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This
column’s topic for today might as well be entitled
“Meralcospeak 101.”
Meralcospeak is that strange, dynamic language the
biggest electricity-distribution utility in the country
has been using to justify the power-rate increases that
it has been imposing on its 4.2 million customers in its
megafranchise area since 2000.
Any
ordinary Meralco consumer knows what I mean by “Meralcospeak.”
It is any of Meralco’s long-winded explanations on why
it has to yet again raise its rates or why you shouldn’t
entertain the preposterous idea that it is out to bleed
you dry.
Such
explanations, which are usually widely publicized, are
invariably packed with terms and phrases that are Greek
to you. Yet Meralco smugly presumes you will readily
understand what it means exactly unless, of course, you
are a hopeless ignoramus.
Just
take a closer look at any of your Meralco household
bill, under “billing summary,” and you will find some of
those strange terms and phrases. The items under the
summary are supposedly the components of the total
monthly payment that you must make (otherwise you’ll be
mercilessly cut off from civilization).
But
rather than go into the exasperating exercise of trying
to make heads or tails of what each item means, you toss
the bill aside and grudgingly admit to yourself that you
actually have no choice but pay. Your only consolation
is that everybody else feels as badly as you do, but
coughs up whatever amount is demanded anyway.
It’s a
rotten feeling. For example, you don’t know what in
heaven’s name “universal charges” (which include
“stranded debts” and “stranded contract costs”) means.
And you can’t understand why the metering charge (under
distribution costs) fluctuates with your electricity
usage. Yet you pay anyway, with a grudging shrug of your
overburdened shoulders.
Meralcospeak might as well be foreign because it is as
strange to the ordinary electricity consumer as
Portuguese or Nepalese. It is invariably packed with
terms and phrases that—I suspect—are intended more to
obfuscate rather than to enlighten a helpless, captive
market.
Like the
English language itself, Meralcospeak is as dynamic, if
not more so. It is ever-expanding, it seems, the way
Meralco’s repertoire of rate-hike increases seems to be
endlessly expanding.
Perhaps
the beginnings of Meralcospeak can be traced to the
Electric Power Industry Reform Act of 2001 (Republic Act
9136) itself. Section 4, entitled “Definition of Terms,”
is actually a glossary of 56 new-fangled terms and
phrases, many of which could give an English major
nightmares and even electric engineers insomnia.
The
acronyms being used in Meralco’s lingo are also so
numerous, they could cross any customer’s eyes.
To
ordinary electricity consumers, the definition of some
of the terms seems to have been deliberately designed to
favor Meralco. Consider only a few of those terms, for
example:
§
Consumer
service charge:
“Refers to the component in the retail trade intended
for the cost recovery of customer-related services,
including, but not limited to, meter reading, billing
and collection.”
The definition is so broad, it could also cover expenses for
the purchase of a company jet or yacht for executives of
a distribution firm, or, for that matter,
“representation expenses” in the form of gambling losses
and the cost of first-class international junkets.
§
Distribution wheeling charge:
“Refers to any electric cooperative, private
corporation, government-owned utility or existing local
government unit which has an exclusive franchise to
operate a distribution system in accordance with this
Act.”
§
Universal charge:
“Refers to the charge, if any, imposed for the recovery
of the stranded cost and other purposes pursuant to
Section 34 [provision on Universal Charge as determined
by the Energy Regulatory Commission].”
Another
term that used to be Meralco’s favorite was purchase
power adjustment, or PPA. This term was discarded after
Sen. Juan Ponce Enrile exposed the Lopez family in
connection with some P918 million that Meralco paid to
the Lopez-owned First Gas Power in 2001 for the
electricity the latter couldn’t have possibly delivered
because it was not yet operational at the time.
The new
term being used by Meralco for adjustments in generation
charges is Automatic Generation Rate Adjustment, or
Agra. There is a related term, which is used alternately by
both the Meralco and the ERC—Generation Rate Adjustment
Mechanism, or GRAM.
At the
bottom of this page is the letter of Mr. Elpi Cuna,
Meralco vice president for corporate communication and
director who tries to explain why Meralco continues to
buy the bulk of Meralco’s power requirements from the
Lopez-owned First Gas Power Corp., without disputing my
point that the main beneficiary of the Epira is the
Lopez family.
Omerta_bdc@yahoo.com
****
Why Meralco has IPPs
Mr. Butch del Castillo,
This
refers to your column entitled “Epira—a boon to the
Lopez Group” which was published on September 12.
You
mentioned a number of issues that concern Meralco, which
we would like to clarify in this letter. Your main
argument against Meralco revolved around what you called
sweetheart deals between Meralco and some independent
power producers (IPP).
Allow
me, then, to clarify why Meralco has IPPs and why it has
to buy from them.
You will
recall that Meralco had generating plants that the
martial-law regime, sometime in the 1970s, transferred
to the National Power Corp. (Napocor) by force of
Presidential Decree 40. Later, in the early 1990s, the
country suffered a serious deficit in generation
capacity.
Since
Napocor could not deliver the amount of power that would
fill the demand, the private sector was asked by the
government to help build the needed capacity.
Accordingly, we entered into power-generation contracts
with baseload power developers. The contracts were based
on the economic and load/demand growth projections made
by the government through the Neda (National Economic
and Development Authority) and Napocor itself.
The IPP
power-supply contracts have the same off-take provisions
as in the Napocor-Meralco contract and were signed after
consultation with Napocor.
Furthermore, all of these IPP contracts were duly
approved by the government, through the then Energy
Regulatory Board, after due notice and hearing.
Moreover, with respect to the First Gas plants, it was
the government that urged Meralco to source power from
plants using indigenous natural gas, which the gas
sellers did not want to develop without long-term
off-take contracts for power.
Incidentally, some 60 percent of the beneficial interest
from the gas off-take agreements accrue to the
government. You then went on to say, “These sweetheart
deals are the reason Meralco consumers have had to put
up with ever-rising rates.”
As to
the rates, it is imprudent to compare IPP rates with
Napocor rates without first dissecting the different
costs involved in the production of electricity. It is a
known fact, as we have explained time and again, that
Meralcos contracts with the IPPs (typical to most IPP
contracts, including those of the Napocor) have both
fixed and variable cost components.
Sourcing
power solely from the Napocor does not free Meralco from
paying the fixed costs attendant to the said contracts.
That is the reason why Meralco has pushed for the
dispatch of the IPPs at no less than contract levels or
the minimum energy quantity.
I need
not emphasize that a lower generation cost is achieved
if the fixed cost is spread over a greater number of
kilowatt-hours, thus resulting to lower rates for
consumers. Cost minimization is attained by displacing
the higher variable cost of one supplier with the lower
variable cost of another supplier.
For the
record, we did not decide on these IPP contracts
unilaterally. We were asked by no less than the
government, Napocor included, to come up with the needed
power because the government and Napocor did not have
the resources, and investors preferred to work with the
private sector in setting up the plants.
Maybe
you will be better enlightened, too, if you would only
look at Meralco’s web site and compare the IPP rates
with those of the Napocor and the Wholesale Electricity
Spot Market (Wesm).
Contrary
to your allegation, you would see in the
generation-charge breakdown that all the IPPs had lower
generation charges compared with either the Napocor or
the Wesm. How, then, could you state that Meralco’s
purchases from the IPPs are the reason Meralco consumers
have had to put up with ever-rising power rates, when
these very purchases from the IPPs had been responsible
for bringing the average generation cost lower?
You
would clearly see from the figures there that had
Meralco sourced its power requirements from Napocor and
WESM alone, generation charge would have been higher.
And if
you were thinking that Meralco would not want the Epira
to be amended, then, with due respect, you are by all
means mistaken. Meralco has always been supportive of
and compliant to laws and guidelines set by the
government that seek to propel the power industry
forward.
We
indeed welcome reforms, particularly in the Epira, that
seek to correct whatever there may be in the power
industry and those that aim to empower customers with
choices by making the industry more competitive and
market-driven.
I hope
that we have clearly answered the issues you raised in
your column and we hope that you can publish this reply
of ours in the spirit of transparency and fair play.
Thank you.
Elpi O. Cuna Jr.
Vice president and director
Meralco, Corporate Communication |
