Meralco not yet off the hook

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 Malacañang says Meralco’s legal problems concerning its rate increase are far from over. PHOTO BY MIGUEL DE GUZMAN

Malacañang says Meralco’s legal problems concerning its rate increase are far from over. PHOTO BY MIGUEL DE GUZMAN

THE Manila Electric Co. (Meralco) may have been excluded from the Energy Regulatory Commission’s (ERC) restraining order against the “exorbitant” power rate hikes imposed late last year, but that does not let the utility firm off the hook, Malacañang said on Wednesday.

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Presidential spokesman Edwin Lacierda said the only reason Meralco was not covered by the ERC order was that a separate complaint against the power distribution company questioning its record rate increase remained pending at the Supreme Court.

Lacierda said the exclusion of Meralco from the order was only in deference to the Supreme Court, which issued a temporary restraining order halting the P4.15 per kilowatt-hour increase approved by the ERC last year. The tribunal has yet to render a decision on the case.

He said the ERC order that could slash power prices imposed late last year by as much as 70 percent would be taken into consideration by the Court.

“Certainly, the Supreme Court will look into this ERC resolution and, perhaps, they’ll take judicial notice of this and that will be part of the appreciation of the facts before them,” Lacierda said.

He said that although the commission allowed Meralco to start collecting the rate hike on the second week of December, the ERC understood that it “should not in any manner be construed as confirmation of Meralco’s generation cost incurred in November 2013, which will remain subject of the confirmation and post-verification proceedings in accordance with applicable ERC resolution on the matter.”

“So when they issued that letter, it was still going to be subject to post-verification.

They would still review the prices. And now, hence, there is an investigation further to the resolution, there’s also a decision from the ERC directing the PEMC [Philippine Electricity Market Corp.] to conduct an investigation into the possible breach of the must offer rule [MOR] within a period of not less than 90 days from receipt of the ERC order,” Lacierda said.

“If the Supreme Court would like to take judicial notice of the ERC resolution [it]can help in their appreciation of the other facts in the case. But insofar as Meralco’s involvement or role [is concerned], that’s still up to the Supreme Court to decide,” he added.

On Tuesday, Malacañang announced that the ERC voided the “excessive and exorbitant” power prices at the Wholesale Electricity Spot Market (WESM) in October to December last year and ordered those rates cut by as much as 70 percent.

The commission found that several power generators had withheld capacity when the Malampaya gas plant went on a month-long maintenance shutdown, inflating WESM prices. Meralco claimed it had to increase prices to make up for the electricity it bought at higher rates.

The order also directed the PEMC to calculate and implement the regulated prices in the revised WESM bills of the affected distribution utilities in Luzon.

New hike looms
Vice President Jejomar Binay, however, warned that a new round of power rate hikes would be inevitable if no new gas reservoir was found to replace the Malampalaya natural gas reserve soon.

Malampaya supplies at least 40 percent of the electricity requirement of Luzon.

“If a new gas reservoir or LNG [liquefied natural gas]does not replace Malampaya soon, we may yet suffer again what we experienced in November 2013,” Binay said during the 2014 Natural Gas Summit at the New World Hotel in Makati City.

He was referring to the spike in power prices at the electricity spot market when Malampaya closed down for repairs in November.

Binay said the government should focus on developing the natural gas industry.

“Mainstreaming natural gas and LNG should form the bulk of our developmental energy program. Their utilization must still be on the forefront—issues like technological maturity, economic efficiency, reliability of supply, adequacy of investments, and availability of support structures must be confronted with our absolute commitment,” he said.

Natural gas, Binay added, produces much less carbon emission than coal, bunker fuel or diesel.

“We have seen in other jurisdictions that gas-fired power stations are also cheaper and easier to build than nuclear,” he added.

He said natural gas is generally accepted in Europe as a transition fuel and then as a reliable and lower-carbon back-up source to ensure the continuous supply of power when renewable energy technologies such as wind turbines and solar panels fail to generate enough electricity to fill the gap.

The Vice President urged the executive and legislative branches of the government to “contemplate additional measures to make the Philippines an even more attractive place for gas investors.”

“We should review decades-old laws such as Presidential Decree No. 87 and the DOE Circular on Natural Gas to make them more in sync with modern times,” he said.

‘Sue them’
At the same time, lawmakers called on the ERC to file criminal charges against the 36 power generators who they said violated the law by withholding their power supply when Malampaya was undergoing scheduled maintenance.

Representatives Antonio Tinio of the Alliance of Concerned Teachers, Carlos Zarate of Bayan Muna and Arnel Ty of Liquefied Petroleum Gas Marketers Association put forward the proposal following the ERC’s discovery that some power producers violated the Must Offer Rule (MOR).

The MOR requires generators to offer all of their available capacities to prevent an artificial shortage that could push power prices up.

Tinio said the ERC decision should spur the filing of charges against power generation companies in accordance with Section 45 of the Electric Power Industry Reform Act (Epira), which states that the commission can penalize any market power abuse or anti-competitive or discriminatory act or behavior committed by any participant in the electric power industry.

“Why is it that the ERC is not filing charges against these power generation companies? These 36 power generation companies violated the Must Offer Rule provision of the law, resulting in artificially high prices in the WESM. Prices increased because these companies withheld their supply,” Tinio, the House Deputy Minority Leader, told reporters.

At the time of the Malampaya outage, at least 2,000 megawatts of power were not offered at the WESM.

“The ERC’s decision is deceptive. They already found out that the prices in WESM during the Malampaya shutdown were wrong. Why are they not taking action against these generation companies? It is as good as saying that a crime was committed but there are no criminals,” Zarate said.

Given that other power plants also shut down their operations when Malampaya was being repaired, prices of electricity on the spot market reached as high as P62 per kilowatt-hour. Meralco has admitted that it instructed Therma Mobile, a power generation company, to bid at that price on the WESM.

“The ERC’s findings that the WESM prices were too high prove that there is collusion but they are apparently taking a step back and being a coward here since they are not filing charges,” Tinio said.

If the ERC does not file charges against the erring power producers, the commissioners should resign, he added.

Ty said the National Grid Corp. of the Philippines should also be held liable given its mandate to make available to the market 22 percent of its power supply reserve.

With report from Llanesca T. Panti

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3 Comments

  1. Roldan Guerrero on

    MERALCO is owned by the LOPEZES. The Lopezes are allies and the primary supporters of BSA in his presidential bid. So expect nothing will happen in this mess. What do you think?