THERE have been a number of interesting developments in the energy realm this week, so for today, I thought a summary of some of the more important ones would be in order. First, of course, is the frenzy of favor-currying in the legislature as lawmakers race to answer President Ferdinand Marcos Jr.’s edict to remove the system loss charge from customer bills. Along with that, there have been some significant regulatory actions and an increase in the volume of conversation about nuclear power, as well as some surprising, and not at all encouraging, developments in the nuclear sector in Europe.
The system loss thing
I have already addressed the topic of system loss at length and do not wish to do so again, but in terms of what actual results we may see from the current enthusiasm among lawmakers, I will offer a prediction. We could see a bill removing the value-added tax levy on system loss charges passed in the House of Representatives before the end of this month, with a counterpart measure passed in the Senate perhaps passed by the end of September or October. Things move slow in the Senate even when it isn’t distracted by an impeachment exercise, so even a simple measure will take more time. That potentially puts a bill on the president’s desk by about the first of November, which he would of course sign immediately; thus, we might see this little bit of relief on our December electric bills.
As far as actually removing the system loss burden from consumers, at this point I do not see that happening at all; and if it does, it will not be until sometime well into next year, and will only have the net effect of reducing the charge somewhat instead of removing it entirely. There are various reasons for this, not all of them valid — the political influence exercised by the country’s electric cooperatives is evil and must be destroyed, but that’s another subject entirely — but they all boil down to the impossibility of eliminating the cost entirely.
My instant thought when the president called out the system loss charge in his State of the Nation Address on July 27 was that he had just stepped on his own you-know-what, and that he should have been more noncommittal in addressing the otherwise very real concern of high energy costs. As President Marcos does not strike me as the impulsive sort, I assume that he was simply poorly advised in this matter; unfortunately, the negative consequences of a promise that is likely impossible to fulfill are going to be directed at him, and not whatever idiot told him to say that in his speech.
ERC actions
In the past several days, the Energy Regulatory Commission (ERC) has issued a few significant decisions that will affect consumers’ electricity costs. First, the ERC directed Meralco to proceed with the refund to its customers of some P9.5 billion in over-collections from 2025, and to complete this refund process within six months. Second, the ERC approved a petition from the National Transmission Corp. (Transco) to increase the feed-in tariff allowance (Fit-All) charge to consumers from P0.2011 per kilowatt-hour (kWh) to P0.3359/kWh, beginning with the August billing. Finally, the ERC approved Meralco’s application for the recovery of P8.7 billion in previously uncollected pass-through costs, amounting to about P0.08/kWh added to customer bills over the next three years. At the same time, the ERC also ordered Meralco to refund about P30.13 million in pass-through charges covering the lifeline subsidy, senior citizen discount and local franchise tax over a period from 2011 to 2022.
There will be similar decisions involving other electricity distributors and cooperatives in the coming days and weeks, but since Meralco is the biggest, it gets the most attention. With respect to Meralco, it is important to note that the directives are neither penalties nor favors, but rather accounting corrections that Meralco itself applied for authority to carry out, and none of them have anything to do with the distribution charges from which Meralco actually earns money.
As far as the Fit-All adjustment is concerned, the entire subject of feed-in-tariffs is one that I have a rather savagely unfavorable opinion toward, but according to the law in force at the moment (primarily Republic Act 9513, or the Renewable Energy Act of 2008), what Transco applied for and what the ERC approved are entirely within bounds, and so must be accepted, for now. Given the country’s enthusiastic push for more renewable energy capacity, this is another topic that needs to be critically revisited, and soon.
What the ERC seems to be doing at the moment is addressing as many of the immediate issues that significantly affect customer power rates as it can, in anticipation of possible changes to the system loss charge. It is a sensible approach; cleaning up as much of the pending work as possible ahead of a previously unexpected potential change in the law reduces complications if or when that change is made. As things stand now, all of the ERC’s actions this week will result in a net reduction of about P0.13/kWh for Meralco customers — perhaps more, perhaps less for customers of other distributors — which is certainly not a bad thing.
More power
If there is one good thing to come out of the broad discussion provoked by the president’s State of the Nation Address directive, it is the acceptance of the reality that the permanent solution to high energy costs is to increase the energy supply. President Marcos also highlighted the country’s nuclear aspirations in his speech, touting it as a cleaner and more reliable solution for energy security. While I will be the first to cheerfully admit that my still strongly anti-nuclear stance has become more nuanced as I learn more, the inescapable reality is that nuclear power is the least capable of providing a near-term solution to the country’s need for energy security. Never mind the difficult economics; it is simply a matter of timelines.
In fact, no form of generation provides a rapid boost to the country’s overall capacity, even if issues such as grid connections and regulatory bottlenecks are completely discounted. From initial approval to operational state, the fastest forms of grid-scale generation that can be developed are solar and wind farms, which can take from between 12 and 24 months to complete, provided there are no particular bottlenecks in land preparation and equipment delivery. Simple-cycle gas turbine plants, which really aren’t on the menu here (and they shouldn’t be, for various reasons), take from 12 to 18 months. Larger combined-cycle gas turbines, which are being developed here, take from 24 to 49 months, while modern coal plants take between 36 and 60 months. Nuclear plants, on the other hand, have a median construction time of between six and seven-and-a-half years, with the planning and licensing phases doubling that time. The Rooppur complex in Bangladesh, for example, which is about the smoothest-running nuclear project on the planet at present and is being built by Russia’s Rosatom, has taken about 12 years, and will only partially go online later this year.
Thus, everything that is being done now in addressing extraneous charges on bills, taxes, subsidies and rate adjustments is simply nipping around the edges of a more fundamental problem that cannot be addressed in any sort of substantial way — provided the energy policymakers and industry start this very minute — until sometime in the middle of next decade. That’s not a reason not to get started, but we will all have to manage our expectations for the results.
ben.kritz@manilatimes.net
Bluesky: @benkritz.bsky.social
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