Super bad timing: Higher power rates would add to layoffs

Published by rudy Date posted on April 28, 2009

The Energy Regulatory Commission (ERC) recently allowed the Manila Electric Co. (Meralco) to raise its electricity rates by 25 centavos a kilowatt-hour (kWh). The increase under the company’s performance based regulation will be reflected in its May billing to its customers.

However, the ERC said Meralco’s consumers would not feel the increase since it also boosted the refund of Meralco’s currency exchange rate adjustment (CERA) by more than 10 centavos a kilowatt-hour, bringing Meralco’s total CERA refund to 14.61 centavos a kilowatt-hour.

The Energy commission ordered Meralco to accelerate payment of the P3.9-billion CERA refund, which began last month, when the power company started reducing rates by 4 centavos a kilowatt-hour. Starting next May there will be an additional 10.61 centavos a kWh reduction, hence the total reduction of 14.61 centavos a kWh.

But for consumers, and especially for businesses, power rates are still too high and they are taking their toll on those companies that are already struggling to operate.

Last month, the National Power Corp. (Napocor) raised its generation charges by 46 centavos per kilowatt-hour in Luzon; by 84 centavos a kWh in the Visayas; and by 71 centavos a kWh in Min-danao. As a result, Napocor unit charges are now P4.3648 for Luzon; P3.7255 for the Visayas; and P2.8177 for Mindanao.

Costlier electricity due to higher generation charges by Napocor further drive firms, including those in export-processing zones, to fire more workers. The upward adjustments in Napocor rates will definitely have the effect of an extra heavy tax on businesses and households.

The rate increases are counterproductive, and have tremendous potential to inflate the prices of consumer goods and services. They could not have come at a worse time.

Higher power rates would make it even more difficult for many firms to cope with the sudden fall in their export sales due to the global economic melt-down, and force them to cut some more on their labor costs.

The higher charges would also weigh down on non-exporting firms already reeling from the decline in domestic consumer spending amid mounting job losses and the unusually harsh economic conditions.

Several power-intensive industries are bound to be hit hard by higher electricity rates like construction, fertilizer, cement, ceramics, steel, petrochemicals, aluminum, pulp and paper, glass, and basic chemicals.

Among export-oriented industries, the power-intensive manufacturing of electronics as well as garments and textiles are extremely vulnerable to higher electricity charges.

Retail trade will likewise suffer, since large shopping malls, supermarkets and restaurants tend to consume a lot of electricity for air-conditioning, lighting and refrigeration.

Actually, even contact centers and other business process outsourcing providers risk being negatively impacted since they operate day and night, seven days a week.

Other industries that consume large amounts of electricity are mining and quarrying; the milling of flour, rice, corn, coconut and sugar; poultry growing; food processing and canning; and even fisheries, which require cold storage.

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