THE OTHER day at Starbucks while having my usual “caffeine fix”, I bumped into Nong Moroy and we had a lovely conversation over Café Americano and what’s bugging the natives of “I Am Iloilo City” re: the spike in electricity rates.
And here’s the gist of the conversation…
Some years ago at the height of the clamor against the seemingly exorbitant electric rates imposed upon them by the former power distribution utility, one of the bones of contention was the “Distribution Charge”.
Perhaps because during that time this was never explained to the consumers properly, the common perception was that the “Distribution Charge” was just another euphemism added to their monthly bill for profit.
Of course times have changed. MORE Power lowered rates from a high of P12 per kWh to P6.45 per kWh, the lowest in the country, and dropped further to P6.38 per kWh in September, still the lowest in the country.
The euphoria caused by this very significant reduction was so overwhelming that most consumers in Iloilo City didn’t even noticed that the “Distribution Charge” is still there but no longer has the negative connotations.
So why is the “Distribution Charge” still there despite the fact electric rates in Iloilo City are the lowest in the country?
Quite simple really, it is a necessity and never meant to be a euphemism for profit.
According to Nong Moroy, “for us to bring power to the community, we need to build, operate, and maintain a distribution system. This regulated cost from the whole process of establishing the channel is called the distribution system. The system allows end-users such as commercial, industrial establishments and residential end-users to utilize power from high-voltage transmission grids”.
Specifically the Distribution charge is the regulated cost of building, operating and maintaining the distribution system that brings power from high-voltage transmission grids to commercial/industrial establishments and to residential end-users.
This is how it works…
Transmission and distribution system – The electricity transmission and distribution systems that connect power plants with consumers have construction, operation, and maintenance costs, which include repairing damage to the systems from accidents or extreme weather events and improving cybersecurity.
Distribution Energy Charge – the cost of delivering generated power from its source to the place it is consumed. Think of this as the charge for delivering electricity from the utility’s electrical substation, through power lines, to your home.
Electricity is transmitted to your home via a network. Managing and maintaining this network costs money. This is why a distribution cost is charged.
Simply put, it’s the cost of bringing power to the consumer’s homes and not profit.
Meanwhile, Generation Charge refers to the cost of power generated and sold to the distribution utility by the National Power Corporation (NPC) as well as the Independent Power Producers (IPPs).
This brings the conversation as to why electricity rates in Iloilo City gradually spiked from the lowest in the country to the current second lowest in the region at P12.48/kWh as compared to the highest at P18.11/kWh.
Nong Moroy explained that the increase is mainly due to the high coal prices in the global market coupled with the weakening of the peso against the dollar. The triggers are the halt in coal exportation from other countries and Russia’s invasion of Ukraine which is one of the world’s largest suppliers of coal.
And that is why there’s an increase in generation cost following the fuel price hike. The generation cost is a “pass through” charge; it is eventually passed on to the end-users – the consumers.
Take note that MORE Power gets only 15 percent of the billed amount. As much as 60 percent goes to the power suppliers, meaning for every one peso only 15 centavos go to MORE Power.
But not to worry as Nong Moroy assured me that this is only temporary. They will sort this out and hopefully bring down the rates to a comfortable level./PN
