Meralco rate hikes, prepaid electricity and neoliberal “users pay”

2014_02_10_16_21_46
Photo from GMA News Online

First published as IBON Features

The February rate hike of Php0.92 per kilowatt-hour (kWh) that the Manila Electric Co. (Meralco) announced is actually just the initial strike. In March, the unfortunate public should expect an even stronger blow from the utility giant as another rate hike of as much as Php1.44 per kWh looms.

Meralco has a simple solution for consumers who find it hard to cope with their ever-increasing monthly electricity bills. Go prepaid and supposedly save up to 20% in consumption. About 40,000 customers are already using Meralco’s prepaid system called Kuryente Load (KLoad). By yearend, Meralco expects to add 100,000 more.

But the basic question is – how can customers save amid the staggering rate increases? The answer is – they can’t. But with prepaid electricity, as the Energy Department once said, consumers will “not unnecessarily spend for what they cannot afford”. Put another way – If you can’t afford electricity, then don’t use it.

Indeed, looking past Meralco’s dodgy claim, KLoad is nothing more than the worst form of the neoliberal tenet “users pay”. It merely passes on the burden of high power rates further to the consumers. It also deepens the exclusion of the poor from access to electricity as a basic service and their right to decent living.

How it works

KLoad was pilot tested in 2013 and commercially rolled out in 2015. To use it, a customer must have Meralco’s “intelligent” meter installed first and register a mobile number for the account. Through SMS (‘text’) using the registered mobile number, the user can load KLoad cards worth as low as Php100 and as high as Php1,000.

The user will receive a text message confirming that the amount has been loaded successfully to his or her account. KLoad also lets users receive text notifications on the account’s remaining balance, low load reminder, and rate adjustments. Like prepaid cards for mobile, KLoad cards can be bought even at retail stores.

For Filipinos who have long been accustomed to prepaid mobile service, KLoad is pretty easy to grasp. In fact, it is this familiarity with and preference for prepaid mobile that Meralco banks on for its KLoad. Saddled with tight budget, most Filipinos use prepaid mobile to control spending.

Lack of a steady income, in fact, forces many to buy in tingi not just mobile credits but most of their daily needs – from shampoo to 3-in-1 coffee. The same concept supposedly applies to prepaid electricity.

The problem is it’s not quite the case.

Rising power rates

Under the KLoad system, retail rates will be the same as the effective postpaid rate at the particular month the load was consumed. Unconsumed credits in a given month will be charged with prevailing rates in the following month.

Unlike in prepaid mobile and other consumer goods where charges are more or less predictable, electricity rates vary monthly (often upwards). The reason is deregulation under the Electric Power Industry Reform Act of 2001 (Epira), which allows automatic adjustments in the generation charge and other periodic adjustments.

The fluctuating rates make it difficult for a household to effectively monitor and regulate their consumption, and accordingly plan their use of electricity based on prepaid credits.

But far more crucially, the ever-increasing power rates will offset efforts by a household to cut their electricity bill even when they shift to KLoad. No matter how much kilowatt-hour that a household tries to reduce in their consumption, the end result is still an exorbitant electricity bill.

Meralco’s own commissioned survey in 2016 shows that its rates are the third highest in Asia. An average Meralco customer is also paying 4.5% of their disposable income for electricity, higher than the global average of 3.9 percent.

Aside from deregulating rates, Epira also privatized the country’s power plants. In Luzon where Meralco operates, just three groups (i.e., San Miguel, Lopez, and Aboitiz) control 70% of power generation. Such tremendous control makes alleged collusion and price rigging easier like during power plant shutdowns that lead to rate spikes.

The whopping rate hike of up to Php1.44 per kWh that Meralco advised its customers to expect in March, for instance, is due to Malampaya maintenance shutdown from 28 January to 16 February. Other power plants will also be on maintenance shutdown on 13-17 February, placing more pressure on power supply and rates.

Anti-consumer, anti-poor

Instead of addressing these policy issues, the onus of coping with rising electricity costs is further passed on to hapless consumers under the prepaid system. With KLoad, no prepaid credits, no electricity. Disconnection is automatic, done remotely by Meralco. It’s that straightforward and heartless.

Through remote and automatic disconnection when credits run out, KLoad violates the rights of Meralco customers as outlined in the Magna Carta for Residential Electricity Consumers. These rights include the right to due process and notice prior to disconnection and suspension of disconnection.

Prepaid customers are supposed to be notified via text three days before the remaining load is estimated to run out. The warning shall be based on the average consumption of the household. But what if the household used more electricity than their average consumption and depleted the load in two days instead of three?

KLoad primarily targets poor communities where collection of monthly bill is problematic and illegal connection is prevalent. A prepaid system for these households ensures that bills are paid to and collected by Meralco. As explained by the Energy Regulatory Commission (ERC), prepaid electricity reduces pilferage and improves collection efficiency and cash flow for distribution utilities.

Meralco has an existing partnership with the National Housing Authority (NHA) to provide KLoad service to urban poor families resettled from waterways and danger areas in Metro Manila. Recently, in a Tondo slum, Meralco installed KLoad for former Smokey Mountain residents.

Notably, prepaid system is among the supposed best approaches to slum electrification that the US Agency for International Development (USAID) endorsed in its 2004 study that also included Meralco as one of the cases.

Affront to decent living

KLoad is part of the long-term plan of Meralco to install the so-called Advanced Metering Infrastructure (AMI) – an integrated system of intelligent meters – in its franchise area. The AMI will allow Meralco to, among others, remotely switch on and off the supply of electricity not only to prepaid customers but also those with regular connection.

Access to electricity is needed to achieve the minimum standard of decent living. Thus, it should not be contingent upon the ability of people to pay and must be a basic right guaranteed by the state. KLoad and Meralco’s remote and automatic disconnection system is a blatant affront to this right.

KLoad will set a worrisome precedent if not questioned and opposed. It is prepaid electricity today. Prepaid water soon? ###

Also read “Prepaid electricity, anyone?” and other articles on the Philippine power industry

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Prepaid electricity, anyone?

Imagine yourself engrossed in your favorite teleserye one night. As a plot-twisting revelation was about to be told by one of the main characters, power was suddenly shut off. It wasn’t a brownout because all your neighbors still had their lights on and only your unfortunate household was engulfed in darkness. You reached for your cellphone and sent an SMS. Within seconds, you received a text message that read: “Your Meralco prepaid balance as of 1/18/13 20:45 is P0.00. Please reload soon to restore electricity services in your household.”

Using SMS

Welcome to the era of prepaid electricity.

The Manila Electric Co. (Meralco), the country’s largest power distributor, has started the first leg of its pilot tests to determine the viability of the prepaid electricity retail scheme in the residential sector. An initial 100 households in Rizal province are covered by the pilot tests, which will eventually expand to 2,000. If the scheme proved to be feasible, Meralco will put some 40,000 households in its franchise area under the prepaid mode of payment.

Meralco, however, is not the first distribution utility (DU) to implement the prepaid scheme. The Batangas I Electric Cooperative Inc. (Batelec I) already launched its prepaid system last Jan. 16 covering around 295 residents in Barangay Camastilisan, Calaca, Batangas. Batelec would later clarify that it’s not yet a commercial operation but only a pilot test. Another cooperative, the Bohol II Electric Cooperative Inc. (Boheco II), has also sought consent from the Energy Regulatory Commission (ERC) to employ the prepaid scheme.

Under the Batelec I system, which is also the same scheme favored by Meralco and Boheco, consumers will use the SMS network to load prepaid electricity credits and check their remaining balance. Consumers can buy prepaid cards denominated in ₱100, ₱200 and ₱300 and send an SMS to 2861 (for Globe users only) to load their prepaid electricity. If they want to check their remaining balance, they can send “kwbalance” also to 2861.

The SMS system may be used too for registration, threshold warning, advice of disconnection and reconnection, and remote disconnection and reconnection. Meralco said that using the SMS system is more practical and viable than installing an in-home display (IHD), which will entail more costs on the utility firm and its customers. An IHD is a prepaid electric meter that loads the purchased energy, display real time information on load consumption and give a warning signal that the load is nearing zero.

Benefits?

The ERC first released the draft rules of the Prepaid Retail Electricity Services (PRES) in 2008. Initially, the PRES covers only residential customers but the coverage was expanded this year to include industrial and commercial establishments as well. Regulators also allowed the use of all available technologies (e.g., SMS, IHD) in the implementation of the prepaid system. When fully realized, the country will join South Africa, Indonesia, India, Australia and New Zealand which are already using prepaid electricity.

According to the ERC, it introduced the PRES so that consumers supposedly can have more power to control their electricity bills. Meralco, meanwhile, claimed that based on a survey it conducted with global conglomerate General Electric (GE) more consumers prefer the prepaid system. Meralco and GE last year signed an agreement on advanced metering infrastructure integrated solution project where the American giant will serve as system integrator.

A Meralco official explained: “Prepaid and buying tingi or sachet is ingrained in the Filipino lifestyle. Many wage earners receive daily or weekly pay, so they would prefer that their expenses from mobile to Internet and — yes — to electricity be also on a tingi basis. This enables them to bridge the timing of their cash outflows.” The utility giant also maintained that the prepaid system will make electricity more affordable for the poor: “If this (prepaid electricity) can be made possible, (consumers) will avoid the monthly experience of having to pay a one-time big amount. With the prepaid scheme, electricity, thus, becomes more abot kaya for some segments of our customers.”

Anti-consumer

These claims by the ERC and Meralco are hogwash; that consumers can really manage better their electricity bill and that the prepaid system will make electricity services more affordable are outright lies. Worse, the prepaid scheme would merely further expose poor households to marginalization while protecting the profits of DUs like Meralco.

Unlike in prepaid mobile phone credits wherein charges are fixed, electricity rates vary monthly (often upwards) because of deregulation under the Electric Power Industry Reform Act of 2001 (Epira). Under ERC rules, unconsumed credits in a given month will be charged with the prevailing rates in the following month. The fluctuating rates will make it difficult for a household to effectively monitor and regulate their consumption and accordingly plan their use of electricity based on prepaid credits. Furthermore, the increasing monthly power rates will offset efforts by a household to cut their electricity bill even if they shift to the prepaid system. No matter how much kilowatt-hour that a household tries to reduce in their monthly consumption, the end result is still an onerous electricity bill (the highest in Asia!) because of ever increasing rates due to automatic adjustments in the generation charge as well as other periodic adjustments allowed under Epira.

Indeed, the overall impact of a prepaid system is the further marginalization of the poor from accessing electricity as an essential service. When the provision of electricity is made prepaid, the cruel neoliberal principle of those who can’t pay can’t use fully comes into play. This creates a serious problem because while many can tolerate not loading their cellphones for a couple of days, not having electricity for running out of prepaid load affects a household’s quality of living. Poor households which rely on a very tight monthly budget that could hardly afford the basic necessities are especially vulnerable. It must be emphasized that depriving people of access to electricity because they have no money to afford it is inhuman, oppressive and exploitative.

But under the prepaid system, the lack of load means automatic disconnection of a household’s power supply. It violates the people’s basic human right to decent living. It also violates the rights of consumers against unfair disconnection of service such as those outlined in the Magna Carta for Residential Electricity Consumers. In the said Magna Carta, consumers have the right to due process prior to disconnection (Article 18); right to a notice prior to disconnection (Art. 19); right to suspension of disconnection (Art. 20); and right to tender payment at the point of disconnection (Art. 21). Under ERC rules, prepaid customers are supposed to be notified (e.g. through SMS) three days before the remaining load is estimated to run out. The warning shall be based on the average consumption of the household. But what if the household suddenly used more electricity than their average consumption and consumed the load in two days instead of three?

Clearly, the only party that will substantially benefit from the prepaid system is Meralco and the other DUs. Consumers, in particular the poor households which are the main target of the scheme, are obliged to pay in advance the DUs for electricity that they have yet to use. This effectively and easily eliminates “bad accounts” or users that could not pay on time and/or could not pay in full due to a limited household income. Furthermore, the system also allows the DUs to cut costs because they will no longer require additional workforce to read the monthly billing or perform the physical reconnection and disconnection of electricity services. Thus, the profits of Meralco and other DUs are firmly secured and guaranteed but at the great expense of poor consumers.

Political, too

Aside from economic gains, DUs and the government could also benefit politically as the social conflict or tension created by unpaid bills and the resulting disconnections are somehow eased by the prepaid system. This is achieved by eliminating the need for the consumers and the DU to transact physically or directly as payments, disconnections, reconnections, etc. are already done through SMS. In a prepaid system, Meralco no longer has to send its people to implement disconnection orders in a community and thus minimize the public visibility of a greedy and heartless corporation that takes away a household’s access to a vital service for failure to pay.

It will also take away the people’s option to use payment boycott as a form of protest against questionable and unjust electricity bills like what the late labor leader Crispin “Ka Bel” Beltran did against the purchased power adjustment (PPA) in 2002. In the book Electric capitalism: Recolonising Africa on the power grid, one of its writers Peter Van Heusden looked at the development of the prepaid electricity scheme in South Africa, which was the first to implement such system through prepaid meters. He noted that prepaid electricity was developed to counter the payment boycotts in the 1980s which was used in Soweto in Johannesburg, South Africa as a political weapon against local authorities and the apartheid regime.

Prepaid electricity does not answer the problem of onerous power rates. It will simply further shift the burden to hapless consumers while making life much easier and more profitable for Meralco and other DUs and absolving government and its flawed neoliberal policies like Epira of accountability to the people. Without electricity because of inability to pay, it’s not only your favorite teleserye that you will miss but also your right to decent living. ###