Sunday, September 06, 2020

BWorld 451, Electricity subsidies, Meralco, and the wind-solar lobby

 * My article in BusinessWorld, September 2, 2020.

I have been writing in this column about power and energy issues for about five years now and still the sector continues to amaze me with so many twists and surprises, good and bad for consumers. For instance, see these recent reports in BusinessWorld:

• “Meralco offers P101-M aid to power users” (Aug. 25).

• “Energy experts urge expedited transition to renewable power” (Aug. 26).

• “Five rural utilities charged more on system loss in 2019” (Aug. 26).

• “Government urged to release Murang Kuryente subsidies” (Aug. 27).

• “Meralco fined for lockdown billing woes” (Aug. 28).

• “Consumer group calls for abolition of electricity cross-subsidy for poor” (Aug. 31).

• “Electric utilities risk franchise cancellation — senator” (Aug. 31).

• “Advocacy group tells Meralco to ‘go green’” (Sept. 1).

• “Power sector wants subsidies cut off for non-poor electricity consumers” (Sept. 2).

For this piece, I want to briefly focus on three issues: subsidies to “lifeline” customers, Meralco gives aid yet is fined with threats of franchise cancellation, and the never-ending lobby to kill coal and favor wind-solar.

One, “lifeline” customers or those with monthly consumption of 100 kwh or less are subsidized by the non-lifeline users by six centavos/kwh. Many of these low-usage households are not really poor, like those living in one-bedroom condo units, they do not need subsidy. Besides, households consumed less electricity before the strict and indefinite lockdown because the members often would go out to work, school, meetings, recreation, etc. After the lockdown and endless quarantine starting March 16, many of the lifeline customers would move to non-lifeline users as they stayed home and hence, electricity consumption greatly increased. Plus there were the hot months of March to June. Those who consumed 100 kwh or less in February would be consuming 150 kwh or more during the lockdown, so why subsidize them and continue to penalize the non-lifeline users and private distribution utilities (DUs) and electric cooperatives?

Two, Meralco was pressured in a Congress hearing to sustain the subsidies to its 2.77 million lifeline customers, forking out P101 million. Then it was penalized by the Energy Regulatory Commission (ERC) with a P19-million fine because it failed “to provide accurate and timely information especially during this time of pandemic has created chaos and confusion,” and failure to allow consumers to pay in instalments. Some legislators and populist NGOs even said that Meralco continues to have “exorbitant” prices.

I think all these allegations including ERC assessments are wrong. Accurate information on unbundled electricity rates are freely available online, actual electricity consumption for three months March-May based on actual meter reading in June is higher than estimated consumption, and electricity prices are actually declining, not increasing and exorbitant.

Compared to August 2014 and 2015 total rates, August 2020 are lower and cheaper (see the table).

Three, the wind-solar lobby of certain NGOs keep spreading fake news that coal power is expensive and dirty. See the generation charge in the table which declined to P4.12/kwh in August 2020. A big portion of Meralco power comes from coal plants like Therma Luzon, San Buenaventura, and Sual Power of SMC — their prices are below the average for IPPs and PSA prices. This despite the higher coal excise tax under the TRAIN law, from only P10/ton in 2017 to P150/ton in 2020.

The real dirty energy are gensets and candles, what people use when there are frequent blackouts and power goes on and off. The rich buy gensets running on diesel that is more expensive and more polluting; the poor buy candles which are among the causes of fires. Solar panels produce zero energy at night, little when cloudy and raining. Wind turbines produce zero energy when the wind does not blow. Adding big batteries to address their intermittency also add costs to their electricity prices because those big batteries are not cheap.

See the table again — the transmission charge is starting to rise as the National Grid Corporation of the Philippines (NGCP) is forced to get more ancillary services, back up fossil fuel power plants and big batteries, as more intermittent wind-solar are added to the grid.

There should be more market-pricing, market competition in power generation and distribution. Subsidies (lifeline customers, universal charge for missionary electrification, feed in tariff/FIT for renewables, etc.) should be zero, or kept to the minimum.

See also:
BWorld 448, Growth, mobility and vaccines, August 15, 2020 
BWorld 449, Energy reserves and security, August 25, 2020 
BWorld 450, Tax competition, not exemption, August 30, 2020.

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