The Center for Energy, Ecology, and Development (CEED) called for the suspension and prohibition of pass-through charges that inflate electricity bills. The call was advanced this Thursday as the Senate Committee on Energy revisited the Electric Power Industry Reform Act (EPIRA) amid intensifying public outcry over high electricity rates.

At the Senate hearing, the Energy Regulatory Commission (ERC) admitted their failure to thoroughly check and ensure if generation companies are passing approved pass-through charges to consumers.

“One of the primary drivers for increasing rates of electricity are pass-through provisions within power supply agreements (PSAs). Generation companies are allowed to pass volatile fuel prices and other variables like foreign exchange rates onto consumers. This burdens Filipinos with expensive electricity every single month. In the Meralco franchise area, 83% of electricity comes from coal and gas, whose prices fluctuate wildly,” said Atty. Avril De Torres, Deputy Executive Director of CEED.

“As Senator Gatchalian pointed out, the staggering discrepancy between contract rates and generation rates actually charged by South Premiere Power Corporation–a gas plant also co-owned by Meralco–is a concrete example of just how much consumers are forced to bear high fossil fuel costs: for July, it charged 13.0886 Php/kWh, or nearly double the 7.0718 Php/kWh originally reflected in its contract,” she added.

CEED added that the unreliability of fossil fuel-based power, particularly coal plants, exacerbates high-cost electricity at the expense of consumers.

“Coal-fired power plants have a long history of forced and unplanned outages, leaving entire regions like Visayas under constant red and yellow alerts. The loss of capacity resulting from these forced outages turns distribution utilities to the Wholesale Electricity Spot Market (WESM) for electric supply at much higher rates – which they, again, pass onto consumers. Consumers bear the cost while generation companies are barely held accountable for their inability and underperformance,” said De Torres.

During the hearing, ERC Chair Saturnino Juan revealed that the last audit of pass-through costs was conducted in 2023, in the wake of Russia’s attack on Ukraine. He also expressed that even then, generation companies invoked confidentiality clauses in their contracts to avoid transparency over such costs passed onto consumers, putting into question the commission’s applied ability to regulate the energy industry and highlighting the risk of unchecked power cost abuses faced by consumers.

“CEED echoes the need for an audit into pass-through provisions within power contracts and actual costs passed onto consumers as generation charges in their electricity bills. This is long overdue. In fact, we have long been calling for the prohibition of pass-through fuel costs. These are costs that should really instead be shouldered by companies as part of their business expenses, given their choice of fuels for generating and selling power. The ERC’s admission that they are unable to sufficiently regulate passed-through costs only affirms the need for a prohibition. Amid the current energy crisis, suspending such costs now would also be a means of providing immediate reprieve for consumers,” said Atty. De Torres.

The think-tank stressed that the abuse of pass-through provisions and the lack of government oversight are symptoms of the failures of EPIRA in delivering its promise of least cost electricity, and in creating a just and robust regulatory environment for the energy industry.

“Ultimately, energy policy that is beneficial to the country must translate to reliable and affordable electricity service for consumers, and the development of and transition to sustainable and least-cost energy, particularly from renewables, nationally. EPIRA has clearly not delivered this in the last 25 years,” she said.