Meralco finance and GDP congruence, energy regulation incongruence
ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star
February 27, 2025 | 12:00am
Last Monday, Feb. 24 , I attended the 2024 Meralco Financials Operating Results: Media Briefing held at Grand Hyatt in BGC, Taguig City. Top officers of the company were there led by chairman and CEO Manuel V. Pangilinan or MVP, EVP and COO Ronnie Aperocho, SVP and chief finance officer Betty Siy-Yap, SVP and chief revenue officer Ferdinand Geluz, SVP and head of Regulatory Management Office Jose Ronald Valles, FVP and head of Networks Froilan Savet, Meralco Power Gen (MGen) president and CEO Emmanuel Rubio, others. Moderator was the always-smiling communications expert Joe Zaldariaga, the company’s VP and head of Corporate Communications.
STAR energy reporter Brix Lelis was also there and his recent stories include “Meralco earnings at all-time high” (Feb. 25), “NGCP wins Singapore arbitration case vs PSALM, TransCo” (Feb. 25), “Meralco: Consumers save P3.88 billion from new power deal” (Feb. 26).
As an economics researcher and writer for decades, I always try to look for the macro perspective of some micro or corporate/industry trends. I saw three correlations and congruences between some national macroeconomic data with Meralco finance.
One, in 2024 our GDP growth was 5.6 percent, Meralco electricity sales (in gigawatt-hours, GWh) growth was 6 percent.
Two, in 2024 the Philippines’ S&P credit ratings was “BBB+ positive,” Meralco ratings was “BBB- positive.”
Three, also in 2024 GDP, household consumption of P16.1 trillion constituted 72.5 percent of GDP. The combined consumption of residential 19,455 GWh plus commercial 20,406 GWh was 73.4 percent of total electricity sales of 54,325 GWh.
I mentioned the first two during the open forum, good numbers. In a closing message, MVP mentioned that the Philippine economy is a private or household consumption-driven economy, hence a high share of household spending on food, restaurants, malls, etc. He is correct. The numbers are in point three above.
The report by MGen president Manny Rubio is cool when he said something like “MThermal and MGas are helping drive the country’s energy security through strategic baseload power expansion.”
Correct. I always believe that hydrocarbons and fossil fuels are useful, not harmful, if we prioritize to save our economy and jobs, save our households and food from the inconvenience of blackout. Save the planet, well planet Earth is 4.6 billion years old and it has seen natural climate change of warming-cooling endless cycle.
Rubio was referring to their existing 1,293 MW coal plants, then an expansion of their coal plant in Toledo, Cebu at additional 78 MW. Then MGas’ LNG plant in Singapore, Pacific Light Plant (PLP) with 1,570 MW by 2030. And LNG plants in Batangas operational 2,475 MW from two huge gas plants in partnership with Aboitiz Power through Chromite Gas, and SMC Global Power. Plus an expansion of Excellent Energy Resources Inc. (EERI) Unit 4 with additional 432 MW by 2029. Coal and gas power, we need more of them, not less.
ERC delayed ruling on ASPA
Last week Feb. 18, the Energy Regulatory Commission (ERC) said it is delaying and postponing until March its decisions on several ancillary service procurement agreements (ASPA) submitted by the National Grid Corp. of the Philippines (NGCP) and its potential suppliers.
These ASPAs went through a competitive selection process (CSP) in 2023, winners announced that year. It is now 2025 or two years since the CSP and the ASPAs – standby power by generation companies (gencos) for NGCP to stabilize the grid when power reserves are low or insufficient -- are still not approved by the ERC.
There is big danger to power investment in this kind of regulation. When gencos bid in the CSP, the parameters and terms set by the ERC itself, they bid at the lowest price possible for them and still make a profit. If the winning price is not quickly honored by the ERC, delays approval of the ASPA because it wants to revise some parameters, have another price control to further bring down the price, winning gencos may be put on the verge of losing money. And potential investors will not come in because rules are changed midway, there is high business uncertainty.
The primary interest of consumers is no blackout. Not cheap at all cost. Power should be available 24/7 to avoid using candles (which can cause fires) or gensets (costly buying the unit and operating on diesel). If the price is high, consumers can adjust their consumption like turning only one aircon instead of two. If the price is forcibly low but there is blackout, the usual “cheap but not available” electricity, consumers cannot adjust but endure the darkness, inconvenience, damaged appliances or food in the refrigerator.
Ronald Valles discussed in his presentation some of Meralco’s PSA that successfully underwent CSP but still awaiting final verification by ERC. Which to me is another delayed approval and implementation and it is not good.
ERC should learn to deregulate. Once they have set the rules and terms at the CSP, there should be quick if not automatic approval of the power supply agreement, ASPA and related schemes for the regulated distribution and transmission sub-sectors.
The transmission sub-sector and NGCP also experience some price control by ERC. Huge and multi-year capital expenditures costing hundreds of billions pesos will require appropriate price adjustments in transmission charge. Adding more ancillary services towards more redundancy in reserves and ensure more stable grid will also require price adjustments in ancillary service charge.
See also this column’s recent papers, “From energy regulation to deregulation, Part 1” (Jan. 30), “Part 2” (Feb. 6).
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