THE Manila Electric Company (Meralco) on Thursday said the rise in electricity bills for the past few months was driven by uncontrollable, surge-level generation charges, which are subject to strict regulatory oversight.
Generation rate, a major component of an electric bill, is the cost of producing or purchasing electricity. This a pass-through charge paid by Meralco to its power suppliers. Meralco does not earn from this.
‘The recent electricity price increases pertain to generation charges, which reflect the spike in international fuel prices and peso depreciation as a result of the ongoing conflict in the Middle East,’ said Meralco senior vice president Atty. Jose Ronald Valles. ‘The effect of these factors on the generation charges are beyond the control of Meralco.’
Besides, Meralco’s procurement of its power requirements could not happen without the regulators’ approval. ‘The procurement by distribution utilities of electricity is affected by international fuel prices and exchange rate fluctuations. The procurement by distribution utilities [DUs] of electricity supply is heavily regulated by the government,’ Valles said.
Valles said the Department of Energy (DOE) and ERC established competitive public guidelines with which all DUs must comply. These guidelines ensure equal opportunities for all eligible power generation firms, regardless of affiliation, and mandate that supply contracts be awarded to those that offer the lowest prices.
‘During the regulatory proceedings and public hearings, the ERC determines whether such contract complies with the distribution utilities mandate under the EPIA to provide customers with the least-cost supply.
All the power supply agreements of Meralco were approved by the ERC, a testament to its compliance with the least-cost mandate under the law,’ said Valles.
He said Meralco’s distribution rates have declined by 18 percent since 2014. The distribution component of an electricity bill goes directly to Meralco. ‘Customers are paying less today for the distribution-related charges of Meralco compared to more than a decade ago. Meanwhile, prices of basic commodities like food and transport as part of consumer price index increase annually by an average of 4.1 and 2.7 percent, respectively,’ said Valles.
Meanwhile, the Center for Energy, Ecology, and Development [CEED] is calling for a suspension of pass-through charges, saying that these fees allow power generation companies to pass volatile fuel costs to consumers.
‘One of the primary drivers for increasing rates of electricity are pass-through provisions within power supply agreements [PSAs]. Generation companies are allowed to pass volatile fuel prices and other variables like foreign exchange rates onto consumers.
This burdens Filipinos with expensive electricity every single month. In the Meralco franchise area, 83 percent of electricity comes from coal and gas, whose prices fluctuate wildly,’ said Atty. Avril De Torres, Deputy Executive Director of CEED.
For the ERC’s part, the chairperson confirmed that distribution rates were last adjusted over 10 years ago.
‘They have not moved for a decade. If we look at that specific component of our bill regulated by the Commission, it does not change month-to-month. It remains constant because distribution utilities can only adjust it after filing an application, undergoing hearings, and receiving a Commission decision on the appropriate rates,’ said Atty. Francis Saturnino Juan.