While Metro Manila Customers Feel the Pinch

Manila Electric Company (Meralco), the Philippines’ power distributor giant, is gearing up for an electrifying August with projections of robust sales growth soaring beyond 6%.

Ferdinand Geluz, the senior vice president of Meralco, has pulled back the curtain on this bullish forecast, citing an upswing in demand that transcends both the commercial and residential sectors.

With the first half of the year already showcasing a promising 3% uptick in consolidated energy sales volumes, Meralco seems poised to capitalize on an energized market. The monthly sales volumes have surged, breaching the 4,000-GWh milestone since April, hitting a peak of 4,643 GWh in June.

In the residential segment, the thermometer’s relentless climb has translated into a spike in electricity demand. As temperatures and humidity soared during the dry season, so did the need for a cooler atmosphere at home. Simultaneously, the commercial segment flourished, basking in the glow of an economic resurgence.

Ronnie L. Aperocho, Meralco’s executive vice president and chief operating officer, jubilantly commented, “Our record-high sales volumes reflect a strong rebound in power demand. With expectations of this growth trajectory continuing, we are committed to making aggressive investments in distribution network upgrades and expansion, along with implementing programs aimed at enhancing the overall customer experience.”

But the backdrop to this electrifying narrative reveals a tale of shifting alliances and market dynamics.

A surge in electricity prices, which has left over seven million Metro Manila customers feeling the pinch in recent months, stems from an intricate deal inked between Meralco and Aboitiz Power back in April.

AboitizPower has cunningly secured a one-year contract to supply power to the bustling metropolis, effectively altering the energy landscape. This seemingly clandestine agreement has inevitably set the stage for impending electricity rate hikes, stirring concern among consumers.

In April, Meralco secured a power supply pact with AboitizPower’s Therma Luzon, Inc., boasting a formidable 370-megawatt (MW) capacity at P8.14 per kilowatt-hour (kWh).

With San Miguel Corp. exiting the scene at the start of the year, Meralco faced a choice: either procure power from the unpredictable spot market at prevailing rates, a decision that would inevitably lead to soaring electricity bills for customers, or enter into an agreement with Aboitiz, the specifics of which remain shrouded in mystery.

So, what went awry in this high-voltage drama?

The previous power provider, San Miguel Corp., and its subsidiary SPPC, found themselves ousted from the limelight after the Energy Regulations Commission (ERC) – a domain seemingly infested and dominated by ex-AboitizPower executives – dashed SMC’s hopes for a price hike.

SMC’s lack of foresight in predicting future market disruptions, including the ongoing turmoil in Eastern Europe and the looming specter of inflation, proved to be their Achilles’ heel.

Their 2019 contract with Meralco, pegged at a meager P4.2455 per kWh, crumbled in the face of financial realities. Following the ERC’s stern denial of their petition for a price hike, SMC was left with no recourse but to cut ties with Meralco, opting to mitigate losses.

Ironically, in the wake of SMC’s abrupt exit, Meralco found itself caught between a rock and a hard place, resorting to the spot market for power procurement. The average price in November of the previous year, as decreed by the ERC, hovered at a daunting P8.47 per kWh.