28 January 2004
The Freedom from Debt Coalition welcomes the recent ERC decision to rollback Meralco’s generation rate from the present P3.4029/kWh to P3.1886/kWh through the Generation Rate Adjustment Mechanism (GRAM).
It needs to be cleared that the rate reduction is not related to Meralco’s pending rate increase petition. The rate rollback affects the Generation Charge paid to the National Power Corporation and the Independent Power Producers (IPPs). The pending Meralco rate increase application concerns the Distribution, Supply, and Metering Charges.
Thus, Meralco should not make any media mileage out of this rollback.
On the other hand, consumers should be forewarned that this rollback is only temporary. The GRAM – successor of the PPA – works with the cycle of supply and demand: if actual consumption is low, electricity rates become higher as losses are higher, and consequently the amount to be recovered from the consumers also increase.
The rollback could have been higher if onerous IPP contracts or at the very least, onerous provisions of the contracts – fuel and purchased power cost adjustment or “take-or-pay” – were cancelled.
Rates continue to be artificially higher because unused and unproduced electricity is still included in our generation rate. This is because the NPC as well as Meralco agreed to buy the power contracted from the IPPs whether or not this power is generated or actually consumed. The problem with high electricity rates continue to persist because the government and Meralco refuse to cancel onerous provisions in their contracts with the IPPs that allow recovery of unused and unproduced electricity.
Consumers deserve every relief they can get after being charged excessively by Meralco through eight long years. This relief, however, will remain like a hanging sword above our heads if onerous provisions of IPP contracts are still around.
FDC urges the government, specifically the Executive, to cancel the onerous IPP contracts.