The Department of Energy (DOE) said on Tuesday that power producers may have conspired to manipulate electricity rates by simultaneously shutting down their power plants to push power prices to a record high.
DOE Undersecretary Raul Aguilos admitted during a meeting with members of the House Committee on Energy that there could have been collusion among power generators and suppliers. The Energy Regulatory Commission (ERC) on Monday approved a historic P4.15 per kilowatt-hour power rate increase to be collected by the Manila Electric Co. (Meralco) starting in January. Meralco customers will pay the rate increase in three tranches.
Aguilos explained that the power rate hike was triggered by the simultaneous, unplanned shutdown and outages of power plants that supply electricity to Meralco.
“These were actually the major reasons, factors, why such a spike happened, because these were not anticipated,” he said.
He noted that the power plants were shut down at a time when the Malampaya plant was undergoing a scheduled annual maintenance. This unseen development raised the possibility of collusion among power producers to increase the electricity rates in the wholesale electricity spot market (WESM).
“We anticipated the Malampaya shutdown, and so we coordinated with the stakeholders with the necessary interventions to mitigate the impacts of the spike.
Listing these as factors, we anticipated the generation cost to rise by P1.58 per kilowatt-hour, so we were surprised when it was P4.15 because there were forced outages from other power plants. It’s possible that the power suppliers are in collusion because it would be hard to believe that they all have forced outages at the same time,” Aguilos told the House Energy panel.
“That’s why the [DOE] secretary would want this investigated to identify the culprits and penalize them if ever, that’s why we also have to seek the assistance from PEMC [Philippine Electric Market Corp.] and ERC because this is also part of their mandate so this is an ongoing process which we would like to be finished within a reasonable period of time,” Aguilos said.
Of the P4.15 per kilowatt-hour increase for Meralco users, the bulk will P3.44 will be from the generation charge because of the Malampaya natural gas plant shutdown from November 11 to December 10.
“We are now conducting an investigation on this [possible collusion]. If not for the unplanned outages, the increase would not have been as high,” Aguiluz added.
ERC Commissioner Josefine Patricia Asirit agreed that the government should investigate the unscheduled shutdown of several power plants to determine if these facilities were really crippled by defects, leaks or malfunction.
“I do understand that the DOE has a mechanism to address and even to visit the different plants that have been on unplanned or forced outages,” Asirit said.
According to a report submitted by Meralco to the House committee, at least nine power plants went on scheduled but extended shutdown and forced outages—Sual, GN Power 2, Santa Rita Module 20, Santa Rita Module 30, Ilijan 2, QPPL, Sual 1, Calaca 1 and Masinloc 1. Together, these plants supply 3,427 megawatts to the Luzon grid.
Had these plants continued their operations, the price increase would only have been P1.58 per kilowatt-hour.
Meralco gets 40 percent of its power supply from Malampaya. But because the natural gas plant was shut down, Meralco had to purchase power from the Wholesale Electricity Spot Market (WESM) at a price of P33.24 per kilowatt-hour.
Meralco President and COO Oscar Reyes said that the company is still undecided whether to implement another rate increase in April to make up for the value-added tax (VAT).
“The increase [in generation charge]is 69 percent due to the fact that we are getting supply from WESM since the Malampaya is on shutdown,” Reyes said.
He urged the government to build more power plants, saying that the last power plant built in the Luzon grid was in 2000.
Also on Tuesday, ACT Teachers Party-list Rep. Antonio Tinio criticized the government for its failure to regulate power rates.
“This seemingly absurd situation points to a massive failure on the part of government, particularly the [ERC], to regulate and protect the public from the predatory behavior of a handful of power producers, who were able to dictate the price of electricity sold in the WESM,” the lawmaker said.
According to Tinio, three power producers can dictate the price of electricity in the spot market—t he Aboitiz-owned Therma Mobile, Bauang Diesel Power Plant which is also operated by the Aboitiz group, and the Limay Combined Cycle Plant owned by Millennium Holdings, Inc. of businessman Mike Valencia.
Before the Malampaya shutdown, the average rate in the WESM is only at P13.74 per kWh but it soared to P33.22 per kWh.