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The Electric Dream: Low Power Rates! May 19, 2004

The Electric Dream: Low Power Rates! May 19, 2004. OUTLINE. Meralco consumers, electric bill, and the charges we pay The Generation charge and its components a. NPC PPA b. Meralco PPA The Transmission Charge System Loss Distribution charge Taxes Lifeline Subsidies.

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The Electric Dream: Low Power Rates! May 19, 2004

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  1. The Electric Dream:Low Power Rates!May 19, 2004

  2. OUTLINE • Meralco consumers, electric bill, and the charges we pay • The Generation charge and its components • a. NPC PPA • b. Meralco PPA • The Transmission Charge • System Loss • Distribution charge • Taxes • Lifeline Subsidies

  3. HOW ELECTRICITY GETS TO CUSTOMERS This slide is from a presentation by Federico Lopez/VSantos 138kV/230kV/500kV Transmission Lines Power Station Step up Transformer Industrial Customers 69kV/115kV Sub-Transmission Lines Distribution Substation Step down voltage to 13.8kV Residential Customers Industrial Customers 220V 3 Commercial Customers

  4. Meralco electric bill for a consumer in the 101-200 kwh category

  5. Meralco electric bill for a consumer in the 101-200 kwh category

  6. Categories of Meralco residential consumers: 1 -100 kwh 2,000,000 (lifeliners) 101 – 200 kwh 1,103,408 201 – 300 kwh 478,884 301 – 400 kwh 199,093 Over 400 kwh 265,138 Total: 4,046,523

  7. The charges that we pay Cost itemCharged by: 1. Generation charge – NPC and IPPs 2. Tax on Generation charge – Govt 3. Transmission charge – TRANSCO 4. Tax on Transmission charge – Govt 5. System loss – Meralco 6. Tax on System Loss – Govt 7. Distribution, Metering and Supply charges – Meralco 8. Lifeline rate subsidies - poorer consumers 9. Tax on distribution, metering and supply charges and lifeline rate subsidies – Govt 10. Local franchise tax – Govt 11. Tax on the local franchise tax – Govt 12. Universal charges – Govt/NPC

  8. Since we want to reduce our electric bill, let us take a look at each Item: 1. Generation charge – 53.1% 2. Distribution, Metering and Supply charges – 15.2% 3. Transmission charge – 10.9% 4. Taxes -10.2% 5. System loss – 8.9% 6. Lifeline rate subsidies -1.3% 7. Universal charges – 0.4%

  9. If we dispense with Items 4-6, 7: 4. Taxes -10.2% 6. Lifeline rate subsidies -1.3% 7. Universal charges (missionary, envi) – 0.4% we immediately reduce our bill by 12%. Thus, in the particular April bill shown earlier, the consumer would pay P979 instead of P1,113

  10. Before and after EPIRA The charges in the pre-EPIRA Meralco bill 1. Basic charge 2. CERA or Currency Adjustment 3. PPA 4. Universal charges: a. Missionary electrification b. Environmental 5. Power Act Reduction

  11. Charges in the bill after unbundling • Generation charge – cost of power generated and sold to Meralco by NPC and IPPs • Generation charge : P4.9073/kwh • Included in the Generation Charge are the ff: • PPA of NPC • PPA of NPC IPPs like Masinloc • PPA of IPPs owned by or affiliated with the Lopezes who are also owners of Meralco Rates are for customers in the 101-200kwh category as of April 2008

  12. 2. Transmission charge – cost of delivering electricity from generators, usually in the provinces, to the distribution system of Meralco. This is paid to TRANSCO. Transmission charge : P0.9922/kwh 3. System loss charge – cost of power lost due to technical and non-technical losses. This is set at a maximum of 14% for coops and 9.5% for Meralco as provided for by RA 7832. System loss charge : P0.8075/kwh

  13. 4. Distribution charge – cost of building, operating and maintaining the distribution system of Meralco, which brings power from high-voltage transmission grids to commercial and industrial establishments and to residential end-users. Distribution charge : P0.5729/kwh 5. Supply charge – cost of rendering service to customers such as billing, collection, customer assistance and associated services. Supply charge : P0.5271/kwh

  14. 6. Metering charge – cost of metering, its reading, operation and maintenance of power metering facilities. • Retail customer charge per month : P5.00 • Metering charge : P0.2435/kwh 7. Lifeline Rate Subsidy Amount collected from residential consumers using more than 100 kwh and also from commercial and industrial consumers to subsidize consumers using less than 100 kwh. Residential 0.1208/kwh

  15. 8. Power Act Reduction Mandated by EPIRA law to obtain immediate reduction in power bills upon its implementation. Power Act Reduction: - P0.0689/kwh 9. Local franchise tax: 0.057%

  16. 12. Universal charges a. Missionary electrification charge: P0.0373/kwh b. Environmental charge: P0.0025/kwh c. NPC stranded debts d. NPC stranded contract costs e. DUs stranded contract costs f. Equalization Taxes and Royalties

  17. I - The Generation Charge In March 2003, we paid P3.2244. Now, we pay P4.9073 per kwh for the electricity generated by the power plants and delivered to our homes, an increase of about 10% annually. This is the biggest cost amounting to 53% of our bill. We must therefore take a hard look at this. The items that are factored into the present Generation Charge have their origins in the PPA and embedded later when rates were unbundled. So we make a brief review of the PPA.

  18. PPA • (Purchased Power Adjustments) • Automatic cost recovery mechanisms approved by the ERB (now ERC) in 1996 • Collected by the Distribution Utilities (DUs) like Meralco, Davao Light, and electric cooperatives to recover costs of power purchased from NPC and IPPs, including systems losses and franchise tax of Meralco and electric cooperatives

  19. Cost items in the PPA of NPC • PPCA (Purchased Power Cost Adjustment) – amount needed to recover the change in operating costs due to the change in power purchased from IPPs FCA (Fuel Cost Adjustment) – amount needed to recover the change in operating costs due to the change in fuel costs. FOREX – Amount needed to recover the change in foreign disbursement due to the change in foreign exchange rates

  20. EFFECTIVE SELLING RATE To recover the change in operating costs due to the change in power purchased from IPPs PPCA COST ADJUSTMENT MECHANISMS To recover the change in operating costs due to change in fuel costs. FCA FOREX To recover the change in foreign disbursement due to the change in foreign exchange rates B A S I C DEMAND - to recover fixed/capacity-related costs ENERGY - to recover variable/energy related costs To cover for the operating expenses and to attain a reasonable return on investment NPC power charges PURPOSE

  21. PPCA (P0.40) Change in operating costs due to the change in power purchased from IPPs FCA (P0.4269) Change in operating costs due to change in fuel cost NPC PPA FOREX (P0.3969) Change in foreign disburse- ment due to change in foreign exchange rates Data as of June 2002 ITEMS THAT GO INTO THE PPA OF NPC

  22. NPC Charges as of June 2002 BASIC P1.8743 FCA 0.4269 PPCA 0.4000 FOREX 0.3969 -------------------- ------------- Effective Rate 3.0981 ITEMS THAT GO INTO THE PPA OF NPC

  23. Many items were responsible for the high PPA of NPC 28 IPP contracts were authorized during the FVR administration and the IAC found provisions in the contracts that were disadvantageous to consumers.

  24. 1. Take-or-Pay Provision in the Contracts An Example • ALSONS-TOMEN Consortium IPP managed the following • generating plants: • 98-MW Iligan I&II in Iligan City - 11% used • 100-MW in Zamboanga City - 30% used • 50-MW in General Santos - 20% used • Average utilization of the 4 plants - 10% • Annual loss that customers paid - P2.6 billion

  25. 2. Undelivered and Billed power Annex B-4 page 1 of NPC petition for P1.87 rates hike

  26. Undelivered and Billed power EXTRAPOLATED Undelivered Power but Paid for Delivered Power Billed Power 30%

  27. Cost of Undelivered Power (Or how much we paid for power not delivered and therefore not used) Undelivered power in 2002 - 8.119 B kwh Effective NPC rate in 2002 - P3.75/kwh Total cost of undelivered power – P30.44 B

  28. Sample report of the Inter Agency Committee that reviewed the IPP Contracts: San Roque Hydro Project 30%

  29. Sample report of the Inter Agency Committee that reviewed the IPP Contracts: Mirant Sual 30%

  30. Sample report of the Inter Agency Committee that reviewed the IPP Contracts: CBK (IMPSA) Project

  31. Sample report of the Inter Agency Committee that reviewed the IPP Contracts: CBK (IMPSA) Project

  32. Sample report of the Inter Agency Committee that reviewed the IPP Contracts: CBK (IMPSA) Project 1997 IMPSA offered to sell to NPC: P1.80/kwh Lopez’ FPPConsortium offer: P0.645/kwh IMPSA matched the offer with: P0.69/kwh FPPC filed a case vs IMPSA/NPC but lost In 1997, NPC average selling rate: P2.1169 Project was undertaken by CBK Power Company: 50% - IMPSA (Argentina) 50% - Edison Mission Energy (US)

  33. Sample report of the Inter Agency Committee that reviewed the IPP Contracts: CBK (IMPSA) Project Computed basic rates (as of 1997): Kalayaan I – P0.7523/Kwh Kalayaan II – P0.7370/Kwh Caliraya - P0.7337/Kwh Botocan - P0.7337/Kwh NPC production cost -- P1.2083/kwh Average basic rates of IPP hydro power plants -- P2.2196/kwh Among the seven IPP hydro plants, the CBK power plants has the lowest levelized IPP adjusted rates. The LCE ranges from P0.65/kWh to P .88/kWh.

  34. The correct thing to do would have been to rescind those contracts (which are the majority) with onerous provisions, or at the very least, renegotiate them. But the businessmen, mostly foreigners, resisted. The government even had to request them to allow amendments to the contracts

  35. 3. Excessive Electricity Rates

  36. First Gas Invoice for Dec 2000

  37. Excessive Electricity Rates

  38. Excessive Electricity Rates

  39. Excessive Electricity Rates

  40. Excessive Electricity Rates

  41. Excessive Electricity Rates

  42. Excessive Electricity Rates

  43. Excessive Electricity Rates

  44. Excessive Electricity Rates

  45. Excessive Electricity Rates

  46. Excessive Electricity Rates

  47. NPC bill for Meralco to pay Power Bill No. 304-02-2004 Dated March 4, 2004

  48. Details of NPC bill For Billing period: Jan. 25 to Feb. 25, 2004 Contract Energy: 1,636,086,109 Kwh Total Energy: 1,084,609,615 Kwh Difference between the Contracted Energy and the Total Energy actually purchased by Meralco: 551,476,494 kWh

  49. Because Meralco did not buy from NPC as per their contract NPC imposed a penalty computed as follows: 551,476,494 kWh @ P2.3887 or a total of P1,317,311,901.22 Meralco should have not purchased from the Lopez IPPs without first fulfilling its contracted energy from NPC to avoid the penalty Since Meralco sells about 2 B kwh per month, that penalty of P1.3B for the month February 2004 was worth about 65 cents/kwh.

  50. Since the Generation Charge is 53% of our electric bill, there would be big savings if this could be reduced. Although the Generation sector is already deregulated by EPIRA the IAC recommendations on the IPP contracts should be looked into again, and checked if they have been implemented.

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