Congress oversight urged on power deals

Congress should use its oversight power and urge the Department of Energy to make changes in the competitive selection process to level the playing field for renewable energy by mandating the straight pricing method.

The power supply agreements that San Miguel Corp. energy arm SMC Global Power wanted to free itself from, the use of the straight pricing method that has stringent requirements on passing on costs to consumers.

“The pass-on provision in the two-step pricing method involves volatile fossil fuel cost which is not a consideration in renewable energy sources that uses the straight pricing method,” Power for People Coalition convenor Gerry Arances said.

The provision allowing higher costs to be passed on to consumers, in essence, already defeats the purpose of the Electricity Power Industry Reform Act to provide the least cost to consumers.

SMC Global Power claimed losses of P15 billion and it wanted a revision of the price it offered to win the PSA with Meralco claiming that fuel prices particularly coal have skyrocketed.

“That’s their risk that they basically decided on in making the low offer but it is up for the government and Congress to rectify the high cost of electricity because of the current situation of high prices,” P4P added.

Arances said that the regime of high inflation should be a wake-up call to stakeholders about the need for sustainable and cheaper sources of electricity.

Sky-high electricity costs

“Sky-high electricity costs hurt Filipino families’ hope of bouncing back. But we are not surprised by the heights power rates are reaching: It is the outcome of a decade of recklessly building dependence on fossil fuels for our power needs,” Arances indicated.

He added that the situation was worsened by the neglect of “actors supposedly protecting consumers’ interests to allow companies to rake in profits,” Arances said.

P4P released data showing electricity prices reached as high as P19 per kilowatt hour in Leyte last July, P16.77/kWh in Ilocos Norte, and P16.12/kWh in Ilocos Sur.

“Despite high power rates in Metro Manila that steadily rose for eight straight months starting from April 2021 to June 2022, these tempered the impact of global prices of fossil fuels on generation rates due to straight energy pricing,” P4P explained.

“Straight energy pricing protects consumers from shouldering pass-on fuel and currency exchange risks which is common among fossil fuels which are extremely volatile,” it added.

The group said the situation calls for mandating a straight energy price in all power supply agreements to relieve consumers of the economic burden brought by fossil fuels.

Currently, Meralco has 1,700 MW with straight energy pricing: A third of its total contracted capacity with power rates from these staying well below ₱5/ kWh, and about 210 MW out of that is from solar and geothermal.

“The nationwide clamor on outrageous energy prices and recurring and persistent outages are consequences of our dependence on fossil fuels. We must pave the path for a swift and just transition to 100 percent renewable energy in response to today’s economic and climate crises,” Arances said.


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