POSTSCRIPT / March 16, 2003 / Sunday


Philippine STAR Columnist

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Cost of electricity could be cut, if only…

TRY THESE: With utility rates going up, this harassed consumer has been brainstorming for ways to reduce the retail price of electricity. Join us as we toss around some ideas. Try these:

  1. Let the Manila Electric Co. (Meralco) generate and sell its own electricity as in pre-martial law days. The firm says it is more efficient and its generating costs lower than those of the National Power Corp. So let Meralco and Napocor compete and give us cheaper power.
  2. In the meantime, let Meralco’s affiliated power generators operate at optimum levels and sell at least 80 percent of their output to Meralco. They use cheaper natural gas from Palawan as fuel and claim to be more efficient, and are therefore able to produce cheaper electricity.
  3. The bulk (around 60 percent) of Meralco’s power requirement is sourced from Napocor. Napocor should then give Meralco the same prompt-payment and volume discounts that Napocor gives to other valued customers, provided the discounts are passed on to us consumers.

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LOPEZ TRACK RECORD: Meralco, which incidentally is marking its 100th anniversary this year, already proved itself in pre-martial law days.

That was before Ferdinand Marcos emasculated the power giant then controlled by the Lopez clan whom the dictator feared and envied. (Now, the Lopezes own only 16 percent, government 24 percent, and some 85,000 stockholders the balance.)

Our electricity then was among the lowest in this part of the world and we hardly heard of brownouts. It was not a perfect setup, but it was far more satisfactory than the present system that depends heavily on an undependable Napocor.

Pre-martial law Meralco generated and distributed its own power. It did not have to buy expensive and unpredictable power from an outside generator and then pass on the exorbitant buying price as PPA (purchased power adjustment) to captive consumers.

The nagging question is: Why should consumers pay for the gross inefficiency and corruption in the Napocor that translates to higher electricity costs?

* * *

NOT THAT SIMPLE: These ideas may seem simple and workable from our point of view as consumers, but they could prove complicated when the businessmen, politicians and economists take over.

We are tantalized by the picture of a trim and efficient Meralco cutting costs as before martial law and competing with the lumbering and corrupt Napocor. Competition is usually good for consumers, so let’s have it back!

But it usually takes about five years to put up a major generating plant. Even if Meralco is suddenly told to generate its own power outside Napocor and its present affiliated generators, this is easier said than done.

Foreign financing would have to be brought in. Considering our muddy image as a fickle investment area where rules are changed in the middle of a game, even the Lopezes may not find it easy to get foreign partners.

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BINDING CONTRACTS: Then there are existing contracts binding Napocor, Meralco and a host of other parties — including the IPPs (independent power producers) hooked to the existing patchwork system.

The Meralco, or the Lopezes, cannot just walk away from these binding contracts.

For instance, Meralco is bound by contract to buy a minimum amount (not less than 50 percent) of its requirement from Napocor even if it can avail itself of cheaper power from its First Gas power plants in Batangas. It has a third IPP — Quezon Power (433 megawatts) in Mauban, Quezon.

Also, the electricity generated by First Gas (Sta. Rita, 1,000 mw, and San Lorenzo, 500 mw, in Batangas City) cannot be dispatched directly to Meralco. Under contract, the power has to be coursed through the lines of Napocor’s National Transmission Co. (Transco).

Napocor-Transco claims that its lines are not that extensive and its traffic not flexible, that it has a set load schedule, and therefore is unable to allow more First Gas power to surge through its lines to Meralco.

Somebody really has to do something about Napocor, but that requires political will, a missing ingredient hereabouts.

* * *

NAPOCOR JUMPS IN: To illustrate: For March, Quezon Power has to be shut down for its annual three-week preventive maintenance. In preparation for this, Meralco asked Napocor-Transco to source the supply assigned to Quezon Power to the two First Gas plants since they are not operating at optimum level (83 percent) anyway.

As usual, Napocor replied that it could not fully accommodate the request because of “technical constraints.” The supply from Quezon was then taken over by Napocor, whose sale to Meralco rose to 67.5 percent from only 59.5 percent of Meralco power in the preceding month.

This despite the fact that First Gas could have generated the same electricity much cheaper and Meralco could have lowered its PPA charge corresponding to the First Gas savings.

* * *

SAVINGS DENIED: For March 2003, Meralco’s PPA stood at P2.899 per kwh. This partly reflects the shutdown of Quezon Power for preventive maintenance. Because of fixed costs, the generating cost of First Gas goes up when its output goes much lower than its optimum 83 percent covered by its contract with Meralco.

If First Gas were allowed to generate more supply to cover the suspended Quezon Power share, its cost per kilowatt-hour would have gone down considerably. The savings could have been passed on to consumers by way of a lower PPA for March.

Had Meralco been able to secure from First Gas the reduction in Quezon’s output, the PPA for March would have been lower by four centavos/kwh, at P2.859 per kwh.

The refusal of Napocor to allow Meralco’s own IPPs to operate at optimum level and thereby lower the cost of electricity has dragged on. It is high time consumers themselves intervened, if only because Napocor’s high cost of inefficiency has become a big burden to them.

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A PARTNER, NOT RIVAL: We cannot understand why the government, the Napocor and the Department of Energy in particular, are harassing Meralco when the power firm can be an active partner in improving the power outlook in the country.

When natural gas was discovered in Malampaya off Palawan in commercial quantities, the government cast around for big users of this cheap fuel. The government convinced the Lopezes to put up gas-fired power plants in Batangas to purchase a big part of the gas supply.

As the enterprise required a sizeable amount, the Lopezes looked for foreign partners. Now that the First Gas plants of the Lopez Group are operating as requested by government, the government is making it difficult for them.

* * *

COAL-BUYING RACKET: Actually, among the reasons why Napocor refuses to allow First Gas to send more electricity to the Meralco franchise area is that the Calaca coal-fired plants in Batangas had been given a new leash on life while nobody was looking. The Calaca output is crowding out cheaper First Gas electricity.

We thought all along that Calaca had been or would be permanently shut down because of its heavy pollution. People in the area, and even unborn babies, are being poisoned by mercury and other toxic metals spewed by burning coal.

But no, all operational coal plants must continue to use coal even if this fuel is dirty and deadly. The reason, we were told by Napocor insiders, is that the syndicate that has long controlled the sourcing of coal will not let a peso slip from its sticky fingers.

The IPPs are under contract to source their coal only through the Napocor. The question has been posed again and again: Who corners the fat commissions from the purchase of coal? No answer has been offered.

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(First published in the Philippine STAR of March 16, 2003)

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