MERALCO TOLD TO EXPLAIN RATE HIKE DUE TO TRAIN

MANILA, Philippines — Energy Secretary Alfonso Cusi has ordered Manila Electric Co. (Meralco) to explain how it came up with the  eight centavos per kilowatt-hour (kwh) increase in electricity bills as a result of the Tax Reform for Acceleration and Inclusion (TRAIN) law.

Cusi said he has written Meralco to explain the projected increase in electricity bills. He has also has directed Energy Undersecretary Jesus Posadas to scrutinize the impact of the TRAIN law as estimated by country’s largest distributor.

“They are saying the increase is eight centavos (for the tax in transmission and coal tax)…we are discussing that now and I told them to scrutinize it because I will not just accept it as a matter of fact,” he said. “It is my responsibility so that I can tell the public.”

Cusi said this is to protect the interests of consumers, particularly Meralco customers.

“That is the role of DOE, we set the policy, we make sure that everybody will follow the policy,” he said.

Earlier this week, Meralco said its customers can expect an increase of at least eight centavos per kwh in their electricity bills, taking into consideration the impact of TRAIN.

Meralco head of utility economics Lawrence Fernandez said electricity rates will be pushed up by implementation of the coal excise tax and the removal of the value added tax (VAT) exemption of the National Grid Corp of the Philippines (NGCP) under TRAIN.

Under Republic Act 9511, NGCP was exempted from paying income tax and VAT. This was repealed in Section 86 of the TRAIN Act, subjecting NGCP to the VAT provision under the National Internal Revenue Code (NIRC).

Based on Meralco’s computation, the VAT on transmission charge will translate to an additional seven-centavo per kwh in its rates which can take effect in February bills, Fernandez said.

For the impact of the coal excise tax, Meralco is awaiting the response of suppliers to compute the increase in electricity rates.

Under the TRAIN law, what was approved was a lower coal excise tax of P50 per metric ton in 2018, P100 in 2019, and P150 in 2020 compared with the original Senate proposal of a “100-200-300” hike scheme.

At P50 per metric ton, Fernandez said the excise tax of coal and oil will translate to an increase of around one centavo per kwh.

However, DOE Undersecretary Felix William Fuentebella said the impact of coal excise tax on electricity rates are expected to reflect on consumers’ electricity bills by March or April because coal plant generators maintain coal reserves good for at least 30 days.

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Reference:

Rivera, D. (January 13, 2018). Meralco told to explain rate hike due to TRAIN. The Philippine Star. 

CUSI ORDERS MERALCO TO EXPLAIN P0.08 PER KWH POWER RATE INCREASE

Energy Secretary Alfonso Cusi has asked Manila Electric Co. to explain its computation of a P0.08 per kilowatt-hour increase in electricity rates following the implementation of the Tax Reform for Acceleration and Inclusion, or TRAIN, tax package.

“… I asked Meralco how did it  arrive at P0.08 per kWh,” Cusi told reporters.

Cusi directed Energy Undersecretary Jesus Posadas to study the impact of the TRAIN on the power sector.

“That is the role of DoE, we set the policy, we make sure that everybody will follow the policy,” the energy chief said.

Meralco head of utility economics Lawrence Fernandez said early this week the company was waiting for the billing of National Grid Corp. of the Philippines to reflect the lifting of the value added tax exemption that would increase rates by P0.07 per kilowatt-hour.

Fernandez said the impact of the higher excise tax on coal was around P0.01 per kWh.

Cusi said the department was also studying the impact of the TRAIN on the Small Power Utilities Group, or the missionary areas of National Power Corp.

“These people are scrutinizing all of those to make sure that the consumers are protected,” he said.

Cusi said he had a responsibility to the public to ensure the rates passed on the utilities were accurate.

Fernandez said NGCP was previously exempted from the VAT on transmission wheeling charges until it was repealed by the TRAIN.

“For NGCP, the TRAIN is in effect January 1. We expect them to apply the VAT on transmission wheeling charges, Fernandez said, adding a 12 percent percent VAT would add P0.07 per kWh to the electric bills of consumers.

He said the earliest Meralco could pass on the TRAIN impact to consumers would be in the February billing.

“If NGCP incorporates it in their January billing, we should expect by February that it will be effective,” Fernandez said.

He said the impact of higher excise tax on coal on Meralco customer was estimated at P0.01 per kWh.

“For generators, it will depend on their stock of coal if they bought it new or in stock. Our expectations is they will stagger the implementation of the coal tax,” he said.

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Reference:

Flores, A. M. S. (January 12, 2018). Cusi orders Meralco to explain P0.08 per kWh power rate increase. Manila Standard. 

‘YELLOW LABEL’ MAY HELP CONSUMERS CUT ENERGY BILLS

It is the color most hated by this administration, but according to Energy Secretary Alfonso Cusi, “the yellow label” will be a major redeeming factor that could help Filipino consumers save on punishing energy bills.

He was referring to the yellow-based “energy efficient labeling” that the Department of Energy (DOE) sets on appliances so it can guide consumers which one would have less energy use when operated. In turn, that will yield cost savings to consumers.

“The yellow energy labels on common household appliances state the energy efficiency ratings of the latter and should be used by consumers as a guide in purchasing said items,” the energy chief said.

With government-induced tough times because of higher excise taxes on products and services, Cusi is ardently appealing to Filipino consumers on self-imposed discipline on energy usage so they would be able to cut their costs.

The energy chief prescribes purchase of “energy smart” appliances; because of their higher efficiency rating. Nevertheless, such may entail higher upfront costs also that penny-pinching Filipino consumers cannot just easily afford.

And with high energy costs literally nailing Filipinos on the cross at the implementation of the Tax Reform Acceleration and Inclusion (TRAIN) Act of the Duterte Administration, Cusi asserted that such must also usher in a phase when efficient use of energy becomes “a way of life” for Filipinos.

Cusi sets emphasis on “the concept of smart energy utilization so consumers can save on energy costs based on strategies already laid down by the government.”

He cited that one strategy could be the “proper use of energy efficient appliances” or those rated on Minimum Energy Performance Standard.

Cusi also apprised consumers “to turn off and unplug unused appliances to avoid electricity wastages,” adding that regular cleaning of light bulbs, refrigerator, television, electric fan and air-conditioners must also be resorted to in saving power usage.

With not just energy prices going up under the TRAIN measure but also that of vehicles, Cusi expounded that consumers must also be “more rational in their choice of vehicles to buy, as well as in their fuel purchases.”

He stressed that “planning trips and properly maintaining vehicles will also save consumers money while prolonging the service life of their rides.”

The department similarly cited data that burning less fuel on travels could spare the earth of carbon dioxide (CO2) emissions, to the tune of 2.7 kilograms of per liter-diesel saved; and 2.3 kilograms on per liter savings of gasoline.

Reference:

Velasco, M. M. (January 6, 2018). ‘Yellow label’ may help consumers cut energy bills. Manila Bulletin.

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Long, uphill climb before PHL could rid of COAL dependence for power generation

The country is still very much dependent on coal as a source of power, amid increasing support and encouragement for the utilization of renewable energy (RE).

“In terms of electricity production, we have noticed a high dependency on coal recorded at 44 percent as of March 2016. Natural gas and renewable energy supplied 22 percent and 25 percent, respectively,” Department of Energy (DOE) Officer in Charge Undersecretary Mylene Capongcol said in her welcome speech during the fourth Annual Philippines Power and Electricity Week.

“While we saw significant growth in the use of variable renewable energy due to the different incentives provided by the Renewable Energy Act, the supply of electricity from hydro had been adversely affected by El Niño, registering a 1-percent decline over the past five years,” she added.

The DOE official said the country managed to achieve a balanced energy-supply mix in 2015, with oil accounting for around 31 percent; followed by coal at 23-percent share; geothermal at 19-percent share; natural gas and hydro accounts for around 10 percent; while other RE sources, such as biomass, solar and wind, comprised the remaining 17 percent.

More than 53 percent of the country’s total energy requirement is largely being supplied by indigenous energy, while 47 percent accounts for imported oil, mainly used for transport and coal, used for generating electricity.

The DOE is collaborating with the Climate Change Commission (CCC), the National Economic and Development Authority (Neda) and  the Department of Environment and Natural Resources (DENR) in crafting a sustainable national energy policy that will decide on the future of coal-power projects in the country. “For now, we encourage power generation using high efficient and innovative technologies to meet the expected demand in electricity,” she said.

The new administration targets a GDP growth of 6 percent to 7 percent in 2016; 6.5 percent to 7.5 percent in 2017; and 7 percent to 8 percent until 2022, with most of the spending expected to support higher infrastructure needed to deliver basic services to the people.  As such, higher growth for energy use, specifically for electricity, is expected, entailing significant amount of investments mainly coming from the private sector, Capongcol said.

“I am taking this opportunity, therefore, to provide a glimpse of what the Philippine energy sector offers,” she added.

For the upstream oil-and-gas development, the DOE will continue the conduct of the Philippine Energy Contracting Round (PECR) with a target of 18 service contracts for award from now to 2030. The service contracts will form part of the petroleum reserves estimated at 94.74 million barrels (MMB) of oil, 3.96 trillion cubic feet (TCF) of gas and 41.34 MMB of condensate.

In terms of indigenous coal, the agency is monitoring 48 exploration service contracts for declaration of additional coal reserves in commercial quantity to enable the conversion of these service contracts to production contracts. “With this, we estimated the in-situ coal reserves to reach 4,297.7 MMT [million metric tons] by 2030,” the DOE official said.

Despite achieving significant growth in the past, the downstream oil industry needs to sustain further investments to improve competition and achieve resiliency in the very volatile nature of oil prices in the international market. “With this, we are inviting foreign investors in oil refinery to provide a more stable and bigger oil-supply base for the country,” Capongcol said.

Moreover, there is an expected higher demand for biofuels with the continuing implementation of biofuels law.  “Biodiesel will increase from the current blend of 2 percent to 5 percent in the shor  term, i.e, by 2019, to reach 20 percent in the long-term period,” she said.

For bioethanol, the increase will start at 10 percent for the short term to reach 20 percent in the medium- to long-term period. Likewise, the DOE will promote a voluntary increase in bioethanol blend by 80 percent in the long term, depending on the availability of feedstock.

In terms of power development, based on the 2015 to 2030 Distribution Development Plans (DDPs) of 140 distribution utilities nationwide, Luzon grid will need additional capacities of about 5,000 megawatts (MW); the Visayas grid will need 1,300 MW; and Mindanao grid will require around 900 MW of new generation capacities.

In Mindanao, specifically, the agency is looking at new developments to make investments more attractive, such as putting in place an electricity market and, ultimately, making the interconnection with Luzon and the Visayas possible.

“We will, likewise, study further if there is a need for another round of installation targets for FiT [feed-in tariff] or can we now make RE market-based without prejudice to the need of the consumers of having affordable power rates,” Capongcol said.

Moreover, investments in natural-gas industry are also needed primarily to support the power industry, and later on, other possible uses. By 2021, the supply of Malampaya gas may no longer suffice for higher requirements of gas, thus, investments in exploring and developing potential areas are necessary.

“As mentioned by DOE Secretary Alfonso G. Cusi, one of the projects that the DOE will be undertaking is putting up an LNG [liquefied natural gas] receiving and distribution center, where initial discussions with World Bank, through the International Finance Corp. were made for the conduct of feasibility studies,” the DOE official said.

Reference:

Lectura, L. (July 21, 2016). ‘Long, uphill climb before PHL could rid of coal dependence for power generation’. Business Mirror. Retrieved from http://www.businessmirror.com.ph/2016/07/20/long-uphill-climb-before-phl-could-rid-of-coal-dependence-for-power-generation/

Hike in Coal Excise Tax to trigger spikes in power rates

The proposed three tiered increment in excise tax for coal as fuel for power generation was objected to because of anticipated spikes that such could trigger on the electric bills of consumers.

This was rationally raised by Senate Committee on Energy Chairman Sherwin T. Gatchalian on his manifestation of opposition to the increases in coal excise tax to be enforced on “staggered basis” of R100, then R200 and later on at R300 per metric ton as propounded under the Tax Reform for Acceleration and Inclusion (TRAIN) Bill. That will be tranches of increases from currently at R10 per metric ton.

Spikes in electricity rates due to the tax imposition, the senator added, would be unavoidable for Filipino consumers because 50 percent of the country’s electricity supply relies on coal-fed power generation.

The lawmaker said “the impact of R100 increase in excise tax on coal will be R4.70 increase in the bill of an average consumer consuming 200 kilowatthours (kWh) every month.”

At R200 excise tax, the cost impact will roughly double to R9.57 for the same consumption bracket of consumers; and at R300 excise tax, it will be a higher cost burden of R14.35.

Gatchalian coherently stated “the proposal on increasing the excise tax on coal seems sound if it will reduce carbon emissions in our country, but since this is a pass-on charge, there is no incentive for the coal companies or the coal power producers to reduce the consumption of coal because this will just be passed on to the consumers.”

It is worth noting that close to 60 percent of the rate component in the electric bill accounts for the generation charge – wherein the fuel for power generation such as coal, gobbles up bulk of the cost.

The lawmaker’s lament is anchored on the fact that “the consumers basically have no choice but to accept what is being billed to them every month.”

Beyond “financial distress” it will have on households, Gatchalian similarly warned on probable “repulsive effect on investments” when industrial users of electricity would be hit.

He stressed that industries may equally suffer as they are “going to be burdened directly by the increase in excise tax on coal.”

Reference:

Velasco, M. M. (November 29, 2017). Hike in coal excise tax to trigger spikes in power rates. Manila Bulletin. Retrieved from https://www.pressreader.com/philippines/manila-bulletin/20171129/281973197970711