PRESS RELEASE

OFFICE OF HON. RAYMOND DEMOCRITO C. MENDOZA Trade Union Congress Party (TUCP Party-List) House of Representatives, South Wing 204, Batasan Complex, Quezon City Contact Person: Lois Oliva Tel/Fax: 951-3011 21 November 2011

TUCP calls for the retention of discounted power rates for ecozones
Warns against open access for ecozones to jack up power rates of captive residential customers of Meralco; Files a resolution to reduce power cost for economic competitiveness Rep. Raymond Democrito C. Mendoza of the party-list TUCP today called on the Department of Energy (DOE) and the Power Sector Assets and Liabilities Management Corp. (PSALM) to extend the lifetime of the Memorandum of Agreement (MOA) between the National Power Corp. (NAPOCOR) and the Manila Electric Co. (Meralco) which provided for the discounted rates of power for around 279 economic zones locators within Meralcos franchise areas. The DOE and PSALM should simply direct the power producers supplying the power to ecozones to continue doing so on those terms as part of their legitimate costs of doing business in the Philippines. Notwithstanding these existing discounts, the power producers are already earning beyond the 12% return-on-rate base set for utilities. The discount should be treated by the DOE and PSALM as part of business costs to be borne by power producers for the privilege of doing business in the country and as part and parcel of the price of participating in a very profitable electricity industry in the Philippines. In the meantime, DOE and PSALM should look at measures to reduce rates including setting aside the performance-based ratemaking, stringently reviewing what can be charged as stranded costs, and placing a cap on IPPs rate of return, said Mendoza. TUCP also rejected the proposal of the DOE and PSALM of accelerating open access whereby the ecozone locators can connect with their IPP of choice. The DOE has indicated that it may be improper for the government to interfere in the pricing of power being done by the fully-privatized Independent Power Producers. Instead, the proposed solution of the DOE is to accelerate open access for the 1 MW load. The DOE solution is no solution at all. Open access is a double-edged sword. Although we may have lower rates for ecozones, the trade-off is that we will get higher rates for captive residential users. We will effectively have the lower/mid-income residential users subsidizing the lower rates for the ecozones, emphasized Mendoza. TUCP points out that whatever the power rates to be negotiated by the ecozones under open access will still be much higher than what they are currently paying Meralco.

Under the open access scheme, the ecozones will be able to negotiate for voluQAme discount in their power rates directly with IPPs, but the Meralco distributor will now seek to recover its cost of investments and its returns over the smaller captive residential market. The consequence is that residential rates will spiral upwards, explained the TUCP solon. Let us remember that under the open access regime, Meralco will try to recover its targeted revenues when it still had the ecozones and the captive residential market, but this time solely from its remaining captive market, which is largely residential. The large industrial users with 1 MW load and above can now buy power directly from the IPP which can give them a rate lower than residential but the residential will end up with higher rates, explained Mendoza. The solon also noted that even the distribution companies are asking for postponement of open access because they are not ready. Further, there is also no consumer impact assessment that has been done on the effects of open access. Let us not rush into open access without study. It will definitely just jack-up rates in the end. Let us get the World Bank or Asian Development Bank to first do a consumer impact assessment and simulation of open access rates, cautioned Mendoza. At a time when international capital is moving to Asia, we may miss out at becoming a foreign direct investment destination. Most recent figures point out that in 2009, the Philippines only attracted $1.9 billion FDI compared to Indonesias $4.8 billion; Thailands $5.9 billion; Vietnams $7.6 billion; and Singapores $16.2 billion. Our power rates which are the fifth highest in the world continue to make us uncompetitive. The data speaks for itself. What is the most patriotic thing for the DOE, PSALM and ERC to do is to reduce the price of power so that we can attract more foreign direct investments that will put up factories and create jobs for the 3 million unemployed workers in our country. Sustainable and gainful employment and livelihood for all Filipinos is the best answer to the problem of persistent poverty in the Philippines, the Chairman of the House Committee on Poverty Alleviation stressed. The TUCP solon filed House Resolution 1897 directing the House Committees on Energy, Labor and Employment, and Trade and Industry to jointly inquire in aid of legislation, regarding the problems and issues pertaining to the impending termination of the NAPOCOR-Meralco MOA that may negatively affect the economy and most especially the jobs and livelihood of 230,000 workers in the ecozones. #