Wake Up, Philippines!

Why should we pay for electricity we did not use?

Posted in Consumer, Electricity, Meralco by Erineus on April 28, 2009

By Neal Cruz Philippine Daily Inquirer First Posted 05:16:00 04/27/2009

On May 4, the Commission on Elections’ Special Bids and Awards Committee will open the proposals of companies bidding to supply and operate the automated election system (AES) for the May 10, 2010 elections. That poll will consist of synchronized national and local elections. (The opening of the bids was previously scheduled for Apr. 27–Ed)

Everybody seems to be pinning their hopes for quick and honest elections on the election machines. With a budget of P11.3 billion (that’s billion!), there are many bidders with many different election machines and systems. The job before the Comelec’s bids and awards committee is to choose the best machines and system at the least possible cost. A failed bidding should have no place in the standards of the Comelec considering that there is very little time left before the elections. There was already a delay in the approval of the P11.3-billion supplemental budget for the poll automation. Another bidding, in case of a failed bid, would delay the setting up of the machines and system even more.

The Comelec cannot allow anything to go wrong in the bidding process and in the final selection of the winning bidder which should provide effective overall nationwide service and total customer support.

Once the envelopes of the bidders are opened, there must be total assurance that the winning bidder shall be able to perform the following tasks on a nationwide scale:

1. Lease more than 80,000 units of “certified” optical scan machines with software, including the supply of printers and ballot paper.

2. Provide electronic transmission of consolidated and canvassed votes.

3. Provide nationwide training, technical support, warehousing, deployment, installation, pullout and system integration.

4. Conduct overall project management.

The poll body has already relaxed a number of rules in the bidding process, particularly in determining the qualifications of the bidders. To encourage participation and to make the bidding process more competitive, the committee has relaxed the experience criteria to qualify more bidders.

Ten technology providers are participating in the bidding, but only two firms based in the United States are highly qualified to supply and manage the poll automation, according to industry sources.

Comelec Chair Jose Melo and his bidding committee are urged to look closely at the track records of the local firms that have partnership agreements with the foreign solutions providers.

The industry is abuzz with the rumor that Indra Sistemas SA of Spain is still undecided whether or not to partner with Stradcom Alliance Holdings Inc. (SAHI) of the Philippines. It is not clear if Stradcom is serious about joining the bid.

Previously, SAHI was able to bag the three biggest government computerization programs, worth billions of pesos, in alliance with three different firms. Stradcom International Holdings got the Land Transportation Office’s computerization project; Land Registration Systems Inc. won the Land Registration Authority contract; and BCA International Corp. won the machine-readable passport project of the Department of Foreign Affairs.

But as we all know already, the LTO project was stopped after the Commission on Audit declared the contract with Stradcom flawed. The COA also ordered that payments to the firm be suspended. The LRA project has remained uncompleted, and Foreign Secretary Alberto Romulo has ordered that the passport contract be rescinded.

After this, the Comelec should look closely into the track records of bidders. Under our free enterprise system, every businessman should have an equal chance to get a project. But the track records of the companies should be analyzed closely. With the stake in the 2010 elections, the Comelec cannot afford to relax. It should be vigilant.

* * *

With the increase in Meralco rates, expect more grumblings from electricity subscribers. A particularly painful and annoying thorn is the so-called “capacity fees” that Meralco has to pay to power generating companies with whom it has supply contracts.

Capacity fees are fixed minimum fees that Meralco has to pay to a generating firm whether or not the energy is taken in full. This fee is then passed on by Meralco to its consumers.

Why should consumers pay for electricity they did not use?

Expecting this question, Meralco has issued a briefer to explain it:

“Capacity Fee represents the capital cost of recovery of the generation plants over a period of time. Since Meralco contracted a guaranteed volume of energy delivery, to be supplied by Independent Power Producers (IPPs), the generating plants have allotted the generation capacity to Meralco based on the minimum contracted energy, whether it was actually drawn or not. If the energy drawn by Meralco is less than the Minimum Energy Quantity (MEQ), then there is opportunity lost by the IPPs. This cost represents the unavailed capacity fee which Meralco is compelled to pay, based on the contract.”

What if the IPP is not able to supply the MEQ due to operational problems?

“Meralco will not be compelled to pay the full amount of guaranteed fixed cost for the period. The fixed cost will be based on actual energy drawn and not on the agreed MEQ level.”

Why the need for MEQ in IPP contracts?

“A certain energy level must be guaranteed in the franchise area to ensure stability of electricity supply. To entice energy investors in setting up generation facilities, they should be guaranteed capital cost recovery to ensure viability of their investment. The MEQ in the contracts addresses the supply and demand concerns of Meralco and IPPs, respectively.”


Energy Regulatory Commission orders Meralco refund

Posted in Consumer, ERC, Meralco by Erineus on February 25, 2009

MANILA, Philippines – Electricity rates will be four centavos lower per kilowatt-hour beginning next month as the Manila Electric Co. (Meralco) implements a P3.9-billion refund on currency exchange rate adjustment or CERA as ordered by the Energy Regulatory Commission (ERC).

CERA is intended to ease the effect of foreign exchange fluctuations on the debt servicing of Meralco and other utilities.

The refund was initially supposed to be reflected in the November billing of Meralco customers. But Meralco filed a motion to defer the CERA refund, saying that it had no capability to fulfill the requirement.

“The commission deems it reasonable to recalculate the amount and the period of CERA refund in order to cushion its impact on Meralco’s financial viability,” ERC said in its order.

In a five-page order, ERC said the four-centavo refund will be implemented until the full amount has been refunded.

Meralco president Jose “Ping” de Jesus said at a press briefing yesterday that the firm is now in a position to make the refund since it would be done on a staggered basis.

Ivanna dela Pena, Meralco utility economics head, said it might take them about three years to complete the refund.

The ERC earlier asked Meralco to set the refund at 14.16 centavos per kwh for a period of 12 months.

De Jesus, who assumed office only last Feb. 1, said bringing down rates is one of his biggest challenges.

“So to put it in very ambitious terms – we will do our best to try to lower power costs to the extent we can. Although we know we have very limited ability to do that,” De Jesus said.

The Meralco chief said the entry of new investors in the power utility firm would help him achieve his objective.

He said Meralco is “in complete synch and perfectly aligned” with its new partner San Miguel Corp.

“I have had a conversation with them. And they have the same objectives to see Meralco improve its image and see power costs go down,” he said.

“In fact, you’ve heard Mr. (Ramon) Ang say that. We have discussed that in the Board and that’s been a constant preoccupation – combine all your sources so that you get the least generation cost for the customer,” he said.

“Although none of that goes to us because if you look at your bill the only constant thing there is your distribution cost, which has not moved since 2003,” he added.

Asked what measures are being eyed to lower power rates, De Jesus said they are looking at various ways.

“The discussion is to get the cheapest source of energy. If we, during peak, get our power from nearby plants (hydro) that’s cheaper than oil-based power peaking plants –and if it is within our franchise area –you don’t have to pay an additional cost for transmission,” he said. “So all of the benefits from that go to the consumer and we don’t benefit from that,” he said.

By Donnabelle Gatdula
Updated February 25, 2009 12:00 AM