• CRISIS AHEAD: Aquino inutile in stopping power hikes

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    Rigoberto Tiglao

    Rigoberto Tiglao

    President Aquino’s administration is inutile in stopping the surge in Meralco electricity costs.

    Consumers have been spared from paying their atrocious bills only because the Supreme Court issued a 60-day temporary restraining order on December 20 against Meralco’s rate hikes, in response to suits filed at the court that the price increase was unconstitutional.

    However, because of the bungling by the Aquino government in its regulatory role over electricity prices, either way the Supreme Court rules on the suit, the country faces an electricity and even possibly a financial crisis.

    The surge in Meralco’s electricity rates in our December bill was due to the fact that in November it bought from the so-called Wholesale Electricity Spot Market (WESM) 9.5 percent of the power it distributes to its customers at an astonishing price of P33 per kilowatt hour (kwh) for a total cost of P9.5 billion. (The cost of WESM-bought power is added to that of the electricity Meralco purchases from its regular suppliers to make up its total generation cost, which accounts for about 45 percent of your electricity bill.)

    “Astonishing” since the average price of such WESM-bought power by Meralco since that market was created in 2007 was just P8/kwH, in October the price was only P14/kwh and in November, P6/kwh.

    Several reasons for Meralco’s expensive purchases have been advanced: a supply shortage due to the shutdown of several power plants; generators’ more expensive costs due to the maintenance shutdown of the Malampaya facility that produces the cheaper natural petroleum gas fuel; and collusion by the power generations among themselves or by the power generators and Meralco. .

    What has been proven to be a major factor for the shortage was the boo-boo by Energy Secretary Petilla in not ordering the government-owned Malaya plant to produce electricity, which could have eased up the shortage (see my column on this on Friday Jan. 17, 2014.) A senate hearing conclusively proved this to have been the case, that even pro-administration senator Sergio Osmena III angrily asked for Petilla’s resignation, saying “If he can’t understand (the electricity industry ) until now after one-and-a-half years as energy secretary, I suggest that he resigns.”-TIGLAO-FOTO-FEB-5

    And guess what?
    After all the Senate hearings and public furor over the issue, after the Energy Regulatory Board announced that it would put a P32/kwh price cap on bids at the WESM, Meralco bought from the market in December at P36/kwh, the highest ever.

    And this is at a period when Malampaya’s maintenance shutdown—that everyone was blaming for the spike in WESM prices in November—ended December 10. The share of WESM-bought power to its total power purchased even increased from 9.5 percent in November to 14.1 percent in December.

    Already shouted at by everyone to stop a repeat of Meralco’s purchases of expensive electricity in November, Aquino’s government did nothing in December.

    Crisis ahead
    Because of the Aquino administration’s bungling in overseeing the power industry, we could be on our way to an electricity or even a financial crisis.

    If the court rules that Meralco’s increases are legal, our electricity bills for the next few months will soar, as the company will pass on the high cost of its power purchases from the WESM for November and December to us consumers.

    To collect the cost of the electricity it distributed in December and January which the Supreme Court stopped, Meralco would charge us P21/kwh, or nearly double the P11/kwH it has been charging us in the past two months.

    Even if Meralco allows consumers to stagger the payment, this would only spread out the huge cost of our electricity. Correct that: Not only huge costs of electricity used in “our” homes but huge costs especially for our industries, which already have been suffering the highest power costs in Asia.

    On the other hand, if the Court rules these as unconstitutional and bars Meralco from implementing the increases, Meralco would have to pay the power generators at least P16 billion, representing roughly the unpaid cost at the price it agreed to when it bought the power at WESM in November and December.

    But Meralco won’t recover these costs precisely since it would be banned from passing these on to consumers.

    That would be such a shock to Meralco that it could even trigger its financial crisis. The firm has billions of pesos in short-term liabilities, which debtors could call in, fearing that it couldn’t be able absorb that P16 billion payment to the power generators.

    And what happens if Meralco tells the power generators it can’t pay them the power it purchased from them? Some of them would likely declare bankruptcy, as they also borrowed money to buy the fuel it used to generate the power, and shut down.

    What would that mean? Meralco would be unable to provide at least some 10 percent of the electricity demand, especially for peak hours.

    What would be the consequences? Brownouts that will devastate the economy as much as, or probably worse than, during the administration of Aquino’s mother Cory.

    How did we come to this? In one word: Incompetence.

    tiglao.manilatimes@gmail.com
    www.trigger.ph and www.rigobertotiglao.com
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    18 Comments

    1. The real root of evil of all these problems and sufferings of the majority filipino IS the rampant corruption and immoral characters of the shameless politicians and their greedy cohorts in this capitalism society.any solution based on this root cause can never resolve the problem of our nation.

      • Rosauro Feliciano on

        We need a very strong political will to stop this abuse of Meralco that is in association with many politicians. This is one way they want to augment their monthly income because this country cannot go after corrupt politicians in fullness. We must do our best to help this government to go after corrupt officials. For all we don’t know those who are vocal against anything the President is doing are those who benefited in the many past administrations that as of now they cannot do illegal means anymore because they are under the watchful eyes of the agents of our law enforcers and hence cannot enrich themselves because this government is serious in prosecuting corrupt officials.

    2. I always believe mag hire ng Norwegian o kahit African cannibals nalang na mag mando sa mga inutil/hintay sweldo/duwag/tsismissess/pilosopo/drama king & Queen Filipino government employees.

    3. Because of WESM, Meralco and the generators involved in this controversy can always invoke the basic economic theories of supply and demand. When EPIRA was considered before enactment into a law, Meralco’s monopsony should have been broken up. Also, tendency for collusion by the generators should have been considered given the fact that only a very few players are in the supply market. Oligopoly was already a known fact at that time. Can the petitioners present concrete evidence on collusion and price manipulation on the part of Meralco and its suppliers? In the end, the SC will accept the workings of economic theories that influenced equilibrium electricity price. It is my presumption that EPIRA was deliberately designed by the lackeys of big generation and distribution business sitting in the halls of Congress.

      • Rosauro Feliciano on

        For how can we expect from those politicians who articulated this EPIRA law to be pro-people when Meralco is the milking cow of many politicians?

    4. the solution to the energy problems is to find oil in the country, I heard there is already found oil in Cebu. they to drill more in other locations like Cagayan Valley, Nueva Ecija, Tawi-Tawi, Quezon, etc. and stop blaming.

      • You need money to do this but then, the money is already in the pockets of the Tongressmen and the Senatongs. There is no more money to be used for development.

      • Rosauro Feliciano on

        What, find oil in the country? It will be worst because the Philippines will be like Nigeria in the Far East Asia. Yes I will believe that if and when we will find huge reserve of oil, then it will be beneficial for all of us. On condition, if we are a Muslim country like countries in the Middle where corrupt officials are beheaded like in Saudi Arabia and/ or put behind bars for lesser offense in terms of corruption because their justice system is not corrupt like ours.

    5. PUBLIC: WARNS ANEW OF MASSIVE BACKLASH
      We the over burden power subscriber of MERALCO are getting confuse why the ever concerned groups of “Anak-Bayan or Anak-Pawis protest cause are always focus on preventing the implementation of power rates increase against the proliferation of MERALCO, GENCOS a.k.a “Kamag-Anak Inc. business ventures syndicate. Instead of hitting the wrong target why don’t we call for the abolition of these expensive petroleum fed power generators and demand for the revival of BATAAN NUCLEAR PLANT designed to produce cheaper electricity without the need of expensive refuel up to 25 years. Condemned this MERALCO THREAT of intentional brownouts. Don’t underestimate a trending public backlash!

    6. From 8/kWh to 32/kWh is staggering ,this goes to show that the ELITE controls the electricity markets,the ongoing SUPREME COURT debate on this is issue ,is just a
      SHOW, at the end the elite will win. We are a pathetic country,just take a look at our congressmen and senators,most of them are LACKEYS AND SCOUNDRELS, they
      act on the whims of the people in the Palace! This people has no PATRIOTISM.
      NO MATTER HOW YOU COMMENT ON OUR RECENT SITUATION, NO CONCRETE
      RESULTS IS FORTHCOMING,I CAN ASSURE YOU ON THAT.
      HOWEVER THANKS FOR THE EXPOSE,MAY GOD HAVE MERCY ON US

    7. “Connivance” thats the word, it’s very clear Meralco,ERC, Malampaya, Napocor and power producers connived each other to artificially produced power problem to pump up the increase in electricity.We should all protest the power increase. If all the maintenance, millions of salary of Meralco bosses, I think there must be a law, the automatic part owners of the peoples of the Philippines in managing Meralco we shoulder everything even their gasoline budget.The senate should allow other power company to compete with meralco, for a long time Meralco monopolized electricity. MVP and others who were involved in power rates increased RESIGN NOW!

      • Correction: NAPOCOR has nothing to with such because NAPOCOR’s only running plant in luzon is the Angat HEPP only. I supesct it ‘s PSALM.

    8. I heard a rumor that the NGCP is controlled by a single individual and that it is not certain that the national grid is secure from sabotage or a deliberate shut down for political or other reasons. The national grid is set up, they say, so that by a single flick of a switch the entire country will be without electricity, i.e., total blackout. I think this should be looked into for whatever it is worth. Can you imagine if China wants to control our country as it has been threathening to do all it has to do is take over the grid and we will be at its mercy. Perhaps control of NGCP should also be looked into to ensure that the owner/s can be relied on to be on our side in all cases.

      • Mr. Domingo, you mentioned China in your comment, did you know that the State Grid Corporation of China is part the consortium that controls the national grid?I just checked the NGCP website. Personally, I do not trust the Chinese.

    9. Mr. Tiglao, thanks for this well researched article. I have no doubt that the energy crisis will come in the nearest future. and this unprepared administration for such crisis have already lined up their excuses and pass it on to the previous administration. As usual this mentally derailed president will find somebody whom he can put the blame regarding this looming energy crisis. Aquino can not washed his hands this time because he was informed of the looming problem a year before. But because he was busy with other things like bribing the senators and spending taxpayers money illegally,because he was busy doing nothing all those years, and ignoring such problems that concerns the people, it is high time that we should kick his ass out from malacanang. If he had not done anything for 12 years as law maker then no wonder he will not do anything as president inspite of trillion money on his disposal.

      • Certainly BS Aquino will blame Gloria as he always have. That is what he is very good at anyway.

    10. florentino maddara on

      Malacanyang people do not mind this problem because they know that there are scapegoats (Petilla, Ducut and perhaps PSALM managers) to be blamed. As usual, blame game is the forte of this present regime. Most gov department heads does not know the meaning of incompetence and ignorance. But they are very good in applying the words such as in collusion and in cahoots with the smugglers, tax evaders, drug traffickers or with their favored greedy taipans who are always generous in giving campaign funds. I think only four depts are very serious and standouts in their works such as COA. BIR, DOJ and the Ombudsman not to mention the now reformed and reliable Supreme Court.

    11. We will wait and see what the government will do in this situation, they may use the Malaya plant which you said is owned by the government to mitigate the impending crisis. I agree that the government could have used the this plant to produce the electricity needed at the time when Malampaya fuel source was unavailable. No matter who the President is, with crises after another will be overwhelmed. In times like these jar our senses so bad, to change our perspective in life. These overwhelming crises after another is life changing event in the history of the Country which by the grace of God and His power may benefit the nation. It is time to be united in prayer and reconciliation, may God have mercy on us all, especially the poor.