LKI Press Statement 2021-038


LKI Press Statement 2021-038

November 14,  2021

Consumer group urges ERC to stop latest round of power rate hike

CONSUMER group advocate Atty. Vic Dimagiba of Laban Konsyumer Inc. (LKI) calls on the Energy Regulatory Commission (ERC) to immediately investigate the additional cost impact to consumers of the 24-day maintenance shutdown of the Malampaya Deepwater Gas-to-Power Project. 

Dimagiba said they have written the Commission on even date  to immediate initiate moto propio hearings on the Meralco added costs and pending said hearings, to immediately issue a provisional authority to stop the implementation of the announced additional costs to ensure that consumers are no longer made to absorb the costs arising from the persistent gas restrictions and shutdowns of the Malampaya. The ERC can consider the LKI letter as a formal complaint .

Dimagiba added the supply contracts between the Malampaya consortium and the generation companies should also be investigated, and to hold the Malampaya consortium accountable for the additional costs incurred because of the persistent gas restrictions and maintenance shutdowns. 

Citing news reports, Dimagiba said First Gas’ Sta. Rita and San Lorenzo can pass on the costs of using alternative liquid fuels to its customers like Meralco. However, we have not read if the existing contracts do allow such pass on costs, as well as the legal basis of the pass on of costs and whether the pass on cost is the least cost, whether there was compliance to competitive selection process or CSP in the sourcing of the alternative fuels,  and more importantly, whether ERC had approved the pass on cost with due notices and hearings 

Dimagiba, in a letter to ERC Chairperson Agnes VST Devanadera and the Commission Members  highlighted the following: 

• As early as September 21, 2021, we have alerted that the scheduled maintenance shutdown of the Malampaya from October 2 to 25, 2021 would result in a series of spikes in the generation charge of distribution utilities and electric cooperatives and would be an additional burden to consumers. 

We even proposed to the Senate Committee on Energy to compel the Malampaya consortium, and not the consumers, to bear the cost impact of the shutdown that effectively increased the cost of power from the

Wholesale Electricity Spot Market (WESM) and Independent Power

Producers (IPPs). 

We even suggested that the ERC and Department of Energy (DOE) be allowed to invoke their mandate under Presidential Proclamation 1218 or use their extraordinary power to source funds and to shield consumers from the unwarranted additional costs. 

All the above suggestions had fallen on deaf ears and we in Laban Konsyumer Inc. are disappointed in the show of indifference , by all the above institutions to the prejudice of the consumers who will now absorb added costs on their power bills. 

  • The Manila Electric Company (Meralco) announced last Friday, November 12, 2021, a Php0.3256 per kilowatt-hour (kWh) increase in its overall rates mainly driven by a Php0.2911/kWh increase in the generation charge as a result of lesser available generation capacity in the WESM, and its IPPs’ shift to more expensive alternative fuel to ensure continuous supply and avert outages during the 24-day Malampaya maintenance shutdown. 

Charges from IPPs increased by Php0.8186/kWh following First Gas-Sta. Rita and San Lorenzo plants use of more expensive fuel to ensure supply and avert outages. The tight supply conditions in the Luzon grid also resulted in sustained high prices in the spot market and triggered the secondary price cap – which pushed WESM charges to increase by Php1.7073/kWh. 

If we do not consider the Distribution Rate True-Up Refund amounting to Php0.2761/kWh and the deferred collection of generation costs of about Php0.52/kWh arrange with suppliers, Meralco customers would have been forced to pay for more expensive electricity rates this month. The deferred charge of Php0.52/kWh will be billed to consumers on a staggered basis over a period of four months or until March 2022. 

  • Before the maintenance shutdown, persistent gas supply restrictions have already pushed power rates to increase in the previous months, and consumers have been bearing these costs, as First Gas – Sta. Rita and San Lorenzo opted to use more expensive alternative liquid fuels. 

Such hearings were held about 4 years ago, where I stood in the hearings of the ERC and where I opposed when ERC approved a one-time increase of Php0.66/kWh – which was billed in three installments – in Meralco generation charge as the alternative fuel used were much more expensive than that of the Malampaya gas. I took the position that a regular and announced maintenance shutdown should be an instance of force majeure even when the contracts then say so. It is now evident that the ERC did not learn from these hearings and glaringly shows the indifference to consumer interest. 

  • As precedent, the ERC can learn from the Metropolitan Waterworks and Sewerage System – Regulatory Office (MWSS-RO) – to protect consumers from any water rate increases – when it announced the imposition of a tariff freeze until December 31, 2022, and the removal of the Foreign Currency Differential Adjustment (FCDA) from the customer bills of Manila Water Co. Inc. and Maynilad Water Services, Inc., following the review and approval of the two concessionaires’ Revised Concession Agreements (RCA), which will take effect on November 18, 2021. 

We hope the Commission would consider these recommendations and provisionally stop these additional costs that burden the consumers amid the prolonged pandemic.  

The consumers should no longer be made to absorb the costs from the persistent gas restrictions and shutdowns of the Malampaya Deepwater Gas-to-Power Project.  END.

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