ERC must step up

Meralco will have no choice then but to purchase electricity from the spot market, which will mean consumers forking out money for higher monthly bills.

By TEB

September 10, 2022

There are problems in the supply issue, which the Energy Regulatory Commission must carefully address to ensure the reliability of electricity use.

This was among the issues tackled by the House Committee on Energy during a public hearing last Thursday attended by Department of Energy and ERC officials.

Energy panel vice chairperson Rodante Marcoleta said the law provided that the regulator should be independent and strong in protecting the welfare of consumers.

Marcoleta also quoted the Supreme Court as saying, “Rate regulation is an art, which will make utility companies good while making the public feel better.”

Under the Electric Power Industry Reform Act, the DoE sets the policies, while the ERC regulates.

Marcoleta was driving hard to warn the ERC about regulatory capture due to the powerful companies involved in the petitions that will result in higher electricity bills.

One such application is that of SMC Global Power, which is a subsidiary of Asian powerhouse San Miguel Corp.

SMC had diversified into hard industries, including power generation, as it projects the economy to slingshot post-pandemic.

The involvement of big business in the power sector makes it incumbent for ERC to strengthen its regulatory function.

“There are companies already applying for adjustment in their electricity rates, knowing that the contract is fixed,” Marcoleta indicated during the House proceeding.

The veteran legislator was referring to SMC Global Power, which had threatened to pull out of the power supply agreement with distributor Manila Electric Co.

Marcoleta said the ERC’s role in putting order in the electricity sector is indispensable.

“How can you even accept applications for adjustment of electricity rates when you know that the contract is fixed?” he asked.

SMC Global Power cited the rising cost of coal and the “supply restrictions” from the fast depleting Malampaya field as factors for its decision to withdraw from the PSA, which it said will take place on 3 October.

Marcoleta also wanted to point out that responsible business concerns have long-term projections and plans that are considered in entering into contracts.

“If it’s a 10-year contract, for example, for one company, I would imagine if I’m the investor, and I use coal as fuel, wouldn’t I have the good sense of talking to the supplier and hedge on the supply,” according to Marcoleta.

“I would tell my supplier: Whatever happens since I have a contract with a distribution company, we can’t change the price.”

“When I asked ERC about the contract, the reply was that the terms in the contract were fixed ‘based on the obtaining circumstances at the time when the contract was signed.’ ”

“How is that possible?” Marcoleta pounded on ERC.

“Why do you think the Filipino people will be hostaged on the assumptions present at the time that the agreement was signed?” thus Marcoleta insisted.

The hostaging part was made real with SMC Global Power’s threat to stop supplying Meralco with electricity that will deprive the Luzon grid of at least one gigawatt or the capacity of two major power plants.

Meralco will have no choice then but to purchase electricity from the spot market, which will mean consumers forking out money for higher monthly bills.

ERC then is tasked to find a Solomonic solution to the SMC Global Power fix, which was the result of a poor business decision.


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