• Aquino can stop the P8-B electricity rip-off

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    That is, if President Aquino is willing to do so, and willing to risk the ire of his corporate backers in the industry. That is, if he has the competence to do so.

    The P8-billion rip-off? The super-profits a group of power generators will get as a result of Meralco’s irresponsible purchase from them in November of grossly overpriced electricity, the cost of which is passed on to five million Metro Manila consumers in their December bills.

    Based on Meralco’s data, it bought in November from these firms — through the Wholesale Electricity Spot Market (WESM), 9.5 percent of the electricity it distributed, or 286 gigawatts, at an astonishing cost of P9.5 billion, or P33.2 per kilowatt-hour (kwh).

    That’s 184 percent the average monthly price electricity sold at the WESM of P11.7/kwh from January to September this year, or 326 percent the average P7.8/kwh price since that market started in 2007.

    These firms though spent only P1.5 billion (P5.3/kwh) to P1.9 billion (at P6.4/kwH) at most to produce that power, which means super-profits for them of P7.7 billion to P8 billion.

    But Meralco won’t be spending a centavo for that overprice. We will, as it is passed on to our electricity bill this month and the next, with the price shooting up by 30 percent.

    Aquino with Ambassador to Japan Manuel Lopez, a director of Meralco. Inset: Meralco chairman Manuel V. Pangilinan, whose Metro Pacific Investments is the firm’s biggest, controlling stockholder

    Aquino with Ambassador to Japan Manuel Lopez, a director of Meralco. Inset: Meralco chairman Manuel V. Pangilinan, whose Metro Pacific Investments is the firm’s biggest, controlling stockholder

    There are allegations that the power firms which sold through the WESM at P33 are also owned by the majority owners of Meralco, which would make it not a case of the distributor’s dopiness, but rather of predatory collusion — if they can get away with it, that is.

    Meralco and the Energy Regulatory Commission so far have not disclosed what generators sold their power to Meralco at P33/kwh.

    If Aquino now realizes he can’t get good advise from his Energy Secretary Carlos Petilla, whose main professional record after all is as Leyte governor for nine years, he could call on one of his top ambassadors to help out to find ways to mitigate Filipinos’ suffering, his envoy to Japan Manuel Lopez, a director of Meralco. (I wonder if Lopez briefed Aquino that his company would be spoiling Filipinos’ Christmas during their dinner in Tokyo last week.)

    A big part of the blame validly falls on Meralco. It claimed that the power deficiency that required it to buy from the WESM was due to the shutdowns of several suppliers as well as of the Malampaya gas facility which provides the cheap fuel for many power generators.

    But most of these shutdowns, including that of Malampaya, had been planned and scheduled when the year started, and Meralco had been duly informed.

    The big question: Why didn’t Meralco prepare for this?

    Meralco could have anticipated the power deficiency by buying from the WESM months ago, for delivery in November, so it would enough power instead of buying at P33/kWh from WESM. Stupid of Meralco. And we’re supposed to pay for its stupidity?

    In fact, the WESM was so much in the doldrums from January to August, because the biggest buyer, Meralco, had so much power that it purchased less than two percent of its requirements from the market in these months, depressing its prices.

    Obviously, the WESM companies thought that they could recover their losses for most of the year because of the bearish market by charging an atrocious P33/kWh in November. And Meralco cooperated.

    Since the outrageous increase in electricity prices this month is not because of controllable factors such as a spike in oil and coal prices—the fuel for the generators—but to market failure or most probably, to the players’ collusion, Aquino can and must stop this atrocious burden on consumers and industry.

    What can Aquino do?
    First, it could be that all he has to do is to have dinner with Meralco’s board of directors, and especially its new chairman Manuel V. Pangilinan, who also controls the mammoth PLDT-Smart conglomerate. Pangilinan’s Metro Pacific Investments Corp. since 2012 has become Meralco’s biggest controlling stockholder.

    He could tell them over after-dinner cognac: “By the way guys, you goofed big-time. Fix it fast, as your stupid price increase would be the last straw on my falling trust ratings.”

    Maybe Ambassador Lopez could give Aquino tips on how to conduct the meeting, based on his experience during President Gloria Macapagal-Arroyo’s dinners with Meralco’s Lopez owners under her term, which for some reason mitigated its rate hikes at that period. (But which, I suspect, cost her starting 2005 in some kind of Empire Strikes Back plot.)

    Why would Meralco care? Because electricity distribution (and of course communication) is one of the most heavily regulated industries, and here as anywhere in the world, government in so many ways can make life difficult for firms in a regulated industry.

    And Aquino certainly would be justified to make Meralco’s life difficult: Why did they buy electricity from WESM at a stupid P33/kWh price? Why didn’t they prepare for the electricity shortfalls that purportedly made them go to the market?

    Second, Aquino should meet with the three or four power firms which sold the electricity to Meralco at the outrageous P33/kwh price, and tell them, “please mitigate your greed, or else . . .”

    To have some bargaining chips in his meeting, Aquino could bring with him a report from WESM how much each of these companies sold at the outrageous prices, and hint that reporters have been asking copies of the report. Maybe Aquino can bring with him in his meeting BIR Commissioner Kim Henares, in the way Mafia godfathers bring their top killers to important meetings.

    I don’t think these firms would finance a coup d’etat if Aquino demands a win-win solution: That Meralco instead pays them the average cost of power it bought from WESM from January to October this year, plus a “bonus” for them of 10 percent.

    That comes to just P12.5/kWh.

    The firms make money since it cost them just P5/kWh to generate the P12.5/kWh they’d be selling Meralco. Everybody happy, except probably one or two shareholders of these firms who planned to buy Ferraris from the killing they would have done with a P33/kWh price.

    Third, Aquino should ask Meralco to fire its President Oscar Reyes as well other officials involved in the purchase of power at P33 from WESM. Do we have to explain that a company president who buys something from the market at six times its average price is incompetent? And Reyes isn’t even full time as Meralco president. He is chairman of such companies as Meralco Energy, MIESCOR, MRL Gold Philippines, and even CIS Bayad Center.

    Moreover, Meralco is not just any company selling widgets or doughnuts: It is a monopoly in Metro Manila, it is imbued with public interest, its decisions affect the lives of five million Filipinos. You can’t just have it run by somebody just looking at the firm’s profits.

    Fourth, Aquino must demand that the Energy Regulatory Commission institute measures to prevent such colossal failure of WESM’s mechanisms.

    Isn’t it obvious to explain that a rise in power prices at the WESM from P5.6/kWh in September to P13.7/kWh in October and then P33.2’kwh in November—in a period when there’s no war that erupted, no global financial crisis, no oil price spike—means a market failure, that it’s been manipulated?

    There are easy, but unfair proposals made by our stupid politicians: that moneys such as the Malampaya account or the P5-billion refund Meralco still has to distribute to consumers be used to mitigate the rate increase.

    But why would we use these funds to fill up the purses of these greedy power firms that sold Meralco such outrageously overpriced electricity?

    But given the track record of this government, my bet is that Aquino would do absolutely nothing. Ironically, those who are most vociferous in opposing the Meralco rate hike that they asked the Supreme Court to stop it have given him a convenient excuse for his “noynoying” on this issue that affects millions of Filipinos: “Bahala na ang Korte Suprema.”

    tiglao.manilatimes@gmail.com
    www.rigobertotiglao.com and www.trigger.ph

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    22 Comments

    1. victor hernandez on

      Follow the logic of Mr. Tiglao, (if he gets the facts right), we have a case of economic sabotage, at least in the Meralco fanchise area. This is also a case where the government failed to police or referreed the working of market mechanism ( it allowed a market manipulation). For those of us who lived under the much pilloried Marcos regime, nothing like this happened. Don’t we pine for the return of Marcos-style of electricity management? I certainly do. These red-bloodied capitalist cannot mitigate their greed because it is in their nature to be so. And our government failed us agaiand again. Maybe President Murillo should give us a lecture on the benefits of nationalizing utilities and power and energy generating companies. I doubt that the Philippine goverrnment officials and business elite will even think about it.

      • victor hernandez on

        Correction, sorry guys: It’s not President Murillo; It’s President Mujica (Jose Mujica) of Uruguay, considered the poorest president in the world. He nationalized utilities and energy in his country.

    2. Why our power bill is the highest in Asia ? of course there were corruptions inside the National Power Corp. long time ago and paying the creditors for building the power plant is passed on the consumers.Self generated income is enough to pay the creditors but these officials are greedy.

    3. It has been ages since I last heard a senator or congressman speak for the people..since Pnoy came to power, what happened….?

      He should go, sooner than later!

      Nakakasawa na ang mga Aquino Cojuangco, at sinumang Yellow or LP!

      Mga Bwiseeeeet….!

    4. florentino maddara on

      I think the root of all this electricity high cost, started during the adm of FVR. It was well planned by those greedy capitalists, Napocor (Well its debts was minimal during Marcos and Cory time but ballooned to billions during Ramos time), Congress and with the help of gov energy officials. First, there were artificial brownouts, then the entrance of IPP’s with guarranteed payments as approved by FVR, continued during the adm of Arroyo (I think Erap did not approved some of the IPP’S but Gloria was following the system of FVR) and the PPA’s in our bills and so forth until EPIRA was concocted by Congress spearheaded by Mikee Arroyo all the more the power investors becoming more greedier than ever. Those God fearing solons who opposed this EPIRA were outnumbered by these bwaya congressman.

    5. bakit inischedule ang preventive maintenance ng mga suppliers sa panahon na alam nila the demand for electricity would be high? meralco cannot wash its hands by saying that it is a mere ‘distributor’ because it had the choice of when to buy the electricity it is going to distribute. by choosing to purchase the electricity at a time when it could make runaway profits without considering its being a company (public unitility?) impressed with public interest is downright criminal.

    6. I commend the courageous journalists like Mr. Rigoberto Tiglao for the relentless effort on exposing this electric ills besetting our countrymen. Had it not for this, the power mafia could still continue their corporate greed undetected thus resulting in sufferings to the Filipino people. They never care when would their axe of greediness will fall to our scorned necks. Their best timing is when we should be happiest in the time of the year…the birth of our Jesus Christ…savior of our souls. I pray that their souls will go direct to their master satan and suffer the fires of hell. If they think that they can bribe satan with their billions…it will even make their sufferings much greater!!!

    7. Those commenters who have eviscerated Katrina Stuart Santiago for her column in the Binay brouhaha should also put some of their vitriol in this space against this issue. But is a gargantuan electricity rate increase not a sexy enough issue for you holier than thous ?

    8. If Marcos were still President he would have threatened to sequester these monopolies unless they tow the line. Meralco was bought by the Marcos regime who knew that it and the Lopezes owed the government banks millions. But the housewife president gave it back to the Lopeze’s for nothing… Now the son is propping it up. Poor Filipino people, like Rizal said, the indolence of the Filipinos is now prevailing. Basket case Philippines: Notice how the rich are getting richer, and all are your Presidents cohorts. I LOVE THE PHILIPPINES AND IT’S PEOPLE BUT I HATE THIS GOVERNMENT!

    9. and don’t we ever forget the power plants are undergoing preventive maintenance daw(?) as it is shutdown therefore not operating but the consumers will still be paying for the undelivered electricity! (and get taxed as well, VAT for it) this is stipulated in the oppressive “eh, pera” i mean EPIRA! the creation of FVR’s gorillas!

    10. As I understand it power producers enter into bilateral contracts with power distributor/s where the producer supplies the electricity and the distributor accepts the power with an agreed price for a fixed period. Under this arrangement the power producer is assured of a market for its power and the distributor is assured of its supply. WESM is another source of power where the distributor can choose too get its supply at prices set by “market” considerations, simply put, supply and demand. I would surmise that under their bilateral agreement the circumstances where a distributor may opt to get or increase its supply from WESM are defined because the producer willl want to ensure that the distributor will always buy it unless prevented by thee circumstances defined. The curious tthing is the main suppliers in WESM are also the same big suppliers who are supposed to sell their “surplus” energy through WESM so that when the WESM price is high due to a shrinkage of supply caused principally to the big suppliers reducing the supply (deliberately by shutting down some of their generators) the same big suppliers will stand to benefit when the distributor is constrained to buy at the higher WESM price. I further surmise that this would be one of the circumstances that will allow buying from WESM under the bilateral. I think there is something wrong here it seems too prone to “you scratch my back I will scratch your back” arrangement and I not yet factoring in goverment complicity in this.

    11. Para may pakinabang naman kay cabalen robert eh ulit ulitin mo ang mga panlalanang ng Meralco et.al.. sa taong bayan hangang Valentines 2014 at baka sakaling maibalik ang hold up na singil ng Meralco. Kaya lang I remember Meralco’s prices also increases yearly during Gloria’s time and that was 9 long years of Meralco price increases.

    12. Jose A. Oliveros on

      I will repeat for the nth time what I have been saying all along. A President who admits that he cannot do anything to stop increases in oil price and utility charges is an inutile President who should not stay in office a minute longer. If “you cannot fight City Hall”, as the saying goes, the more “you cannot fight Malacanan.” It is evident that PeNoy and his legal advisers have not heard or have forgotten what Justice Jose P. Laurel said in the landmark case of Calalang v. Williams that in promoting the welfare of the people, the government can constitutionally adopt measures legally justifiable or extra-constitutionally through the exercise of powers underlynig the existence of all governments on the time-honored principle of salus populi est supreme lex (the welfare of the people is the supreme law).

      Or does PeNoy want the Filipino people to exercise their “superior right” to alter or change their government with one that to them shall “seem more likely to ensure their safety and happiness.”

    13. POOR FILIPINOS, AS LONG AS WE’RE NOT CHANGING OUR FORM OF GOVERNMENT THERE WILL BE NO CHANGES, AN HONEST PRESIDENT IF EVER THERE’S ONE THAT COMES ALONG WILL BE SWALLOWED BY BUSINESS ENTITIES THAT DONATE TO THIS POLITICIANS COFFERS DURING ELECTIONS.. THESE WOULD BE PRESIDENT SURELY NEEDS FINANCIAL BACKINGS BEFORE THEY CAN BE PUT IN THE HIGHEST POSITION IN THE LAND.. WOE TO FILIPINOS WANTING AND WAITING FOR CHANGES FOR IT WILL NEVER COME..

    14. At the root of the problems engendered by this price hike are the real costs of fossil fuel, both crude oil for processing and natural gas to run the turbines for generation of electricity, when delivered and utilized in one form or another to generate the useful form of energy. The Platts system in Singapore is one of the many options available to the three major refiners to bring in the basic input to production with their co-generation plants, as the case may be, and the IPPs too have a field of options where to source their bunker fuel, coal or natural gas. PNOC have its own fleet of VLCCs and can always exercise its sovereign rights to go directly to the source of fossil fuels, be it crude or natural gas, wherever these maybe; transportation costs algorithms to PH are a fixed. Establish and level out the costs of the basic inputs at the initial point of power production then take out the cost of production and related distribution and marketing and other costs directly related to the costs of sales to the consumers. As practiced by the IPPs, there are strong indications of price manipulations submitted to the WESM. This is just robbery in broad daylight. Sammy’63.

    15. What can you expect from a President who is not an economist like Gloria. He could have made Gloria help him in this field but he jailed her for flimsy cases for revenge. Gloria knows more law on the economy and more brilliant in this field that a “Student”. If you are a student, don’t be ashamed and/or too proud to ask your teacher, if you do not understand the subject. The teacher has gone all through this during her student days, during her teaching career and experiences as government official and as President – “Pride”? I am student myself.

      Mamatay na ang mga “Boss mo” – Pride? Ikaw mismo ang papatay sa Boss mo.

      Marcos was asked by the people to do away his fascist regime – walang tayong facismo, Marcos declared.

      Senator Guingona shot back – “Ikaw mismo” ang problema.

      This is what we got for electing a vindictive President. Proof he spend billions of pesos just to remove Chief Justice Corona because of Hacienda Luisita? Why blame Justice Corona alone – the decision is unanimous.

      • Ur ryt Abnoy should have impeached the entire SC not Corona only as he has the entire Congress in his PDAF pocket. Has Abnoy done that we could have a fresh SC who will be suspected naman as rubber stamp of Abnoy.