Cure for scourge
Now that the crisis is about to be resolved, craving for profit has returned in some members of the private sector.
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Daily TribuneNow that the crisis is about to be resolved, craving for profit has returned in some members of the private sector.
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High electricity prices in the country should not be an irreversible situation if the government takes a proactive role, which civic groups said is what is expected amid the soaring global inflation.
For years, the Philippines had the notorious distinction of having among the world's highest energy prices, which are also the biggest deterrent to investors.
A formula, the so-called straight energy pricing, is in effect in some of the power supply agreements that resulted from the mandated competitive selection process.
Now, some of the contractors, such as SMC Global Power, want to withdraw from the deal, citing the rising cost of fuel as a result of the post-pandemic recovery, worsened by supply bottlenecks from the European conflict and the still lingering pandemic.
Straight pricing limits the recovery that generating plants get from higher fuel prices through a certain percentage in escalation costs.
The competitive selection process needs some tightening, including the mandating of all PSAs to adopt straight energy pricing and prohibit automatic pass-through provisions.
The pass-through component in the PSA is the bane of electricity users, since it allows generating companies to collect an array of additional costs, which in other business fields are assumed by private companies and not the buyers.
Government should also mandate 100 percent guaranteed availability of electricity, as plant outages always cause a spike in electricity bills as augmentation power, mainly from the spot market, is always expensive.
Consumer group Power for People Coalition cited an instance of an unplanned coal-fired power plant outage due to boiler tube leaks that triggered generation charges to increase by P3.44 per kilowatt-hour.
Congress can also step in and use its oversight power and urge the Department of Energy to make changes in the CSP to level the playing field for renewable energy by mandating the straight pricing method.
SMC Global Power wants to free itself from the straight pricing method by abandoning its current contract and participating in a new CSP with improved terms, or a possible two-step contract that has a pass-on provision.
"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 use the straight pricing method," P4P convenor Gerry Arances said.
SMC Global Power claims losses of P15 billion and it wants a revision of the price it offered to win the PSA with Meralco, claiming that fuel prices, particularly coal, have skyrocketed.
That's the risk that they decided on in making the low offer to corner the Meralco deal, according to consumer groups.
Solidarity has been a powerful virtue that allowed the nation to go over the Covid hump. Now that the crisis is about to be resolved, craving for profit has returned in some members of the private sector.
