ILECOs face tough choices as MORE Power expands

By Francis Allan L. Angelo

The entry of MORE Electric and Power Corp. (MORE Power) into the franchise areas of Iloilo Electric Cooperatives (ILECO I, II, and III) has sparked intense discussions on the future of electricity distribution in Iloilo Province, with various options on the table for the cooperatives as they prepare for a competitive landscape.

The ruling directly impacts the ILECOs, which are now faced with the reality of MORE Power entering their previously exclusive franchise areas.

The Senate discussions, as detailed in a recent Supreme Court decision upholding MORE Power’s expansion to Iloilo province, emphasize the non-exclusivity of public utility franchises, a principle enshrined in the 1935, 1973, and 1987 Philippine Constitutions.

Senator Win Gatchalian, in a Senate hearing, emphasized the goal of improving services and reducing electricity costs.

“If we now allow an exclusive grant of a franchise, that might not be conducive to public service.” He underscored that the legislative intent behind Republic Act No. 11918, which expanded MORE Power’s franchise, was to create a competitive environment that could lower energy rates.

“We are actually creating a new utility giant in the Province of Iloilo, which is MORE,” Gatchalian stated, highlighting that the shift in market dynamics could lead to significant changes in customer distribution and service quality.

However, concerns were also raised about the fate of ILECOs’ existing customers who may not transfer to MORE Power.

Then Senator Ralph Recto pointed out that as MORE Power captures a larger market share, the remaining ILECO customers might face higher rates due to the smaller customer base and the burden of absorbing the existing generation and distribution costs.

Recto cited simulations showing potential rate hikes if customers migrate to MORE Power, leaving fewer consumers to shoulder the existing costs.

“Assuming that all of the customers will move to MORE because of their apparent low rates, the rates of ILECO I will increase by P4.4, ILECO II by P5.7, and ILECO III by P0.26,” Senator Recto noted during the discussion.

This potential increase is a significant concern for those left with ILECOs, especially as MORE Power is expected to take a 45% market share, a substantial jump from its current 13%.

But the discussions also revealed that the ILECOs have options to mitigate these impacts. These include entering joint ventures, technical service agreements, or leasing arrangements with MORE Power to reduce operational costs.

Recto suggested that selling or leasing distribution assets to MORE Power could be a viable strategy for the cooperatives to minimize losses and stabilize rates.

However, Gatchalian expressed concerns over the fate of “leftover customers,” who might not have the opportunity to choose between the service providers and would be left absorbing the costs of existing contracts.

Gatchalian urged for clarity and certainty for these customers, warning that the proposals on the table might not necessarily lead to lower electricity costs.

The legislative intent behind Republic Act 11918, which expanded MORE Power’s franchise, is to promote competition in the electricity distribution sector, providing Iloilo consumers with the freedom to choose between different utilities.

With the SC decision, MORE Power can now expand its service areas to the towns of Alimodian, Anilao, Banate, Barotac Nuevo, Dingle, Dueñas, Dumangas, Leganes, Leon, New Lucena, Pavia, San Enrique, San Miguel, Santa Barbara, Zarraga, and the component city of Passi which are within the ILECOs service areas.

According to latest data from Iloilo-based think tank Institute of Contemporary Economics (ICE), residential electricity rates in Iloilo City and province for the period August 2023 to July 2024 show a notable increase across various distribution utilities.

MORE Power has managed to keep its rates lower compared to Iloilo Electric Cooperatives (ILECOs).

In July 2024, MORE Power’s average residential electricity rate was recorded at 12.86 P/kWh, while ILECO 1, ILECO 2, and ILECO 3 reported rates of 14.85 P/kWh, 16.86 P/kWh, and 13.33 P/kWh respectively.

The increase in electricity costs is attributed mainly to the rising costs of power generation. MORE Power’s generation rate stood at 7.56 P/kWh, significantly lower than ILECO 1’s 9.49 P/kWh, ILECO 2’s 10.46 P/kWh, and ILECO 3’s 8.41 P/kWh.

The Energy Regulatory Commission (ERC) has intervened by directing distribution utilities to stagger the impact of high generation costs over a four-month period ending in September.

The measure aims to mitigate the immediate financial burden on consumers.

However, it merely masks the underlying pressures driving up prices.

MORE Power has consistently maintained lower rates than the ILECOs, with a 16.1% average difference over the past year.

The difference is largely due to MORE’s lower acquisition costs for power supply, which are approximately 33.4% below those of the ILECOs.