Power Purchases Must Be Clear to Consumers

By Francis Allan L. Angelo

Recent calls for the Energy Regulatory Commission (ERC) to investigate GUIMELCO’s power purchases underscore a growing frustration among consumers grappling with fluctuating and high electricity rates.

This petition is not just about price complaints; it is a reminder of the need for transparency in how electric cooperatives acquire and price power—a process often mired in technical jargon and complex market mechanisms that leave many consumers in the dark.

GUIMELCO’s situation exemplifies a challenge that electric cooperatives across the country face. Many consumers may not fully understand how electricity rates are set or why costs can suddenly spike. However, ignorance is costly, particularly when it comes to electricity—a basic necessity. It is essential that electric cooperatives and distributors break down the details of power procurement for their member-consumer-owners (MCOs), explaining the process in layman’s terms to build understanding and trust. Transparent communication is not merely a best practice; it is a necessary step to prevent consumer backlash and the discontent we now see.

Decoding the Power Market

To the average consumer, electricity pricing may appear straightforward: they consume energy, and they are billed a rate per kilowatt-hour. However, this rate is influenced by a complex supply chain. Electric cooperatives like GUIMELCO acquire power through a combination of long-term contracts with independent power producers and short-term purchases from the Wholesale Electricity Spot Market (WESM).

WESM, where electricity is traded like a commodity, experiences price fluctuations based on supply and demand. When demand surges or supply dwindles, prices can skyrocket. For GUIMELCO, the power purchased from the Independent Electricity Market of the Philippines (IEMOP) reached PHP 36.58 per kWh—well above the market price cap of PHP 32 set by the ERC and other regulatory bodies. This triggered the current controversy, with MCOs demanding to know why they should bear the cost of purchases exceeding a government-imposed price ceiling.

Price Caps and Power Costs: What Consumers Need to Know

Here’s where transparency becomes crucial. The PHP 32 per kWh cap is not a blanket limit on all electricity prices; it applies specifically to trading within the spot market. GUIMELCO, like many other distributors, may have incurred costs higher than the cap due to a staggered payment scheme instituted by the ERC. This scheme, while aimed at stabilizing prices for utilities, has apparently complicated how these costs appear on consumer bills.

For MCOs, these distinctions might seem trivial, but they have real financial implications. GUIMELCO’s residential rates in August hit PHP 17.67 per kWh, the highest in Western Visayas, and the cooperative’s justification—price cap exemptions and staggered payments—may not be sufficient without a clearer, more digestible explanation. In such cases, it falls upon cooperatives to proactively educate their consumers about the distinctions between spot market rates, price caps, and how these translate into monthly bills. Ignorance or misunderstanding only breeds suspicion and erodes trust.

The Cost of Opaque Communication

Lack of transparency on power purchases can lead to suspicion, resentment, and ultimately, a loss of consumer confidence. A well-informed public would understand the reasons behind rate spikes, such as unforeseen spot market purchases or the impact of high-demand months. Conversely, a public left in the dark might wrongly assume that rate hikes stem from mismanagement or exploitation.

By fostering an informed MCO base, electric cooperatives can avoid contentious situations like GUIMELCO’s. Regularly published reports on rate determinants, simplified explanations of technical terms, and an active effort to inform MCOs about market conditions and their impacts would go a long way in quelling discontent.

ERC’s Role in Accountability

The ERC plays a pivotal role in safeguarding consumer welfare by overseeing electric cooperatives and enforcing market regulations. However, ERC’s mandate should also extend to ensuring that distributors communicate clearly with consumers. Guidelines on transparency, requiring cooperatives to explain power purchases, price adjustments, and market mechanisms in accessible language, would equip MCOs to better understand and accept their bills. The ERC should consider mandating such transparency standards, holding cooperatives accountable not just for their prices but for how well they communicate these prices to the public.

 

Towards a Transparent Power Market

The rising cost of electricity, compounded by economic challenges, makes it imperative for electric cooperatives and regulatory bodies to foster transparent power purchasing practices. In GUIMELCO’s case, its contracts with suppliers like Green Core Geothermal Inc., Panay Energy Development Corporation, and GN Power Kauswagan, all set at around PHP 6 per kWh, suggest that steady, affordable power is possible when sourced through bilateral agreements rather than relying heavily on the volatile spot market. Yet, even this advantageous sourcing strategy can only be appreciated if MCOs are given a clear picture of how these sources are blended to calculate their final bill.

For electric cooperatives, clear and proactive communication on electricity purchases isn’t just a courtesy—it’s a duty. The public deserves to understand how their electricity is bought and priced, especially in a market as crucial and sensitive as power. Only with transparency can we move towards a power sector where consumers feel informed, prepared, and empowered to meet the rising costs of their basic needs.