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Power sector resiliency tested by COVID19

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Forcing the issue of expanding electricity bills payment further erodes stability in the power sector that is also reeling from the economic impact of the global COVID-19 pandemic.

The lockdown measures introduced by the national and local governments have significantly reduced demand for electricity in the industrial and commercial sectors. The global COVID-18 pandemic has had a profound impact on the power sector, leading to a sharp reduction in demand, disruptions to the power supply chain, and heavy financial stress.

Estimates made by the International Energy Agency (IEA) put the reduction in global electricity demand at 2.5 percent in the first quarter of this year, to peak at five percent contraction by yearend.

Domestically, dominant power distributor Manila Electric Company (Meralco) reported a 40 percent drop, representing 4,516 megawatts (MW) in March this year and further to 4,289 MW in April in peak power demand.

Despite the income strain caused by the falling demand and inability to collect from customers, Meralco initially offered a 30-day payment reprieve to its customers for bills due from 1 March to 14 April. The Energy Regulatory Commission (ERC) earlier approved that all consumption during the enhanced community quarantine (ECQ) period — or bills covering March, April and May — should be paid not earlier than June 15. The payment reprieve was further extended up to the end of October by Meralco in response to calls from the government and the public sector with the economy still reeling from the impact of the pandemic.

Balancing industry sustainability
However, at the recent Senate finance subcommittee’s hearing, ERC chairperson Agnes Devanadera disclosed that the commission is drafting a new advisory that would further extend the disconnection policies power distribution utilities (DUs) and electric cooperatives up to 31 December this year.

“We are issuing, your honors, the advisory and even before, we have issued advisories… we have always advocated for the relaxation of the disconnection policies of our distribution utilities,” she said when queried by Senator Risa Hontiveros about the 31 October extension set by Meralco.

Devanadera added, “You’re right, Madame Senator, Meralco announced that their deadline is October 31, but how about our Christmas, how about our New Year.”

When further pressed by the senator if the ERC is mulling on lengthening the deadline to 31 December, Devanadera answered in the affirmative. She stated, “That is what is written in our draft now and we are following the spirit, the letter of the laws.”

There are, however, downsides to the regulator’s response that typifies mendicancy.

First, it discourages consumers to be responsible for their consumptions. There were even muted calls during the strict lockdown to waive the March to May power bills as a form of “subsidy from the government” or as a form of “assistance’ (ayuda) from the power distributor.

Secondly, it does not address the liquidity problems faced by Meralco and the other electric cooperatives across the country because of the drop in demand, which will be further aggravated if cash flow is disrupted too. Indeed, Covid-19 has induced a drop in demand like no other since the spot market was launched in 2006.

P2.69B electric bill savings
From 16 March to 31 August this year, when its franchise areas were placed under ECQ, modified enhanced community quarantine (MECQ) and general community quarantine (GCQ), Meralco waived the Guaranteed Minimum Billing Demand (GMBD), which resulted in P2.69 billion savings for its 87,728 business customers, both small and medium enterprises and large corporations from their electricity bills.

At least 57,939 business customers received a total P513 million GMBD relief when its suspension was extended to industries that were allowed by the Inter-Agency Task Force (IATF) only partial operational capacity, or not allowed to operate.

Another 28,463 Meralco business customers received P272 million in GMBD relief after the IATF Guidelines and the Department of Trade and Industry expanded their Memorandum Circular for MECQ that allows industries with skeleton workforce to 50% operational capacity, or not allowed to operate.

Meralco president and CEO Atty. Ray C. Espinosa said the waiving of the GMBD was aimed at assisting local businesses, from small to large, while also contributing to the general efforts to jumpstart the economy.

By waiving the GMBD, Meralco hopes to keep the economy afloat.

P2.4B force majeure savings
In addition to the GMBD waiver, the largest power distributor promptly invoked force majeure provisions in its power supply agreements since March in its contracts with seven power suppliers with conglomerates, which totaled to about P463 million, or 17.10 centavos per kilowatt hour per customer in the generation charge.

Fortunately, Ayala, San Miguel and Aboitiz consented to this. Invoking force majeure resulted in a total savings of P2.4 billion from lower generation charge for the past six months. This savings was passed on by Meralco to its customers through lower power rates.

According to Espinosa, his company also shouldered the convenience fee for online transactions during the GCQ period. Some P30.4 million in convenience fees covering 647,000 transactions were refunded to customers from 16 March to 15 July.

Pay if you are able
In the same Senate hearing, Devanadera appealed to consumers with the capacity to pay to settle their electricity bills the soonest. This appeal will be included in their upcoming advisory.

“We appeal to those who can pay, who already have the money to pay, maybe their children have sent them money to settle their bills,” she said, adding that power distributing companies, including Meralco, need to raise their collection to pay for their suppliers as well. Otherwise, power generation and distribution could stop.

She even appealed to government agencies to lead the sectors that pay their bills because they have a budget allocation for such expenses, “to help out the industry because the effect is down the line.”

“We are also urging government offices —who have the budget allocation — not to overlook paying their dues,” she said.

Moving forward
As the delivery of goods and services largely depends on the power sector, the industry is the undisputed engine of the global economy, supplying electricity to all other sectors. Yet, even in times of crisis, such as the current COVID-19 pandemic we have been experiencing, the power sector has consistently provided a reliable electricity supply that is critical for sustained medical services and working remotely under lockdown conditions.

The pandemic has caused many dislocations to the power sector. They need our support as well and not mendicant policies.

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