• Another told-you-so moment

    Ben D. Kritz

    Ben D. Kritz

    THE role of the media in a democracy being what it is, there is not much more the average opinion writer can do with the job than to “call on” the responsible component of the government to do its job and right the wrongs that seem to be obvious to everyone but the regulators.

    Since the nation is not functioning with the calm efficiency of a Swiss watch, the impact of media attention is clearly limited. While we never quite accept it, the low probability of actually helping to make a difference is something to which we’ve grown accustomed, which in turn has the pleasant side effect of making the rare occasion a regulatory body decides to embrace common sense and the concept of public interest a happy surprise.

    This past Tuesday was one of those rare occasions. The Energy Regulatory Commission (ERC) announced that 13 power companies were being charged with violating regulations against anti-competitive behavior for colluding (although the ERC was careful to avoid that term) to drive up the wholesale price of electricity in November and December 2013. The companies, ERC’s investigators determined, had engaged in “physical or economic withholding” of electricity during those months, intentionally aggravating a shortage of supply and causing prices on the Wholesale Electricity Spot Market (WESM) to soar.

    The companies named by the ERC include the state-run Power Sector Assets and Liabilities Management Corp. (PSALM), operator of the Malaya and Casecnan power plants; Pan-Asia, which runs the Limay power plant; Aboitiz Power Renewables, operator of the Makban Geothermal facility; San Roque power plant operator Strategic Power Development Corp.; GNPower, operator of the Mariveles power plant; Udenna, operator of the Subic diesel-fired plant; SEM-Calaca; TransAsia; 1590 Bauang; CIP2; Therma Mobile, which operates the Navotas power barge complex; and everyone’s favorite, the Manila Electric Co. (Meralco).

    Meralco was included because it allegedly influenced Therma Mobile, with whom Meralco had a supply agreement, to withhold some of the Navotas plant’s capacity in November 2013. Therma Mobile (TMO), a unit of Aboitiz Power, was already slapped with a P234.9-million fine for it by the Philippine Electricity Market Corp. (PEMC) at the end of January this year.

    (For more background on the TMO-Meralco story, see my earlier columns, “Meralco: Ang liwanag ng conspiracy,” January 21, 2014, and more recently, “TMO’s faulty memory,” February 28, 2015.)

    Bayan Muna party-list Representative and public utilities crusader Neri Colmenares, however, seemed to have decided to look a gift horse in the mouth after ERC’s announcement this week, complaining that the findings did not specifically charge the power companies with collusion. It cannot possibly be a coincidence, Colmenares said, that 13 power plants had ‘unexpected’ production problems at the same time. He is almost certainly correct; “coincidence” in this case in not the simplest explanation.

    But knowing there was some kind of conspiracy afoot and actually proving there was are too completely different things. In order to prove collusion, one has to prove that the parties involved communicated the goal to manipulate prices to each other, and clearly agreed to a course requiring action on everyone’s part in order to achieve that goal. That is much more difficult than proving anti-competitive behavior on an individual company’s part, because that is simply a matter of correlating actions to outcomes; anti-competitive behavior need not be intentional.

    The possible penalties faced by the offending companies are not particularly impressive, either, fines ranging from P50,000 to P50 million depending on the number and severity of violations; even at the upper end of the scale, most of those named would not be seriously harmed by being fined. The length of time it took the ERC to investigate and draw a conclusion about the price-fixing scandal—nearly 18 months since the first hints of trouble—is also not much of a deterrent.

    The real progress in the ERC’s decision this week, while it may have been disappointing to some and will impose only relatively weak punishments on the offenders, is that it establishes a precedent, at least for the ERC. Any similar circumstances in the future, i.e., simultaneous unexpected plant shutdowns, or unusual wholesale electricity price movements, can no longer be ignored. That’s a step in the right direction in that it loosens, to a small degree, the grip of regulatory capture on the ERC.



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    1. Pssh! ERC was quick to grab onto Bayan Muna’s leftist rantings to salvage its own bruised reputation after they not only failed to prepare for maintenance shutdowns that were announced a year ahead, but they were also asleep at the switch in monitoring WESM. As Mr. Kritz reported, everyone’s favorite whipping boy is Meralco, and though they are just a distributor, ERC decided to include them because of an arrangement with Aboitiz that ERC itself had approved, again, for crowd appeal. (Interestingly, the Philippine Electricity Market Corp. charged everyone included here except Meralco.) Are we to believe allegations from a government agency engaged in doing a CYA?

    2. Big deal indeed! ERC finally determines a seeming collusion to manipulate prices with “sanctions” against the culprits and most riling of all is the dumb bell petilla screaming to high heavens that the threathened penalties are too little. In local parlance this is nothing but a “Moro-Moro” taking us for fools to believe that these bunch of morons are finally doing something for the common good. The hapless consumer is taken for a ride here expecting him to calm down with the illusion that he has upright and alert regulators in this administration ready to protect him against the greed of suppliers. Recall that not too long ago petilla was incessantly crying “wolf” about the sure to happen massive energy shortage with the warning that unless his co moronic boss is given emergency powers to rent power barges the people will suffer and failing in this he tried to salvage the scheme by proposing instead the allocation of 500m to pay the same oligarchs for their use of their generators. When this also did not fly he has offered to resign. Petilla and these suppliers were in cahoots all the while and ERC was in it too but after 18 months of investigating (Kuno) it comes with a finding not of collusion but coincidence resulting in price spike and (hurrah) those involved will get a less than slap on the wrist penalty. As a final slap stick gesture before fading away petilla screams the fines are too small.