‘Deadly’ power rates loom over Meralco supply deals

A “deadly” increase in power rates of the Manila Electric Co. (Meralco) by as much as P1.55 per kilowatt hour (kWh) could be expected if the utility’s seven pending supply agreements with its affiliates were approved by the Energy Regulatory Commission (ERC), a lawmaker warned on Thursday.

Rep. Carlos Zarate of Bayan Muna party-list made the warning in reference to the power supply agreements (PSAs) with Redondo Peninsula Energy Inc. for 225 megawatts; Atimonan One Energy Inc. (1,200 MW); Saint Raphael Power Generation Corp. (400 MW); Central Luzon Premiere Power Corp. (528 MW); Mariveles Power Generation Corporation (528 MW); Panay Energy Development Corp. (70 MW); and Global Luzon Energy Development Corp. (600 MW).

Zarate said the ERC’s approval of the power agreements, Newcastle coal price doubling to $100 per metric ton and even hitting $109 per metric ton on May 18, the Philippine peso retreating to as low as P52 against the US dollar and continued implementation of the new tax reform law that increased excise taxes on fuel would result in hikes in power rates.

“Meralco assumed that prices of the benchmark Newcastle coal would average only around $50 per metric ton, while the peso would trade against the US dollar at P46:$1. All power plants contracted to supply Meralco with 3,551 megawatts of electricity under the seven PSAs will run on coal, while the US dollar will be the reference currency in importing coal for these contracted power plants. This means that an approval of the seven PSAs by the ERC, coupled with the above-mentioned variety of factors, is a deadly combination,” Zarate said.

Based on Philippine Statistics Authority (PSA) records, food prices rose 5.7 percent in March from 4.8 percent in February and 3.1 percent in March last year--less than two months after the Train ( Tax Reform for Acceleration and Inclusion) was enacted into law.

“If the seven PSAs will push through, the average generation charge under them will cost Meralco customers P5.22 per kWh or P1.55 per kWh more than what Meralco wanted us to believe in the PSA applications and in its earlier House presentation,” Zarate said, referring to Meralco’s estimate of cost of electricity generation charge at P3.67 per kWh.

With the P1.55 per kWh Meralco rate increase, the utility can earn as much as P54.54 billion in additional charges in a year, he added.

Rep. Rodel Batocabe of Ako Bicol partylist backed Zarate’s position.

“The ERC should fulfill its mandate of reducing the burden on consumers, on top of stabilizing the supply of electricity,” Batocabe said.

At least 51 percent of Atimonan One is controlled by Meralco.

Meralco PowerGen Corp. has the majority control of Redondo Peninsula Energy, while Saint Rafael is a joint venture between Semirara Mining and Power Corp., Meralco PowerGen Corp. and Marubeni Corp.

Meralco PowerGen Corp. also has a 49-percent stake in Mariveles Power.

The Panay Energy Development Corp. and Global Luzon Energy Development Corp. are subsidiaries of Global Business Power Corp. of which 14 percent is owned by Meralco PowerGen.

Under the Electric Power Industry Reform Act or Epira, distributors like Meralco have the obligation to supply electricity at the least cost to their captive market.