Meralco makes its own rules on prepaid electricity

March 31, 2014 9:29 pm
Ben D. Kritz

Ben D. Kritz

LAST week, I happened to see an interesting newspaper advertisement that made the following exciting announcement: “Here’s more good news from Meralco! Manage your electricity consumption with Meralco’s prepaid electricity. The Meralco Kuryente Load is now available in pilot areas of Taytay and Angono. Customers in Cainta and Manila (Sta. Cruz, Sta. Mesa, Sampaloc and Tondo) may now inquire on availability of this prepaid electricity service in their areas.”

According to various news reports, the service is now being used by about 125 customers, with 38,000 more to be made eligible to sign up for it in the near future.

Well, that is certainly good news. I wasn’t aware that Meralco’s troublesome, often—delayed prepaid electricity initiative had finally smoothed itself out and had been approved by the Energy Regulatory Commission (ERC). It turns out, however, that there is a very good reason for that—the program has not, in fact, been granted the required provisional authority by the ERC, despite recent public statements by Meralco officials that it has been approved. An exhaustive search of the records of ERC notices, decisions, and orders for the past five years yields no such approval, and there was certainly no such approval issued in January, which is what Meralco spokesman Joe Zaldarriaga claimed in a report published by GMA News on March 17, with Meralco senior vice-president and head of customer retail services Alfredo Panlilio repeating the same assertion to Business Mirror last week.

The only ERC ruling that could even be vaguely interpreted as authorization for Meralco to proceed with a prepaid electric program was an April, 2013 decision (ERC Case No.
2012-033RC) by the Commission giving final approval of a 2012 plan by Meralco to shift some of its planned capital expenditure to the development of an “Implementation Services of Prepaid Electricity Management System” (IS-PEMS), an information management package that would establish a payment and accounting system capable of handling a prepaid electricity service.

The ERC’s ruling, however, did not authorize Meralco to continue beyond that and actually begin offering the prepaid service. It is easy enough to see that authority to do so was not even implied by the ERC’s 2013 ruling, because there are already a couple examples of prepaid electricity applications (and subsequent ERC approvals) with which it can be compared: Using the software-as-a-service system provided by Makati-based Xen Energy Systems Inc. (XESI), one electric cooperative in Batangas (Batelec I), and two in Bohol (Boheco I and Boheco II) have already implemented and are gradually expanding prepaid electricity in their service areas.

The authorizing orders from the ERC pertaining to those projects are not at all cryptic about their subject; Boheco I’s application says, for example, right at the top of the page in bold, capital letters “application for authority to provide prepaid retail electric metering system.” Is there a similarly tagged document in ERC’s extensive database with Meralco’s name on it? No, there is not.

That suggests only a couple possible explanations, none of which are very complimentary to Meralco or the ERC. Meralco officials may simply be lying; crude presumption though that may be, the company’s credibility has hit such a low ebb in the course of the recent rate hike scandal that one could certainly be excused for forming that impression in the absence of a better explanation. On the other hand, Meralco may genuinely believe they have been granted “authority to provide a prepaid retail electric metering system,” due to inexplicable difficulties in grappling with the regulatory environment in which they operate, or the fact that the English language contains a lot of big words. The third possible explanation is that Meralco actually did receive the provisional authority to proceed with their prepaid electricity scheme through an arrangement with the ERC that has not been publicly disclosed, in much the same way that the ERC approved Meralco’s now-aborted plan for implementing its rate increase on the basis of a memo on company stationery back in December. Regardless of how Meralco determined they could push forward with their prepaid electricity scheme, it appears the move was made with a complete disregard for regulatory procedure.

An even bigger problem is the apparent use by Meralco of prepaid electric meters that were not only disapproved by the ERC once, but were specifically rejected by the Commission when Meralco appealed for a reconsideration of the meter specifications. The difference between the Libra meter used by the XESI system and the meter (produced by Germany’s Orga Systems) preferred by Meralco is that the former is roughly one-third the price and has an LCD display—in accordance with the ERC specifications—that shows the customer the remaining balance in pesos and kilowatt-hours. The Orga meter, on the other hand, has no such display, obliging the customer to register a cell phone number with Meralco and rely entirely on text messages for information about his or her electric usage and prepaid credit balance.

The Meralco plan has come under fire from the Trade Union Congress of the Philippines (TUCP) and the Teddy Casiño-led POWER (People Opposed to Unwarranted Electricity Rates) consumer-action group, and Meralco’s suspect approach to prepaid electricity certainly adds some weight to the groups’ concerns. The two groups are worried that customers could be shortchanged by “disappearing load,” as has been frequently experienced by some prepaid cell phone customers, and that the prepaid electricity scheme in general could very well violate consumers’ rights under the “Magna Carta for Residential Electricity Consumers” which, among other things, restricts the times at which electricity service can be cut off for lack of payment.

And as TUCP Executive Director Louie Corral pointed out, the prepaid electricity offer does not address Meralco’s high rates at all, even if it gives customers an easier way to manage their bills. The distribution charges paid by Bohol customers range from P0.57 to P0.70 per kWh, and Batangas customers pay an even lower P0.46 per kWh; Meralco residential customers, by comparison, pay distribution charges of between P1.02 and P2.31 per kWh.

Prepaid electricity is a good idea, despite the skepticism; in other countries where it has been introduced, electricity usage among prepaid consumers actually declined by 10 percent to 12 percent in addition to the cost savings realized by electricity distributors, leading to lower rates overall.

Where it has been introduced here in the Philippines, the service has been very well-received and has attracted the interest of thousands of potential customers, and could help to manage not only the country’s uncompetitively high rates, but its potential supply shortfalls as well. But letting Meralco potentially drive customers away from the concept by implementing an unapproved and likely faulty system because the monolithic, Indonesian-controlled utility feels it is above following the rules is bad form, bad policy, and potentially very bad for the country.

benkritz@outlook.com

2 Responses to Meralco makes its own rules on prepaid electricity

  1. manuel g galecio says:

    Sa prepaid metering system, wala yong system losses na pinapasa sa customers?

    • Ben Kritz says:

      The system loss charge is bundled with the rest of the bill components. Without making it too complicated, what is basically being done is that prepaid electricity is being billed at a rate equivalent to the previous month as a total per kWh. This was somewhat of a controversy when the rules were being developed, because it means the distribution utility is always behind their current price (whether up or down). Prepaid customers buy load in peso amounts rather than kW amounts mainly for that reason; from month-to-month, the amount of electricity a P100 load buys will fluctuate somewhat.

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