Main title

07:03 AM

businessmirror.com.ph/index.p...nion&Itemid=64
Abolish WESM!
Written by Lito U. Gagni / Market Files
Wednesday, 28 April 2010 21:04

Electricity rates have so gone out of whack that the debilitating increase has zapped any remaining competitive edge of the Philippine industries and is threatening to deal a fatal blow to the Philippine economy.

The rates that amount to a minimum of 60 percent can be traced to an unconscionable policy of the Wholesale Electricity Spot Market (WESM) on arriving at its price-setting mechanism for the power that it ultimately charges the distribution utilities.

From the looks of it, what the subprime mess that has obliterated iconic financial institutions in the United States failed to accomplish on the Philippine economy may be delivered by the WESM-induced electricity rates. The short-circuiting of the economy stares us in the face, and unless the wise legislators of the realm come to the rescue, we might have to deal soon with a raging public unable to comprehend the electrical shock from the runaway surge in power rates.

WESM’s fixing of the rates is what has contributed in large measure to the electricity rates that Meralco bills us. It cannot seek refuge from its “uneconomic” way of setting the price for the rate that Meralco eventually passes on to us. The strange way by which WESM dictates the rates that Meralco ultimately charges should be communicated to the public so that the culprit in the economic darkness that is about to engulf the country’s economy is properly identified.

On WESM’s web site, there is a discussion of what it terms as the “effective settlement price” or what it has come up with in terms of pricing its power rates for distribution utilities like Meralco. There, for all to see, is the increase from P1.88 per kilowatt-hour (kWh) in January of 2009 to P4.56 per kWh for the period from December 26, 2009, to January 25, 2010. With this huge increase in electricity rates, how can any industry in the country compete—or survive, for that matter. And with various industries increasingly unable to cope, we will soon see the specter of joblessness rising.

The price-fixing practice of WESM is beyond comprehension; it is patently out of sync with economics. It chooses the highest bid price (instead of the lowest) offered by the plants participating in the bidding process. Let us say that WESM seeks tenders for 6,000 megawatts (MW) of its power requirements. One plant can supply 1,500 MW at P1,000 per MW, the second one submits a bid of P2,000, the third one sets it at P6,000 per MW and the last at P50,000 per MW.

After ranking the bids from the lowest to the highest price, the clearing price approved is P50,000—the price offered by the fourth plant which completes the required P6,000 by WESM. That is what the WESM charges Meralco, which is just a pass-through distribution utility. And yet, since it is Meralco that bills us, the collective angst is directed at the poor distribution utility, not at the real culprit: WESM. It is time our economic misery ends. The government should abolish WESM and allow the Philippine economy to sputter along.

May 3, 2010, 06:24 AM

Brilliant post! Thanks for taking the time to research. If you want to find something worthwhile to march in the streets for this is the issue. Where is People Power?

May 3, 2010, 06:50 AM

Our No Nuke Plants, (even though 2 are in the process of being constructed) No lower octane (87) Unleaded gas outside metro areas, high energy rates, VAT on petroleum products, High electricity rates and our 60% Filipno owned business Constitution, 35% Business Tax, 12% VAT, 25% Income Tax make the Philippines the worst investment and business environment in Asia.

Now that China and Taiwan are about to sign a trade agreement we can watch 130 + business relocate to mainland China and not take but a token few OFW's with them to make the transition before they also are looking for a new line of work.

Somebody better wake up FAST or we are going to see some pretty tough times in the near future....!

May 2, 2010, 10:46 PM	#1
albertus magnus Los Indios Bravos Join Date: Jul 2009 Location: Maharloka, Mu	Philippines - no.1 in electricity rates in Asia surpassing Japan: Abolish WESM! businessmirror.com.ph/index.p...nion&Itemid=64 Abolish WESM! Written by Lito U. Gagni / Market Files Wednesday, 28 April 2010 21:04 Electricity rates have so gone out of whack that the debilitating increase has zapped any remaining competitive edge of the Philippine industries and is threatening to deal a fatal blow to the Philippine economy. The rates that amount to a minimum of 60 percent can be traced to an unconscionable policy of the Wholesale Electricity Spot Market (WESM) on arriving at its price-setting mechanism for the power that it ultimately charges the distribution utilities. From the looks of it, what the subprime mess that has obliterated iconic financial institutions in the United States failed to accomplish on the Philippine economy may be delivered by the WESM-induced electricity rates. The short-circuiting of the economy stares us in the face, and unless the wise legislators of the realm come to the rescue, we might have to deal soon with a raging public unable to comprehend the electrical shock from the runaway surge in power rates. WESM’s fixing of the rates is what has contributed in large measure to the electricity rates that Meralco bills us. It cannot seek refuge from its “uneconomic” way of setting the price for the rate that Meralco eventually passes on to us. The strange way by which WESM dictates the rates that Meralco ultimately charges should be communicated to the public so that the culprit in the economic darkness that is about to engulf the country’s economy is properly identified. On WESM’s web site, there is a discussion of what it terms as the “effective settlement price” or what it has come up with in terms of pricing its power rates for distribution utilities like Meralco. There, for all to see, is the increase from P1.88 per kilowatt-hour (kWh) in January of 2009 to P4.56 per kWh for the period from December 26, 2009, to January 25, 2010. With this huge increase in electricity rates, how can any industry in the country compete—or survive, for that matter. And with various industries increasingly unable to cope, we will soon see the specter of joblessness rising. The price-fixing practice of WESM is beyond comprehension; it is patently out of sync with economics. It chooses the highest bid price (instead of the lowest) offered by the plants participating in the bidding process. Let us say that WESM seeks tenders for 6,000 megawatts (MW) of its power requirements. One plant can supply 1,500 MW at P1,000 per MW, the second one submits a bid of P2,000, the third one sets it at P6,000 per MW and the last at P50,000 per MW. After ranking the bids from the lowest to the highest price, the clearing price approved is P50,000—the price offered by the fourth plant which completes the required P6,000 by WESM. That is what the WESM charges Meralco, which is just a pass-through distribution utility. And yet, since it is Meralco that bills us, the collective angst is directed at the poor distribution utility, not at the real culprit: WESM. It is time our economic misery ends. The government should abolish WESM and allow the Philippine economy to sputter along. Last edited by albertus magnus : May 3, 2010 at 07:03 AM.

May 3, 2010, 06:24 AM	#2
EdithB Member Join Date: May 2009 Location: SoCal/Cebu	Brilliant post! Thanks for taking the time to research. If you want to find something worthwhile to march in the streets for this is the issue. Where is People Power?
EdithB Member Join Date: May 2009 Location: SoCal/Cebu

May 3, 2010, 06:50 AM	#3
kel1guy Member Join Date: Aug 2006	Our No Nuke Plants, (even though 2 are in the process of being constructed) No lower octane (87) Unleaded gas outside metro areas, high energy rates, VAT on petroleum products, High electricity rates and our 60% Filipno owned business Constitution, 35% Business Tax, 12% VAT, 25% Income Tax make the Philippines the worst investment and business environment in Asia. Now that China and Taiwan are about to sign a trade agreement we can watch 130 + business relocate to mainland China and not take but a token few OFW's with them to make the transition before they also are looking for a new line of work. Somebody better wake up FAST or we are going to see some pretty tough times in the near future....!
kel1guy Member Join Date: Aug 2006

Main title

Sub title

Main title

Sub title

Main title

Sub title