Aquino vows action vs. power profiteers

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 President Benigno Aquino 3rd led the ceremonial laying of time capsule of the San Gabriel Power Plant in Batangay City on Tuesday. With him are Federico Lopez, First Gen Corp. chairman and CEO, Oscar Lopez of the Lopez Group of Companies, Energy Secretary Jerico Petilla, Batangas Gov. Vilma Santos Recto, Richard Tantoco and Francis Giles. MALACAÑANG PHOTO

President Benigno Aquino 3rd led the ceremonial laying of time capsule of the San Gabriel Power Plant in Batangay City on Tuesday. With him are Federico Lopez, First Gen Corp. chairman and CEO, Oscar Lopez of the Lopez Group of Companies, Energy Secretary Jerico Petilla, Batangas Gov. Vilma Santos Recto, Richard Tantoco and Francis Giles. MALACAÑANG PHOTO

Saying that electric consumers should not be made to pay for the “wrong decisions” of power producers and distributors, President Benigno Aquino 3rd on Tuesday vowed to take action against unjustified power rate increases.

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The President said concerned agencies continue their investigation into reports that power companies committed a grave mistake when they purchased electricity at higher rates from the Wholesale Electricity Spot Market (WESM).

The Manila Electric Co. (Meralco) had claimed that it was forced to buy more expensive power because of the simultaneous shutdown of the Malampaya gas plant and other power plants last year. As a result, the Energy Regulatory Commission (ERC) approved the utility firm’s petition to increase power rates by P4.15 per kilowatt-hour. However, the Supreme Court stopped the implementation of the rate hike.

The High Court set oral arguments on the power rate hike on January 21.

Aquino said it is likely that several people profited from the power crisis.

“Our impression is there are people who really made a very significant profit from this situation. So I have tasked the DOE [Department of Energy] again as the lead agency to investigate,” Aquino said during the groundbreaking of First Gen Corp.’s San Gabriel Power Plant Project in Batangas on Tuesday.

He noted that the DOE is investigating if power producers conspired to shut down so that prices would go up at the electricity spot market.

“My position personally is, if it was a commercial decision that was wrong, government never promised that they will be shielded from their wrong decisions,” the President said.

He said the ERC can order power companies to return any unjustified profits.

“I think it is incumbent upon us that this situation that greatly affects the welfare of so many of our countrymen, we should know what actually transpired, and what correct actions should be undertaken to address that situation,” he added. “If there are unjustifiable profits, the ERC can order the disgorgement of these profits.”

The President also dismissed Meralco’s warning that rotating brownouts will occur if it will not be allowed to increase its electricity rates.

Aquino said the scenario of rotational brownouts is unlikely because there is ample power to meet demands in Luzon.

“Well, naninigurado tayong hindi magkakaroon nitong rotating brownouts dahil, technically, meron tayo talagang enough of a supply, if not, even a surplus currently at least for Luzon [We would like assure that there will be no rotating brownouts because technically, we have enough of a supply, if not even a surplus currently at least for Luzon],”he said.

He added that there will be “less brownouts” in Mindanao during the summer months because of an “innovation” to be implemented by the DOE “to address that perpetual cycle in Mindanao.”

More power
In his speech, Aquino said that the new energy project will ensure sufficient supply of power and attract investors.

The $600-million project has three phases. The first unit to be built by First Gen will produce 414 mega-watts for the Luzon grid.

“This plant also bodes well for our country’s continued growth. Our economy hinges on having adequate power. After all, it is growing at a rapid pace—and we want to sustain this. Businesses are continually seeing the Philippines as an ideal investment destination,” he said.

“And we must continue doing our utmost to be able to tell investors: If you decide to set up shop in the Philippines, an adequate energy supply for your factories and facilities will be as low as possible on your list of things to worry about,” he added.

By 2016, the President said power demand in the Luzon grid is expected to rise to 11,000 megawatts from today’s 10,294 megawatts.

First Gen has 15 power plants that are contracted for sale under long-term power purchase agreements or other energy sales agreements.

First Gen already has the 1,000 megawatt Santa Rita gas-fired power plant and the 500-MW San Lorenzo plant in Batangas. In addition to the first unit launched on Tuesday, First Gen will be building two more power generation units to be completed several few years from now.

Emergency powers     
The President also shot down proposals to grant him emergency powers to address the rising cost of electricity.

Aquino said the current situation does not call for any emergency powers, which was pushed by Rep. Ben Evardone of Eastern Samar.

Evardone earlier proposed that the President be given extra powers for a year to address the “catastrophic problems” of energy and mass transportation.

However, Aquino emphasized that the 1987 Constitution already allows the Executive branch to use such powers in times of crisis.

“We have emergency powers already in the Constitution that authorizes us to take over certain industries. So I don’t think we are in the situation that we have to employ Section 17 of Article XII,” he told reporters.

He was referring to Section 17 of Article XII which states that “In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately-owned public utility or business affected with public interest.”

But despite the President’s statement, Sen. Antonio Trillanes 4th filed a measure that seeks to grant the chief executive special authority to prevent a power crisis.

Trillanes, in filing Senate bill 2051, insisted that the President needs emergency powers in light of the threat of rotating blackouts in areas being serviced by Meralco.

Under the measure, Aquino will have the power to enter into negotiated contracts for the construction, repair, rehabilitation, improvement and/or maintenance of power plants, projects and facilities whenever necessary for the national welfare and in the public interest.

The proposed emergency authority introduced by Trillanes is almost similar to the powers given by Congress to then President Fidel Ramos in 1993, when the country was gripped by a power crisis.

However, Trillanes’ proposal prohibits the government from granting sovereign guarantees for the payment of obligations incurred by the Independent Power Producers (IPPs).

The bill also authorizes the President to compel IPPs to sell power to distribution utilities like Meralco as well as power distribution cooperatives and to fix the rate of return of the IPPs on their rate base to a reasonable rate not to exceed twelve percent per annum.

SB 2051 also empowers the president to use all available funds, including the Malampaya Fund, to finance the maintenance, rehabilitation, and replacement of energy infrastructure in preparation for and/or in response to natural and man-made calamities, and to finance subsidy for energy consumption by end users in case of market failure.

At the House of Representatives, Rep. Romero Quimbo sought the scrapping of the value-added tax (VAT) in electricity and replace it with a fixed tax scheme to unburden consumers.

Quimbo, he chairman of the Committee on Ways and Means, said that it is about time for the government to revisit the imposition of VAT on power to alleviate electricity rates.

“We need to study that further—if we need to bring back the fixed franchise tax or any tax that we can collect [from power producers]in order to lessen the burden of the consuming public,” he said.

The lawmaker explained that in the three stages of power production, generation and distribution phases are slapped 12-percent VAT, which makes a consumer pay 24-percent VAT. If the tax will be eliminated, the power charges can be reduced by 85 centavos or up to P1 per kilowatt-hour.

Quimbo said his committee is studying how to scrap VAT on electricity without compromising the government’s revenues.

“We need to know the impact of this move. Many people think that when power costs are low, more investors will invest, more jobs will be generated, and maybe this can be the solution of a holistic economic development that is really job-generation centered,” he added.

Also on Tuesday, Evardone filed House Bill 3676 prohibiting cross-ownership of power generation and distribution companies to prevent collusion among energy market players.

Evardone said that distribution companies, their subsidiaries, officials, stockholders and their relatives should be banned from holding interest in generation companies, and vice versa.

“In the present set-up, only a few corporations dominate both the generation and distribution sectors. This fuels the recent allegations of collusion among players in the generation sector and/or with those in the distribution chain,” he said.

With report from Llanesca Panti

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12 Comments

  1. I agree with Representative Miro Quimbo that VAT on electricity can be reduced without affecting government revenues. It is possible. The idea is greatly appreciated as it is FAIR to the ENTIRE CITIZENS.

    But what is not fair is BIR Captain Kim Henares’s selective policy in her tax collection and anti-tax evasion drive. That while she scares and runs after small and medium business enterprises, she fears high profile personalities and large entities like DUNKIN’ DONUTS local seller…(…a TAX EVADER?,,,) which has huge unpaid tax deficit of P1.5 billion for year 2007.

  2. Rosauro Feliciano on

    I think the previous administration had planted “bombs” in ED and/or ERC through appointment of people who would be used to eventually sabotage anything conceived by the incoming administration if and when in the event the one who made the appointment would be prosecuted by the incoming administration. Anything is possible in politics.

  3. Rosauro Feliciano on

    The Energy Dept and the Energy Regulatory Commission are clearly immature in terms of management capability because both the ED and the ERC, with all management powers they have, simply don’t recognize that they have that power to impose on ALL producers of electricity to schedule their Preventive Maintenance. If Preventive Maintenance is done on schedule, there is no valid reason that any of these producers has to stop abruptly in providing electricity to Meralco. They are telling us people that they are on preventive maintenance, which is abruptly done. This is the simple and basic in Quality Management System that preventive maintenance has to be scheduled and therefore implemented as scheduled. However, granting that they (the ED and the ERC) have all the capabilities to know about what THEY ARE DOING, then everything under the circumstances, the ED, ERC and Meralco are in conspiracy to artificially create the current problem that Meralco is forced to purchase electricity at higher cost from other producers not its regular one due to Preventive Maintenance being undertaken by the Electricity Power Providers; e.g. the natural gas provider which is controlled by the government organization. Moreover, if indeed the situation is contrary to their capabilities of really not knowing about what they are doing, then ALL the people employed by the government behind the ED and ERC are completely immature, inept, incompetent, unskilled and hopeless in terms of management. So they have to be all terminated from their respective positions for look-busy-doing-nothing-clumsy people. Are they there behind the management of these ED and ERC because of connection with the higher up in the government or is it because they are doing this artificial problem because their salary is low and can no longer engage in corruptions?

  4. Rosauro Feliciano on

    As I monitor the many blogs relevant to the issue involving Meralco-ER-ERC partnership, I can only imagine that there appears now a great number of our people being swayed by the pro-previous administration supporters because they (saboteurs) accumulated lots of resources including huge amount of money at their disposal. This is the power of money. Money can
    prolong even the most notorious crimes of the century like the Maguindanao massacre committed in our generation. People open your eyes so you can see that those who want to free their supporters now under prosecution are in tandem with the previous administration that planted “bombs” in the ER and ERC to sabotage this administration’s on-going plan to uplift the condition of our poorest of the poor.

  5. How could BaNoy punish the profiteers when the photo of Manila Times suggest he is one of them as he was laying the foundation on the soon to be new power generation plant of Lopezes?

  6. all talk, no action! the threat is a little too late as damage is already done to the people who already bore the brunt of the high electricity rates (in december and upcoming one in january).

    • santiago caisido on

      I agree with you this all lip service of BSA good for press release lang yan. Pustahan tayo ng isang buliling maghihirap pa rin tayong mamamayan sa pagbayad ng kuryente.

  7. We are watching you Mr. President! Sana masugpo mo ang mga ganid na walang ginusto kundi kumita ng limpak-limpak at walang paki sa hirap naming consumer. Pero duda ako kung aasahan mo ang kagaya nila petilla, ducut at de lima wala rin mangyayari. E sino pa kaya?

  8. At last the Aquino administration, at least in WORDS but not yet in DEEDS, seems to be getting ready to respond to a grave problem: the very high electricity costs charge by power companies on household consmers, schools, non-power-industry businesses and industries. These high costs are a cause, perhaps the main cause of the departure of manufacturing companies from the Philippines and the slow entry of foreign investors to our country.

  9. From “malacanang is powerless in face of electric rate hikes” to this new stand. Kasi Abnoy was caught with his pants down, AGAIN! If not for the public outcry, he would have not acted!! Pero, the proof is yet to be seen. Tignan natin kung may resulta, palagay wala nanaman, like all the other issues. Kaso, palpak so Abnoy!