QUEZON CITY, 4 October 2022 – The Energy Regulatory Commission (ERC) denied yesterday the joint proposal of Meralco and San Miguel Corporation (SMC) of a PHP0.30 per kilowatt-hour (kWh) increase in power rates.
In their official ruling, ERC reminded both parties, especially Meralco as a regulated entity, of their obligation to preserve the 2019 power supply agreement (PSA) they have voluntarily entered under the approved terms to protect consumers in its franchise area. The PSA, according to the Commission, “provides no room for price adjustment and only a guaranteed supply of energy to Meralco consumers at a fixed price.”
SMC Global Power Holdings (SMCGP) applied for the PHP0.30 per kWh increase to be able to recover from the PHP5.2 billion worth of revenue losses due to the surge of fuel prices in the global market from January to May this year. “The fact that the PSA is financial in nature provided Meralco and its consumers the assurance that any fuel supply risk was of no moment and was assumed in full by the supplier,” the ERC said.
“The Commission, therefore, cannot afford relief to any party for its miscalculations, imprudence or inadvertence, at the cost of the consumers,” it added.
In response, Renato Redentor Constantino, executive director of the Manila-based climate and energy policy group Institute for Climate and Sustainable Cities (ICSC), said:
“We welcome the decision of ERC to deny the rate hike petition of Meralco and SMCGP. ERC’s ruling stands on solid ground and serves as a firm reminder to power industry players of their obligations and responsibilities to the nation. PSAs, unlike ordinary commercial contracts, are imbued with public interest and thus subject to strict regulation by the government. Under this financial agreement, power suppliers must bear all the risks of market volatilities.
“Again, we call for the immediate abolition of the automatic fuel cost pass-through or pasaload. It is not fair for consumers to bear the increases in fuel costs. Power companies dominating the market – especially those who continue to rely on imported, expensive, and unreliable coal and those whose power plants are persistently on prolonged outages and intermittent operations should be slapped with commensurate penalties that would alleviate price hikes and cushion their impacts on consumers. If companies operating these coal plants can’t or refuse to do so, ERC must impose on them the heaviest penalties it can muster, and if these still prove inadequate, our legislature must consider measures that can truly compel these companies to meet their contractual obligations. As we drop the pasaload fuel pass-through practice, coal plant operators must be prevented from passing on their poor decisions to Filipino consumers. The ERC made the right call to make power companies, SMCGP in this case, accountable; charging more serious penalties should be ERC’s next move.
“The energy transition is already advancing in the Philippines and neighboring countries, and renewable energy continues to prove it is more affordable and reliable in times of high demand. We simply need to enable a faster transition. Equally important, we must look at the situation between Meralco and SMCGP, where market power is wielded by a single large corporation, a non-competitive setting that has penalized the pockets of Filipino households and businesses for too long. We must continue to pursue the big prize, which is about establishing genuine competition in the power sector. The economy needs more market players and more distributed generation in the industry, in order to secure lasting energy security and inclusive economic and development benefits our people have long deserved.”
AC Dimatatac, ICSC: firstname.lastname@example.org, +63 998 546 9788, +63 917 149 5649
PHOTO: Linemen working along Brgy. Malanday, Marikina City during the aftermath of ST Karding last September 26, 2022. Handout photo from Aurora Malaya