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.
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.”
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.
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