#TalkThursday: Meralco’s rate hike and rollback

MANILA, Philippines – Rappler talks to Larry Fernandez, the Head of Utility Economics for the Manila Electric Company (Meralco).

In a 35-page decision favoring consumers on March 11, the Energy Regulatory Commission (ERC) orders the Wholesale Electricity Spot Market (WESM) to cut down on the generation charges it imposed on Meralco in December and January. (READ: ERC orders WESM to cut power prices)

Meralco had to source more power from WESM following the shutdown of the Malampaya natural gas facility, which supplies fuel to its major power plant suppliers. Other power plants also went on unscheduled shutdowns. WESM charges pushed up Meralco’s power rate by a record P4.15 per kilowatt-hour in December.

The implementation of the rate hike is now subject of a temporary restraining order (TRO) from the Supreme Court (SC). (READ: SC stops Meralco power rate hike)

Earlier taking a hit for “hastily” approving Meralco’s price increase, ERC blames market failure for the spike in prices. It says WESM prices during the Malampaya shutdown “could not qualify as reasonable, rational” because of “lack of competition” resulting in a “contrived supply shortage.” It adds power generation companies violated WESM’s “must-offer rule,” which requires them to offer all their available capacities in the market.

Meralco was also earlier accused of jacking up WESM prices. Bayan Muna Rep Neri Colmenares, who petitioned the SC to stop Meralco’s power rate hike, said Meralco instructed its supplier Aboitiz-led Therma Mobile Inc. to offer its capacity in WESM for P62/kWh, the maximum price allowed.

In front of the House Committee on energy on January 22, Meralco lawyer Rey Espinosa defended the power distributor, saying the high bid was part of a strategy. He said they didn’t want power from Therma to be dispatched during off-peak hours because they needed the plant to run during peak hours, when demand was the highest. (READ: Meralco: We did not mean to inflate power charges)

ERC orders WESM operator Philippine Electricity Market Corporation to send out revised bills for immediate settlement of distribution utilities in Luzon. Meralco’s will be maintained until the SC’s TRO is lifted.

Watch the interview below.

– Rappler.com