“By exposing hidden costs and advocating for fair assessments of energy sources, we can hold stakeholders accountable and promote a more equitable energy landscape”
GOOD corporate governance requires that records and processes are transparent and available to stakeholders.
Transparency also means stakeholders should be informed of key corporate decisions.
If we demand transparency and accountability as hallmarks of good governance in the public sphere, we should also demand this from the private sector.
We wish to underscore this close on the heels of the blistering heat we had to endure in the last three months that triggered a spike in energy demand and in turn led to the urgent need to boost electricity supply by as much as 3,000MW.
It is in the country’s main economic hub, the National Capital Region, where the energy supply must always be adequate. We rely on the Manila Electric Company or Meralco for our power needs.
The government requires Meralco to procure power supply through a competitive selection process based on the criterion of cost-effectiveness.
Hence, early this year, Meralco opened bids for additional power supply.
What happened was that at least 2,400 MW out of 3,000 MW was snapped up by power plants running on natural gas.
But the bid winners only use imported liquefied natural gas (LNG) instead of indigenous gas from the Malampaya reserve. Is there something amiss here?
Definitely, since imported LNG costs more than indigenous gas.
The preference for imported LNG that costs more will be reflected in higher monthly billings of Meralco customers.
Meralco’s terms of reference for taking part in bidding for power supply agreements defined a qualified plant as one that is less than 10 years old.
This automatically disqualified power plants that are more than 10 years old but still operating efficiently on indigenous gas since the 2000s.
Newer plants fuelled by imported LNG were therefore qualified to bid for PSAs.
The clear preference for imported LNG raises serious concerns, especially since this is likely to lead to higher electricity costs.
The discrepancy between declared and actual costs remains hidden from the public, leading consumers to ultimately bear the burden of added expenses.
The apparent favoritism towards newer power plants fuelled by imported LNG thus disqualified the more established plants running on local gas sources.
LNG imports mean additional expenses, including shipping and conversion costs that inflate the actual cost of producing electricity.
In March 2024, the effective rate of local gas barely reached PhP5 per kWh while the effective rate of imported LNG was more than PhP6 per kWh.
The records indicate in January 2024, the average cost of power generation using local gas was only a little over PhP5 per kWh and imported LNG at more than PhP7 per kWh.
In other words, the real cost of imported LNG is not clearly stipulated.
The cost of imported LNG cited in bids is only cost at port of origin, meaning it is priced as a raw material that it really is.
Undeclared, whether intentional or not, are the actual costs of importing LNG.
By the time it reaches Philippine shores, we’re told, LNG from foreign countries would have accumulated added costs from freight, shipping and the process of converting it from liquid to gas form usable for power generation.
The expense involved in this process is nearly as much or more than the basic cost of the fuel.
By the time imported LNG goes through the operational processes of power plants, its cost has more than doubled or at least tripled.
Who would ultimately bear the burden of added expenses? The power consumers like you and me.
The plain truth is that using local gas for electricity generation is more cost-effective than relying on imported LNG.
The systematic preference for imported fuel not only imposes financial burdens on consumers but also challenges the integrity of the bidding process within the CSP framework.
Transparency is paramount in rectifying these disparities.
By exposing hidden costs and advocating for fair assessments of energy sources, we can hold stakeholders accountable and promote a more equitable energy landscape.
What should be done?
The only rational course of action is to do away with the rules of the so-called competitive election process that features a built-in bias for imported liquefied natural gas.
There should be a mechanism that would ensure public oversight and accountability, uphold transparency in energy supply, and ultimately, protect the interests of ordinary consumers who have to contend with higher prices of goods and services at this point. (Email: [email protected])
