PROMETHEUS BOUND: Ka Bel’s electric dream

By Giovanni Tapang, Ph.D.

Crispin Beltran was laid to rest yesterday. The labor leader and advocate of the poor was 75 when he fell down a ladder while fixing their roof. He has been the consumer’s champion against high electricity rates inside and outside of Congress. He went to the Energy Regulatory Commission (ERC) to petition against unwarranted rate increases and joined pickets and rallies on power related issues. On the day of his death, Congressman Beltran would have had filed a bill to remove the value added tax (VAT) on electric power, which accounts for a little more than 10 percent of our electric bill.

Ka Bel has taken the adage of “practicing what you preach” seriously in his advocacy for lower electricity rates. In 2001, he refused to pay the Power Purchase Adjustment (infamously known as the PPA) which accounted for more than half of his bill. His refusal to pay for undelivered power led to the disconnection of his electricity service.

As electricity rates rise amid the already high cost of food and fuel, the government’s solution is an Arroyo take-over of Meralco and the acceleration of Napocor’s privatization. Will these really stop ever-increasing electricity rates and reduce our electricity bill?

Half of our electric bill is taken up by the generation rate where part of the PPA that Ka Bel refused to pay was hidden. It includes the take-or-pay provisions in the contracts of independent power producers (IPP) with distributors and Napocor. It ensures guaranteed returns for the IPPs even in cases where no power is delivered to our homes. One estimate is that these take-or-pay provisions account for more than 15 percent of our total bill.

Government taxes account for another ten percent of our power bill. There is VAT applied on the generation, transmission and distribution components of our bill. There is even VAT on systems loss and subsidies for the lifeline rates taken from customers using more than 100 kWh per month. Subsidies and franchise taxes add another 1.35 percent to the total.

Systems-loss accounts for another nine percent. It is mainly due to any technical inefficiency on the part of the distributors, their in-house use of electricity and pilferages. Why are we paying for pilferage when a violator is required to pay consequent fees under the Anti-Pilferage Act?

Additional pass-on charges include the metering charge and universal charges. In the future, stranded cost and debt recoveries of Napocor and distribution utilities which amount to around P200 billion will be collected from consumers.

All these charges add up to around 40 percent of our electricity bills. If you include other government royalties, these pass on charges could rise to about half of our power costs. This means that only the remaining half of our electric bill is electric power that you have actually used. The rest are due to pass-on charges, taxes and undelivered power due to inefficiencies and take-or-pay contracts. This is the same problem that Congressman Beltran pointed out in 2001 and only shows that the PPA remains embedded in our electricity rates.

Instead of waging an advertisement war and staging a takeover of Meralco, the government could have immediately reduced our bill to half by removing the VAT and government taxes on power, the systems loss and renegotiating to remove the take-or-pay provisions in IPP contracts.

The government could have moved to repeal the Electric Power Industry Reform Act which allows passing on these charges to consumers. Under the EPIRA, one of the first laws Mrs. Arroyo signed during her presidency, consumers seem to be the perpetual milking cow of the government, distribution utilities, Napocor and independent power producers. Under the government’s plan to accelerate the privatization of Napocor, we can only expect more rate increases as consumers absorb the losses incurred by the power industry players.

In addition, consumers must not be made to shoulder other recoveries such as the P14 billion Napocor-Meralco settlement and the P9 billion in generation charges from Napocor’s “market-power abuse” in the WESM in 2006. Both cases are pending in the ERC.

Ka Bel’s electric dream of reducing power rates can be realized if laws such as the EPIRA that are biased against consumers are scrapped and cheap and accessible utilities like electricity are made available to the public. We cannot have band-aid solutions that only provide brownie points to the government but will burden the people in the long run.

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