‘TRO on price hike puts Meralco at risk’

Meralco comments before the SC on the price hike case, saying it was just reflecting the generation charges imposed by power suppliers

COMMENT. Meralco filled its comment on the price hike case, saying it was just reflecting the generation charge imposed by the market operator. File photo by AFP

MANILA, Philippines – If the temporary restraining order (TRO) issued by the Supreme Court on Manila Electric Company’s (Meralco) controversial power rate hike continues, the utility firm may face the risk of not being able to purchase the electricity needed to supply Luzon for the succeeding months.

This was the claim of Meralco in its response-comment on a petition filed against its record-high rate adjustment.

“The entire power industry may come to a screeching halt. One can readily imagine the dire consequences to the economy and security of the country should this happen, as there will surely be rotating blackouts throughouts Meralco’s franchise area,” Meralco warned. 

The 139-page document was submitted to the High Court on Wednesday, January 8.

According to Meralco, it has been constrained in paying charges to its power suppliers as it can only collect and temporary bill its consumers given the TRO. 

The 60-day TRO was issued by the SC following two separate petitions against the hike. The petitions were ordered consolidated by the tribunal.

“Due to the TRO, Meralco’s cash flow is at the risk of being severely restricted. Consequently, its ability to deliver efficient and reliable service to its customers and to the public is also impaired,” Meralco explained.

Meralco appealed for the dismissal of the consolidated petition.

Generation vs distribution

Meralco also regarded “unfair” the proposed move to disallow the billing of the increased charges, as “it does not derive a single centavo of profit” from the adjusted rate.

The December adjustment, it maintained, resulted from the generation charge or the cost of producing electricity. It said the generation charge is a pass-through charge, meaning it remits payments for it directly to its power suppliers.

 

“Thus, it is unfair to prevent or disallow Meralco from billing and collecting these increased charges unless the sources of such increased charges are likewise prevented or disallowed from billing and collecting the same from Meralco,” it said.  

Meralco said it had to source power from the Wholesale Electricity Spot Market (WESM) following the shutdown of its major power source, the Malampaya gas field, as well as the simultaneous outages of its other power plant suppliers.

WESM is operated by the Philippine Electricity Market Corporation (PEMC). On Thursday, January 9, the PEMC and 6 other Meralco power suppliers were ordered included by the SC as respondent in the Meralco case.

Not involved in collusion

On the alleged collusion among power suppliers, Meralco said it is not involved in and does not stand to benefit from it, citing again its nature as a distribution utility.

Meralco, it said, should not be “prejudiced, penalized and damaged” on the basis of the alleged market sabotage.

Petitioners argued that a possible collusion occured among power suppliers that had simultaneous outages, which may have led to higher rate adjustments.

The power suppliers with plants that simultaneously shut down were likewise ordered by the SC as named respondents in the petition set for oral arguments on January 21. These include SEM-Calaca Power Corporation, Masinloc Power Partners Corporation, Therma Luzon Inc., San Miguel Energy Corporation, South Premiere Power Corporation, and Therma Mobile Inc.

Efforts to mitigate

Meralco further argued that it “took measures to mitigate the effects of the shutdowns of several power plants and the resulting increase in generation charges,” even when it was not required by law.

The mitigating proposal came in the form of staggered billing of Meralco customers. 

Approved by Energy Regulatory Commission on December 9, Meralco rates were supposed to increase by a total of P4.15 per kilowatt-hour (kWh), divided into 3 tranches: P2.41 kWh in December 2013, P1.21 kWh in February 2014, and P0.53 kWh in March.

“It is unfortunate that Meralco is now being made to bear the burden and incur the ire of the public for the increased generation rates for which it is clearly not responsible for,” it said.

It has already received demand letters from transmission and generation companies.

“This means that the grim scenario described earlier is not at all far-fetched and may well be imminent,” said Meralco.

“Indeed, any prolonged prohibition against the collection of the pass-through charges would have disastrous effects,” it added. – Rappler.com