Consumers must not pay for the added costs of the Malampaya shutdown

I wrote a letter to the Chairperson and the members of the Energy Regulatory Commission ( ERC )  on November 14, 2021. I sought temporary relief in the collection of Meralco’s power rate hike of about Php 1.00pkwh.

I have not received any acknowledgement from the ERC. The Department of Energy ( DOE ) aknowledged receipt of their copy but passedon thebuck to the   ERC.  Neither have I received acknowledgement from the Office of Senator William Gatchalian norfrom Meralco.

In pursuit of the consumers’ right to information and right to seek redress,I reproduce that letter in   this column (edited for space).

“Subject: Moto Propioinvestigation under Section 43 of the EPIRA with prayer for provisional authority to stop the collection of the additional Php 1.00 pkwh from the consumers.

As early as September 21, 2021,   Laban Konsyumer Inc. had alerted that the scheduled maintenance shutdown of the Malampaya Deepwater Gas to Power Project 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 suggested that the ERC and Department of Energy DOEshould invoke their mandate under Presidential Proclamation 1218 or use their extraordinary powers to source funds and to shield consumers from these unwarranted additional costs.  

          All of the above suggestions have fallen on deaf ears and we in Laban Konsyumer Inc.were disappointed with theindifference of the above institutions to the prejudice of the consumers who will now absorb added costs on their power bills.

          Why so?

Meralcoannouncedon November 12, 2021 a Php0.3256 per kilowatt-hour (kWh) hike 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 not for the Distribution Rate True-Up refund amounting to Php0.2761/kWh and the deferred collection of generation costs of about Php0.52/kWh arranged with suppliers, Meralco customers would have been forced to paying 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.

          We read based on news report that 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  costs ,  whether the pass on costs is the least cost , and more importantly , whether ERC had approved the pass on cost with due notices and hearings.

Under Section 43 of the EPIRA, we deem the ERC – given its rate making quasi-judicial authority to fix power rates – conduct a moto propioreview and direct all parties involved to explain that these specific contract provisions are legal and the pass on cost the least cost to protect the consumers from bearing these unwanted costs.  Foremost, in the light of the Supreme Court decision in ALYANSA NG BAYAN vs. ERC, DOE and Meralco , whether the mentioned generation companies conducted a competitive selection process to determine that the costs of the alternative fuel is the least cost to the consumers.

Moreover, a review of the contracts between the Malampaya consortium and the natural gas power plant operators is also strongly encouraged, and to hold the Malampaya consortium accountable for the additional costs incurred because of the persistent gas restrictions and maintenance shutdowns.

We had written this letter to theCommission to immediately initiate moto propio hearings on the Meralco added costs and pending saidhearings, 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 Deepwater Gas-to-Power Project. 

Respectfully submitted.”

Atty. Vic Dimagiba

President of Laban Konsyumer Inc.

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