Академический Документы
Профессиональный Документы
Культура Документы
www.agham.org
Ever increasing rates from the EPIRA A closer look at the electric power industry in the Philippines
Electric power is a basic service that is needed by households in everyday activities and is equally important for industries to operate. The failure of the government to provide electric power was evident when the country faced massive blackouts in the late 1980s and early 1990s due to a shortage of power supply. The response of the government to this power crisis was not to build the necessary infrastructure to meet the demand but to contract out power generation to independent power producers or IPPs. Furthermore, it has made steps to privatize the whole power industry effectively abandoning its role in providing electric power services and opening up the power industry to private companies.
Energy (DOE). DOE was tasked to develop and update the existing Philippine Energy Program (PEP) which shall provide for an integrated and comprehensive exploration, development, utilization, distribution and conservation of energy resources. As its policy response to the power crisis, RA 7648 or the Electric Power Crisis Act was enacted in the same year that the DOE was created. This further opened the door to entry of private power corporations. DOE was tasked to boost the entry of these private firms in construction and operation of power plants.
If we exclude the US, the IPP capacity in the Philippines exceeds that put up over the rest of the world combined in terms of installed capacity. This would continue to increase with the full implementation of the EPIRA and the privatization of power generation. The EPIRA brings about the exploitation and plunder of our natural resources to the benefit of these foreign companies. Far from improving our electric power independence by promoting indigenous energy sources, it has reduced taxes and royalties from those exploiting our resources. This would make our resources free for plunder and profit to all takers which are mostly foreign owned transnational companies. The EPIRA provides for the equalization of taxes and royalties on the exploitation of natural energy sources which just means the removal of these taxes or the exemption from such taxes of the IPPs. Under the bill to increase VAT rates to 12% being discussed in Congress, IPPs are already being exempted despite the fact that these companies are paying only 3% of their revenues as taxes. In addition, the power of eminent domain, as provided for in the act (Sections 6 and 12), granted to transmission and distribution companies gives them prior rights over the countrys land resources and thus may evict the occupants or owners of the land in question. The dislocation of the indigenous peoples (IPs) from their ancestral domain and of other peasant settlers with the construction of power plants and other development projects over their claimed territories has been well documented The EPIRA favors power industry players over consumer interests. It legitimizes the passing on of costs of power generation to end users. The passing on of power generation costs to consumers is legitimized by the EPIRA such as the passing on of system loss charges transfer the inefficiency losses of distribution utilities to end users. Other line items in the unbundled bill such as the missionary electrification charge and environmental charges passes on the responsibility of rolling our new electric power lines and the environmental maintenance of power utilities to the general public. Stranded costs and debts by both the NAPOCOR and utilities are also to be recovered from the general public in the Universal Charge. The EPIRA has put as policy the full recovery of prudent and reasonable economic costs of a distribution utility. As a result, distribution utilities now recover and pass on currency fluctuations, fuel cost fluctuations as well as contract obligations (PPA) to the end-users. The mechanisms approved by the ERC such as the Generation Rate Adjustment Mechanism (GRAM) and the Incremental Currency Exchange Rate Adjustment (ICERA) are concrete examples of these pass on costs to consumers. The unbundled rates, even with the discounts, hit the smallest end users hardest. Small end users, even with the 50% discounted rates, still pay 159% more than their real electricity costs. Higher users of electricity would pay from 120% (100 kwh) to double (more than 500 kwh) their real electric costs. The EPIRA has not brought about and will not bring about a stable electricity supply to the whole country. In 2003, the total installed capacity in the country is 13,380 megawatts, of which 11,191 megawatts is the actual dependable capacity. Current peak demand is 67% of dependable capacity or 7,497 megawatts. The Philippines has an excess capacity of around 11% factoring buffer requirements. This has changed in 2004, where the country's total installed generation capacity stood at 15,763 MW and its dependable capacity at 14,008 MW. Our peak demand is 9,069 MW and thus overall, we have the capacity to provide for our electricity needs. However, interconnections of major islands are needed to distribute this power capacity over the country. It is indeed true that the construction of power plants will still have to continue but the government and the EPIRA makes sure that the IPPs will play a key role in providing electricity. However, this does not mean that the IPPs would find it viable to build and maintain in the long run a power plant. As soon as the location becomes a liability to the private companys profit margins, they can and will shut down operations. This can be seen in the threats some years of the Cebu based Cebu Private Power Corp (CPPC) that it will shut down operations of its 65 MW plant due to financial constraints further aggravating the projected shortage in the Visayas. Such moves makes the development and industrialization of our country hostage to the whims and profit margins of the private industry players.
consumer of electric power (mostly households and commercial buildings) that are most affected by rate increases. The privatization of Napocor through the Electric Power Industry Reform Act of 2001 or the Power Act therefore has direct implications on the people's daily routine (since electricity is a basic utility) and has long term strategic implications on our national development. In December 2004, it will cost you at least 28% more in electricity bills this compared to the same time the previous year. A household consuming 150 kWh per month will effectively be paying P7.20 per kilowatt hour in year end 2004 compared to P5.61 for each kWh December last year. The 28% increase is mainly due to the provisional authority granted by the Energy Regulatory Commission to the National Power Corporation (NAPOCOR), increases in transmission rates, previous adjustments in generation rates due to the Generation Rate Adjustment Mechanism or GRAM as well as adjustments in the currency exchange rates. Those with 70 and 100 kWh monthly usage are going to pay 23 % and 22% more, respectively.
Electricity rates (usage in kWh/month) MERALCO FRANCHISE AREAS Amount Effective amount per kWh Dec 2003 Dec 2004 Increase % increase Dec 2003 Dec 2004 Increase % increase 50 125.76 170.70 44.94 36% 2.52 3.41 0.9 36% 70 241.53 296.36 54.83 23% 3.45 4.23 0.78 23% 100 438.36 534.34 95.98 22% 4.38 5.34 0.96 22% 202 1207.12 1506.38 299.26 25% 5.98 7.46 1.48 25%
Source: 5th status report on EPIRA Implementation, May 2004-October 2004, Department of Energy Since 1990, where one kWh costs P1.83, the price of electricity has increased to 300% resulting to at least P5.58 on the average for the country.
Unbundling of rates
With the unbundling of power rates, it is instructive to study the costs of each item in the approved rate
schedule. Although, it is a vital part of the EPIRA and energy privatization, it is worthwhile to note that the Court of Appeals (CA) annulled the Energy Regulatory Commissions decision to unbundle electric power rates for Meralco. Recently, the CA have denied the motion of reconsideration of Meralco and the ERC on this decision. This means that the unbundling should again be heard and rates reverted back to its previous levels. Furthermore, consumers should also be refunded from rates stemming from the unbundling decision. We estimate the refund to total at least P 6.4 billion pesos. For a family using 200 kWh per month this would be around P680 pesos for the 20-month duration since the unbundling up to January 2005. Other unbundling cases previously approved by the ERC should be reviewed. There are several electric cooperatives and distribution utilities whose unbundling should be looked into in the light of the CA decision. With the unbundling of power rates, several recovery mechanism has been prescribed by the ERC, effectively hiding the PPA, and passing on all risks and price fluctuations to the consumers.
the provisional authority last year from the ERC to 3.4236. Factored into the formula for generation rate adjustments is the purchased power cost as approved by the ERC. In the PPA formula there is the cost of electricity during a supply month. Both do not make a distinction whether the electricity was actually delivered or not as a result of the onerous take or pay provisions of many IPPs. Both do not also filter out electricity purchased at excessive rates. Certainly neither the GRAM nor the PPA formulas strip those amounts of cost expenses that should not be there at all but which accountans can easily sneak in.
Thus, through the GRAM, as with the PPA, the consumers, among other things, will continue to pay for electricity that they do not actually use; shoulder the cost of excessive rates of power contracted by NPC and Meralco; and pay for the inefficient operations of IPPs. The ERC in its its approval of the unbundling of Meralco rates has acknowledged that The current PPA is allocated between the generation and transmission rates. The generation component shall be periodically updated through the Generation Rate Adjustment Mechanism (GRAM). -ERC Order dated 30 May 2003, page 9 Thus with the unbundling of rates, the PPA is now being paid for under five new line items in the electricity bill as diagrammed below:
Reduction of cross-subsidies
A 28.52 centavos/kwh increase in the electric bill of the residential consumers starting October 2004 was the result of the reduction by 40% of the interclass cross subsidy. The EPIRA mandates that all subsidies will have to be removed within 3 to 10 years, with the lifeline rate subsidy to the consumers using less than 100 kwh the last to go. Thus, residential consumers will have to pay an additional 42.78 centavos by October 2005 and lifeline consumers will lose their discounts around 2010. Even the 30 centavos Power Act Discount that the government used to sugarcoat the passage of the EPIRA bill is now just 16.52 centavos, effectively increasing our rates by 13.48 centavos. The total removal of inter-class subsidies will result in an increase of 71.30 centavos. In fact this subsidy scheme becomes a milking cow for distributors such Meralco because the amount that they collect is more
Discount 50 % 35 % 20 % -
These discounts apply to the generation, system loss, distribution, metering and supply charges. The above is called by its technical term, lifeline rate subsidy. Those using above 100 kwh presently pay an additional 7.61 centavos per kwh that is used to subsidize the lifeline consumers above who are using less than 100 KWh (which is really a case of one section of consumers subsidizing another section of the consumers). In addition, all residential consumers get a discount of 71.30 centavos per kwh subsidy paid for by collecting from the commercial and industrial consumers. This will be removed within 3 years under the Electric Power Industry Reform Act or EPIRA. This means an increase of 71.30 centavos on top of all the recent rate increases. In this discount scheme, Meralco, NPC and President Arroyo are happy since they earn brownie points while hiding the reality that none of them gave any centavo to alleviate the burden of high electric rates. What Malacanang should do, instead of this obfuscation, is to reduce electric power rates and grant wage hikes to truly address the concerns of the people
of this cost is remitted to Meralco's independent power producers (IPPs), most of which charge nearly twice as much per kilowatt-hour as Napocor plants. The Lopezes earns also from the generation charge. The systems loss, including pilfered power and the electricity used by Meralco offices and facilities, is passed on to us at a rate of 69.65 centavos per kWh. This is despite the fact that for the past years, Meralco's technical system loss (i.e. excluding pilferage) has not changed from 8%. That means Meralco has not seriously tried to become more efficient. It goes after pilferage since they can recover twice of their losses, once from the pass-on cost as part of the systems loss charge, another courtesy of the Anti-Pilferage act which allows them to charge the households the estimated cost of their pilferage. The systems loss has several components. One is the electricity lost through pilferage. Another is electricity lost as they pass through distribution equipment and wires. A third component bundled with the systems loss charge is electricity consumed by Meralco offices and facilities, technically called company use. The Meralco consumers pay for all this, and it is all legal because the government allows it. Republic Act 7832 or the Anti-Pilferage of Electricity and Theft of Electric Transmission Lines/Materials Act of 1994 supposedly provides for the rationalization of system losses by setting caps on recoverable system loss allowed to private electric utilities and electric cooperatives. This cap shall be no lower than nine percent. Essentially this passes on to consumers any inefficiency of a distribution utility like Meralco. Technical losses are losses inherent in the electrical equipment, devices and conductors used in the physical delivery of electricity. These are losses in sub-transmission lines, substation power transformers, primary and secondary distribution lines, distribution transformers, service drops, voltage regulators, capacitors, reactors and all other equipments used in the operation of the distribution of electricity. On top of these technical losses, load loss due to electric energy pilferage is also considered as part of what is termed as non-technical loss. System loss charges also includes administrative losses (company use) which are the electric consumption of distribution substations, the offices, warehouses and workshops of the distribution utility. Meralcos system losses currently amount to 13.38 %. Our main criticism with regard to system losses is the fact that Meralco and other distribution utilities pass on these system losses to the public. This pass on charge was part of the PPA previously and the public is unduly burdened in paying for the inefficiencies of the distribution utility. This part of our electric bill is due to energy that never gets used in our homes and is mainly due to any technical inefficiency in the part of the distributor, their in-house use of electricity and pilferages. Although pilferage is being pointed to at by Meralco as a big part of these losses, any violator that will be caught is required to pay consequent fees despite these losses being already collected and paid for by the item for system loss in our bills. If so, why do we still have to be charged for system losses? More pass-on charges are the metering charge and franchise and local taxes. Universal charges, which include many other components such as the missionary and environmental charge, will also include in the future stranded cost and debt recoveries that amounts to around 200 billion pesos to be collected in 15 to 25 years. The missionary charge is a compulsory contribution to a fund to be used for electrifying remote barangays because no businessmen would like to invest in those areas where there are only a few customers but requires big capital outlay for the long wires and many posts. But why are we charged for a job the government should be doing? This is also true of environmental charges. Why are we charged for the havoc that the generation plants of Napocor or these IPPs do to the environment? Consumers seem to be the perpetual milking cow of Meralco, Napocor and the IPPs. Unbundling has increased power rates and it will continue to increase because of the new charges, the passing on of the 200-billion-peso stranded cost and debt recoveries and the eventual reduction of subsidies. All these mean higher electric rates for all.
Electric cooperatives
An electric coop (or REC, or rural electric cooperative, the legal nomenclature used) is owned and managed by the consumers who are also its members who elect the members of the board and appoint a GM to manage its day-to-day operation. An REC can be either a non-profit non-stock or a stock coop. If a stock coop the member/consumers own stocks and can be paid out dividends when a profit is made. SORECO II is an example of a stock coop
where the member consumers buy stocks on monthly installments, many at P5.00 per month up to a certain maximum. A coop can either be registered or not with the Cooperative Development Authority (CDA). If registered it is exempted from income and other taxes, which is an incentive for coops to be registered. Both are supervised by the CDA as far as their coop legal responsibilities are concerned, like calling for a regular assembly and the like. A coop belongs to that group called Distribution Utility (DU). Since distribution is still regulated under the EPIRA a coop must file for its power rate with the ERC (Energy Regulatory Commission) before it can bill its customers. In its application for power rate (or tariff) the coop factors in its O&M (operation and maintenance) expenses, a reinvestment fund (for upgrades and expansion), other expenses that may be allowed by the ERC, and the desired RORB (Return on Rate Base) which is the provision for profit so that members can have dividends. If non-profit, non-stock there is no such provision so that the power rate would be lower. Normally though member/consumers of stock coops would not mind a higher electricity rate because they would share in the profit. The big difference then between an REC and a DU that is privately-owned like Meralco (Lopezes) or Davao Light (Aboitiz) is the nature of ownership and control of the utility. If the DU is a coop the consumers themselves own and control and manage the utility firm and any profit made (if stock coop) are shared among the consumers who are of course the people in the community. The coop is responsible to the members who are also its consumers who are also its owners. Conflict of interest is very minimal because the owners and the consumers are the same people. If the DU is a private company a few wealthy individuals own, control and manage the utility firm. Any profit made is shared only among them. Since the objective of businessmen is to maximize their profit you will easily understand why such racket as the overcharging case of Meralco happened, where it had to pay us back P29B in overcharges illegally collected in ten years. In reality, many coops in the 70s, when Marcos issued his PD ordering the setting up of coops, started correctly and with very good intentions. Of the 119 coops today, only about 1/3 are classified as Class A, many in Class D and E and mired in debt and operational losses due to inefficiencies and overpricing of materials, etc. With many coops in sorry state and in debt the government, instead of setting things aright through ways of strengthening the coops wants to have thse coops sold to private companies through what is called an Invstment Management Contract (IMC) or outright buy. The IMC is the more clever way because a private company, after 5 years of managing and controlling a coop operations can buy the coop for a song. These IMCs are going to be part of the strategic plan to privatize wholly the power sector.
Ako ni Elektrokyut ng Anakpawis (with apologies to the kid in the TV ad) Gastos sa: Generation charge...ako Transmission charge...ako Systems loss charge...ako Ninakaw na kuryente...ako Kuryenteng di naman nila nilikha...ako Kuryenteng di ko naman ginamit...ako Kuryenteng di nasukat dahil sira pala ang metro...ako Kuryenteng ginamit ng Meralco sa nga opisina nito...ako Gastos sa: Distribution charge...ako Supply charge...ako Retail customer charge...ako Metering charge...ako Discount para sa mga da poor lifeliners...ako Discount ko, binawasan na ako Overcharging ng Meralco...ako Gastos sa: CERA dahil sa pagtaas-pagbaba ng dolyar...ako Local franchise tax...ako National franchise tax...ako Noon nga pati income tax...ako Buti na lang nagreklamo at nanalo ako GRAM sa pabago-bagong gastos sa paglikha ng kuryente...ako Pakuryente sa mga liblib na pook, alyas missionary charge...ako Para sa pag-alaga sa kalikasan, alyas Environmental charge...ako Gastos sa: 12% Return on Rate Base o Kita ng Meralco....ako 8% Return on Rate Base o Kita ng NPC...ako P24 Bilyon kita ng Mirant noong 2002...ako P4.6 Bilyon kita ng Lopez' First Gas Power noong 2002...ako Bilyon-bilyong kita ng iba pang IPPs at power utilities...ako Milyon-milyong suweldo ng mga executives ng mga ito...ako May mga darating pang gastos sa: TRAM na pabago-bagong gastos sa pagdeliver ng kuryente...ako pa rin kahit na alam kong tinaTRAMtado na nila ako Bilyon-bilyong stranded debts ng NPC...ako pa rin Bilyon-bilyong stranded contract costs ng NPC...ako pa rin Equalization taxes and royalties...ako pa rin Lagi na lang ako. Lahat din lang naman ang gumagastos ako I-takeover ko na lang kaya ang NPC, Mirant, mga IPPs at Meralco. Pagkatapos ako ang magiging may-ari....si Juan de la Cruz, ako!