BWorld 593, Low power supply and Meralco distribution cost

* BusinessWorld April 3, 2023.
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The big power blackouts in the Philippines started in 1990, when total power generation was 26.3 terawatt-hours (TWH; 1 TWH is equal to 1 million megawatts per hour or MWH). It was severe in 1991, with generation down to 25.6 TWH, and in 1992 with 25.9 TWH, resulting in blackouts lasting many hours every day for two years. Things flat lined in 1993 with 26.6 TWH.

Fast forward to 2023 or 33 years later, when the threat of blackouts continues. Last week, on March 28, the National Grid Corp. of the Philippines (NGCP) warned of power interruptions these hot months.

Here are more troubling numbers about power generation in our country. In 1990, while the Philippines was generating 26.3 TWH of power, Vietnam had only 8.7, Malaysia had 23, and Indonesia had 33 TWH. By 2021, or after three decades, the Philippines is generating 108 TWH of power while Malaysia creates 177 TWH, Vietnam 245 TWH (or 2.3 times that of the Philippines), and Indonesia 309 TWH.

Expressed in average kWh/person of electricity consumption, in 2021 the Philippines generates only 982 kWh/person while Indonesia generates 1,136 kWh/person, Vietnam 2,485 kWh/person, Thailand 2,521 kWh/person, Malaysia 5,420 kWh/person, and Singapore generates a whopping 10,229 kWh/person.

From 2014 to 2021, the increase in power generation in the Philippines was only 4.4 TWH/year while Indonesia increased its power generation by 11.5 TWH/year and Vietnam by 14.8 TWH/year. Since the Philippines targets a GDP growth rate of 6-8% a year until 2028, our power generation should increase by an average of 10 TWH/year or double the current annual increase. See this column’s March 20 piece, “Sustained growth via stable and ample electricity.”

The bulk of our neighbors’ power generation comes from fossil fuels, not from intermittent renewables. From 2012-2021, the Philippines’ average coal consumption in petajoules (1 PJ = 277.78 gigawatts/hour = 0.278 TWH) was only 224 PJ/year while it was 371 PJ/year in Malaysia, 410 in Vietnam, 539 in Thailand, and 1,265 PJ/year in Indonesia. See this column’s March 22 piece, “No energy transition happening, only RE addition to fossil fuels.”

So, the Philippines should focus more on a bigger power supply, focus on electricity security and grid stability, on having no blackouts — even for a minute. Our high electricity prices relative to our neighbors in the ASEAN (except Singapore) is mainly due to our low power supply and grid instability, with frequent thin reserves that drive up prices. If we expand supply and reserves faster than the demand, prices will stabilize automatically. The most expensive electricity is no electricity — blackouts. And the dirtiest energy is not coal but candles, biowaste, and small gensets running on diesel.

Despite the Philippines’ low power generation per capita as discussed above, one consolation is that in Metro Manila and neighboring provinces, there is electricity security. Meralco is doing its job of securing sufficient power for its huge customer base.

Two weeks ago, around March 20, I saw a report from ABS-CBN with former Energy Regulatory Commission (ERC) Commissioner Alfredo Non saying that Meralco has been overcharging for the distribution charge from 2012 to the present, for a total of P110-120 billion. Mr. Non was ERC Commissioner from July 2011 to July 2018. In his seven years as Commissioner, he could have completed his investigation but he did not and now in 2023, or nearly five years after his term ended, he makes noise?

I think Mr. Non is wrong on four counts.

One, even assuming that he is correct in his accusation of “overcharging of distribution cost” by Meralco, he should have finished tackling this issue during his seven years term at ERC but he did not. That is his fault, not Meralco’s.

Two, even under the new ERC leadership, the distribution charge has been upheld and not contested or reversed.

Three, I checked and compared the cost component in monthly electricity bills on the Meralco website. I averaged them for the annual rates, focused on residential consumers that use 200-299 kWh/month, and the rates are not that high compared to the generation charge and transmission charge (see Table 1).

Consider also other costs in the monthly electricity bill — taxes, system loss charge (pro-rate remitted to NGCP and gencos), the universal charge for missionary electrification (UC-ME, a subsidy to off-grid islands and provinces), feed-in tariff allowance (FIT-All, a subsidy to intermittent renewables), a lifeline rate subsidy for customers who use less than 100 kWh/month and pay no distribution charge as this subsidy is passed on to distribution charge of customers who use more than 100 kWh/month.

Four, I checked the BusinessWorld Top 1000 Corporations report, which uses financial statements submitted to the Securities and Exchange Commission (SEC) yearly. I computed the net income/gross revenue ratio, and saw that Meralco has the lowest ratio among the companies in Table 1. It is not a hugely profitable company. The ones who really make a big profit are NGCP and Energy Development Corp., followed by South Premier Power Corp. (SPPC) and First Gas Power Corp. Not in the annual report on Top 1,000 corporations are Quezon Power Phils. Ltd. Co. and San Buenaventura Power Ltd. so they are not included in Table 2.

Perhaps Mr. Non and other detractors should shut up and just wait for any new ERC ruling on distribution charge rates for all distribution utilities and electric cooperatives.

Back to power supply problem and the withholding of power, see these recent reports in BusinessWorld: “ERC to review SMC termination of power supply deals” (March 20), “Meralco moves to partly replace lost 670 MW” (March 21), “NGCP warns of power interruptions” (March 28), “DoE won’t intervene pending NGCP ancillary services appeal” (March 28), “Meralco secures 1-year urgent power supply deal with SPPC” (March 30), “ERC orders distributors to file emergency power supply agreements” (April 2).

San Miguel Corp.’s two power companies are unusual. SMC said they lost money in 2021 for both SPPC and San Miguel Energy Corp. due to higher fuel costs, but SEC data showed they had net incomes, not losses, of P4.5 billion and P5.3 billion respectively that year. Then SPPC terminated its supply contract with Meralco when its rate hike petition at ERC was denied, then it applied for another supply contract. Oh well.
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See also:
BWorld 590, No energy transition happening, only RE addition to fossil fuels, April 03, 2023
BWorld 591, Devolution and rightsizing the bureaucracy, April 04, 2023 
BWorld 592, On LBP-DBP merger and MUP pension reforms, April 08, 2023.