Malampaya, which however is running out of gas, by 2027 by one estimate. LNG extracted from the Reed Bank can be piped to the Malampaya facility which has a 500-kilometer pipeline to Batangas, which means transport cost for the fuel will be much cheaper than the LNG shipped from abroad.

Stupidity

But this points to the stupidity of the current administration’s belligerency toward China. There is no way for China to allow the Philippines to explore for and extract LNG from the Reed Bank with the government’s anti-China stand. We’re giving up a vast source of LNG and exchanging it for some godforsaken shoal which yields nothing.

Meralco must always explain in detail to consumer groups why it is raising their electricity prices, to the extent of revealing how much local LNG was used by the generation plants and how much imported.

Indonesian tycoon Anthoni Salim controls Meralco. FROM 2022 FIRST PACIFIC ANNUAL REPORT

This is especially so since a foreign conglomerate, the First Pacific Group, majority-owned and -controlled by Indonesian tycoon Anthoni Salim, has 47.5-percent ownership of Meralco. The Constitution limits foreign ownership in electricity distribution to 40 percent. This has been unchanged, even with the ridiculous Republic Act 11659 of 2022, which by simply redefining certain public utility industries as public services industries, liberalized foreign ownership of these.

Meralco has been extremely profitable for First Pacific since its acquisition from the Lopez clan in 2009. From 2014 to 2022, its net income totaled P200 billion, or $3.6 billion, at least half of which were remitted to the company’s Hong Kong headquarters.

Obstacle

The high price of electricity in the Philippines has been one of the biggest obstacles to the increase of foreign investment in the country. Even a number of Chinese-Filipino businessmen have relocated their plants to China to take advantage of power prices there, which are nearly half that of the Philippines. This is, however, partly due to the fact that governments in Asean (Association of Southeast Asian Nations) have been subsidizing electricity prices, while the Philippines hasn’t.

If Southeast Asian countries can use subsidies to lower electricity prices, maybe we should, too. That would have a bigger economic impact than directly handing over cash to the poor, who after all suffer too from high electricity prices. But this is not at all being studied by our government.


Facebook: Rigoberto Tiglao

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My website: www.rigobertotiglao.com

This Post Has 3 Comments

  1. Dorina S. Rojas

    What do we expect from leaders who are leaders of the Dark World? They would probably lead us to even darker sides to emphasize their agenda that they are the light of the world. Sounds like the prophets of doom are here to stay.

  2. Dorina S. Rojas

    Our leaders love to be in the dark and take us with them there but when the light comes out, they go out first and claim the credit while we stay in the dark. And they call it sabotage.

  3. TOTAL AMBOY DEATH

    …Meanwhile, our deluded old farts in government have the guts to talk big about attracting foreign investment. LOL!

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