Prepaid electricity: Neoliberal “users pay” at its worst

From Ebizload

The Manila Electric Co. (Meralco) recently said that it aims to expand its prepaid customers by 100,000 from the current 40,000 this year. Kuryente Load (KLoad), the utility giant’s prepaid electricity service, is presently available in Mandaluyong, Manila, Pasig, and parts of Rizal. Meralco now plans to offer KLoad to customers in Caloocan, Makati, Marikina, Pasay, Pateros, San Juan, and Taguig.

Pilot tested in 2013 and commercially rolled out in 2015, KLoad allows customers to save up to 20% in consumption, or so Meralco avers. But looking past this dodgy claim, KLoad is nothing more than the worst form of the neoliberal tenet “users pay”.

The scheme deepens the exclusion of the poor from access to electricity as a basic service and their right to decent living. As the Energy Department once said, prepaid electricity helps “consumers not unnecessarily spend for what they cannot afford”.

How it works

A user 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.

In March this year, for instance, Meralco said that its rates are set to rise by as much as Php1.44 per kWh purportedly 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? ###

 

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