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LKI 2020 14th Press Statement – PIPPA Letter

Ms. Anne-Estorco-Montelibano
President and Executive Director
Philippine Independent Power Producers Association, Inc.
Unit 2408, 24th floor, Prestige Tower,
F.Ortigas Jr. Road (formerly Emerald Avenue)
Ortigas Center, Pasig City 1605

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Good Day, Madam President,

 With regards to the current situation these past couple of weeks during Enhanced Community Quarantine, LKI cites the following main points:

  • Proclamation Nos. 922 and 929, series of 2020 restricted the movement of   citizens, residents, tourists and establishment owners in Metro Manila and Luzon through: (i) adoption of flexible working / work from home arrangements, (ii) temporary closure of non-essential shops and businesses, and (iii) continued operation under a skeletal workforce for some establishments and businesses:
  • According to the DOE, these measures to enforce the ECQ have led to about 30% reduction in electricity demand in Luzon with a slowdown in most economic activities.
  • With the significant reduction in demand, the ERC mentioned that WESM prices have also been declining.
  • The price of power from supply contracts of DUs and ECs in Luzon should also go down with the drop in demand. 

Thus, we at LKI are of the opinion that Power Supply Contracts normally have a Force Majeure provision for events that are not within reasonable control, directly or indirectly, of the DU/EC and GenCo. Clearly, effects of the ECQ can be considered as Force Majeure under the supply contracts.

Recognizing that the ECQ is a Force Majeure Event will relieve electricity consumers in Luzon from paying for fixed charges for generation capacity that was not consumed. For DUs/ECs, it is prudent and imperative for them to invoke the Force Majeure provision in their supply contracts because they are obligated under EPIRA to supply electricity to their captive customers in the least cost manner. 

For GenCos, it is only fair that they accept the ECQ as a Force Majeure Event; if not, GenCos will have windfall profits with consumers paying for “ghost” deliveries. 

The ERC has also suspended the FIT-ALL collection for one month to minimize bill shock after the ECQ. 

It is time for GenCos to extend its share and directly help consumers during this time since they account for the largest component in the electric bill. 

In a press statement we will be sending out as well, our consumer group Laban Konsyumer Inc. (LKI) spoke on behalf of the Filipino public to call on power generation companies and power plants to lower the cost that they will pass on to consumers during these troubled and challenging times of the enhanced community quarantine. The group said that “it is a difficult situation nowadays for the Filipino consumer, especially when it comes to making money since most people are not able to work any longer. Because of this, our group is calling on the owners of the power plants to find a way to lower the power generation costs that they will be passing on to consumers.”

LKI President Atty. Vic Dimagiba stated that “demand and the supply gap of power is almost less now by fifty percent. The wholesale electricity spot market should be at an all-time low for this billing cycle. There should be automatic provisions on the power supply agreements and independent power producers to lessen to positively impact the pesos per kilowatt hour rate that consumers will have to pay. Therefore we call on generation companies to relieve contract capacities with distribution utilities nationwide.”

LKI explained how “generation companies should share the burden and reduce their contract capacities to avoid stranded cost or refuse fixed costs that will be shouldered by customers. There are provisions in the contracts between the distribution utilities and the generation companies pertaining to that, so we hope that the generation companies do not object. During this enhanced community quarantine, these generation companies should not oppose this possibility of charging less to the poor consumers. We must first and foremost protect the welfare of our Filipino people.”

Dimagiba highlighted how “now is not the time for these generation company owners to be greedy. That is why Laban Konsyumer Inc. is issuing a statement calling on gen eration companies to share in the burden of relieving consumers of high prices during this time. LKI is aware of the large drop of demand and this will obviously impact WESM prices. Thus, we also are posing the question of what will happen to Power Supply Agreements. It is our understanding that Power Supply Agreements typically have force majeure provisions that Distribution Utilities and Electric Cooperatives can invoke, to reduce contract capacity or MEOT commitments at this time, but the sad reality facing us all is that generation companies may object to this because it will negatively affect their profit and bottom line, even during these times of national crisis. So we at LKI are vehemently calling on power generation companies to be cooperative with our proposal so as to relieve the burden that consumers are sharing all over the country during the health crisis.”

The group stressed that electricity demand dropped by around 30 percent due to the lockdown imposed by the government to contain the virus, as mentioned and pointed out by none other than Department of Energy (DOE) Chair Alfonso Cusi himself.

LKI showed how Classes, offices and businesses in Metro Manila, except for essential services, were suspended until April 12 to contain the spread of the disease. And this severely dropped the demand for power.

“There are also delays in on-going construction and other activities in the energy sector…Hence, these may result to delays in the completion of on-going projects and repairs and further hinder energy-related investment,” Cusi said, as reinforced by LKI. 

Dimagiba concluded by saying “with all these developments, power generation company owners should make their own proposals for how they can lower the costs for the benefit of the everyday average consumer. We will wait to see if these power plant owners take action and hear and hear our call. We hope for a swift response, and wish that the Department of Energy and the Energy Regulatory Commission will act on this as well, and put pressure on these generation companies, to make sure that lower generation charges are implemented for the good of all Filipinos struggling to make it through, especially those without a daily salary or those that have painfully lost jobs and have no way to provide for their families. These are emergency times, and desperate measures must be undertaken to keep ourselves afloat. With this low demand of power, one good outcome of all this chaos can be the lower generation rates being paid to the big power plant owners.”

We appreciate your support on the above proposal. If for any reasons the power plant sector had already taken a decision favorable to the consumers, then kindly consider this letter as an appreciation and testimonial to the industry on behalf of the electricity consumers. 

Very truly yours, 
Atty. Victorio Mario A. Dimagiba, AB, LLB, LLM