* This is my article in BusinessWorld last February 01, 2019. It is a web version only and not published in the print edition due to space constraints that day.
The Philippines’ expensive electricity is largely caused by 9-10 different charges slapped on our monthly electricity bill. As mentioned in an earlier paper in this column, “Walang forever, universal charge in electricity and PSALM” (January 15, 2019), these are: generation charge, transmission charge, distribution charge, supply charge, metering charge, system loss charge, universal charge, feed in tariff allowance (FIT-All), VAT and other taxes.
The universal charge (UC), currently 37.9 centavos per kWh, is composed of four items – Napocor’s Stranded Contract Cost (UC-SCC) and Stranded Debts (UC-SD), Missionary Electrification (UC-ME) and Environmental Charge (UC-EC). The SCC is now the biggest item of these four but SD will shoot up in the coming years because there is still P466.2 billion of Napocor’s remaining debt.
So the bad news is that UC fund administrator, Power Sector Assets and Liabilities Management Corporation (PSALM), projects that it will collect UC 86.0 centavos per kWh from 2020 – 2026.
But there is good news, a pending legislation, SB 1950 or the “Murang Kuryente” bill by Sen. Sherwin Gatchalian, which proposes to use the net government share from Malampaya royalty to pay the UC-SCC and UC-SD. The Committee Report was passed on 2nd reading in the Senate on Wednesday, January 30.
In a presentation during Stratbase-ADRi’s “Energy Outlook” forum on September 28 last year, Senator Gatchalian showed these numbers if Malampaya fund collection of P204 billion is used to pay the UC-SCC and UC-SD.
Consumer savings of using Malampaya fund for UC, in centavos per kWh
That 84.74 savings would spare a household with average monthly consumption 200 kWh of P169/month or P2,034/year in savings, equivalent to one sack of rice.
But consumers still have to pay, in centavos/kWh: (a) 1.26 balance for UC-SCC and SD, (b) 15.61 UC-ME, and (c) 0.25 UC-EC, or total 17.12. Over the long term, these should be abolished too. Modern technology will allow isolated islands to have reliable, 24/7 electricity off-grid by tapping various energy sources, both conventional and renewables.
On January 24, the Senate Committee on Public Services conducted a public hearing on various franchise bills that were passed on 3rd reading in the House of Representatives. Among those bills is HB 8179 or the Solar Para sa Bayan Corp. (SPBC) franchise.
I wrote to Senator Grace Poe, Chairperson of the Committee. I pointed out certain sections of the bill that are cronyism-seeking and anti-consumers. I post portions of my letter below:
Section 1, “… franchise to construct, install, establish, operate, and maintain… distributable power technologies (DPTs) and minigrid systems… in any areas to be determined by the DOE, which shall include unserved areas and underserved areas throughout the Philippines… access to any transmission or distribution system… eligible to become a member of the wholesale electricity spot market…”
Why grant a nationwide, unlimited scope, coverage and execution for this special corporation? It can choose any area in the Philippines like a fast-growing tourism and industrial zone and do business there on the pretext that it is an “underserved” area. It can overlap service provision with existing DUs even though such overlap is not allowed that is why they are given a specific, non-infringing area franchise.
Why automatic membership in WESM? Currently, only ERC-authorized players can become WESM members. The bill allows SPBC to ignore ERC requirements for WESM membership.
Section 5. “… The grantee shall charge reasonable and just power rates for its services to all types of consumers…”
Solar + genset power is not cheap, it will be expensive to the public. Solar + battery is also not cheap. Solar does not generate electricity at night, or hardly generates power at daytime when there are thick clouds and heavy rains. The company will be relying on gensets running on non-greenie diesel power.
Section 15. “The grantee shall submit an annual report to the Congress of the Philippines…”
SPBC really intends to go around ERC regulations and go straight to Congress. ERC monitoring is more technical and focused while Congress monitoring is less technical and scattered with so many political concerns.
Overall, HB 8179 is deceptive. SPBC’s marketing and selling point to the public is that it is a greenie solar power-generation company. But its franchise bill says that it is a nationwide, unlimited generation-distribution company.
A good solution for this kind of bill is to junk and reject it. But it is not practical politically because it was passed quickly at the House of Representatives, which indicates the measure’s wide political connection.
A compromise solution is to limit the unlimited scope, denationalize the nationwide coverage which the bill seeks. Put it under the technical monitoring and permitting of the ERC, not under Congress. No automatic membership in WESM so that it must get ERC authorization first, and when it misbehaves after being admitted it can be kicked out of WESM too.
BWorld 287, Public transport mess and traffic congestion, January 26, 2019
BWorld 288, Economic prospects 2019 and cement tariff, January 28, 2019
BWorld 289, Growth by elections and FDIs by PSA liberalization, January 31, 2019