The oral arguments at the Supreme Court brought out interesting facts with regard to the massive P4.15 per kilowatt-hour power rate hike.
Bayan Muna Representative Neri Colmenares and Rep. Carlos Isagani Zarate narrated how the power rate came about and how the Energy Regulatory Commission (ERC) simply agreed to the increase filed by the power company.
In Meralco’s request to the ERC on December 5, 2013, it asked that it be allowed to bill consumers a total generation charge of P7.90 per kwh in its December 2013 bill. This includes the P4.15/kwh increase part of which is a value-added tax of 71 centavo and a P 3.44 generation charge increase. This P3.44 increase includes P2.38 obtained from the Wholesale Electricity Spot Market (WESM) and P1.06 taken from Meralco suppliers. Meralco attributed the increase to the shutdown of the Malampaya facility that supplies natural gas to three major plants (Ilijan, San Lorenzo and Sta. Rita).
The shutdown was already announced a year earlier and was effected by Shell on November 11 to December 10, 2013. The Department of Energy met with the generation companies and Meralco to supposedly ensure supply. The problem was that these power companies did not deliver on this promise. Several plants’ shutdown unexpectedly causing a shortage in supply. This in turn drove the prices in the WESM to a ridiculous high price of 62 pesos.
Meralco contracted energy from Therma Mobile before the shutdown but it only delivered energy below its normal capacity. What was mentioned in the oral arguments was that Meralco ordered Therma Mobile to bid in the WESM these high prices on the assumption that it will not be bought in the spot market. However, due to the reduced supply, the WESM accepted the high bids of Therma Mobile. This price is very high compared to the average prices in the WESM.
As we heard in the oral arguments, it turns out that the Meralco got its wish through a mere letter and the ERC approved it without any notice or publication and a formal hearing. This is despite the suspiciously sudden and simultaneous shutdown of generation power plants which coincided with the long announced Malampaya servicing. The ERC should have not have hastily approved the proposed rate increase only a few days after Meralco’s letter.
What is more telling is how the ERC surrendered monitoring the prices of electricity by issuing its rules on the AGRA or the Automatic Generation Rate Adjustment. Worse, the EPIRA itself frees the generation companies from review and regulation.
This lies at the heart of the Makabayan petition. The EPIRA itself bars the government and its instrumentalities from regulating generation companies. The law declares that generation is not a public utility. This should not be the case as the problem we are facing right now shows. If we take a generation plant not as a public utility, then these companies can increase prices at will and we will always be at the mercy of their profit margins.
The power generation companies contracted by distribution companies are part of the whole delivery of power to our industries and homes.
As such they should be and are, in fact, public utilities. This means that they should be subject to franchise requirements and supply, price and profit regulation.
Because of the EPIRA, these generating companies and suppliers have escaped accountability and can manipulate and have been manipulating the market and supply which is very much prone to collusion with one another in order to jack up electricity rates. The ERC can always just point to the provision in the law when it decides that this is all right despite these increases being highly irregular and unjust.
Rep. Colmenares pointed out that generation and supply of power is imbued with public interest and as such should be regulated. He said that the activities being conducted by these companies serve or affect a wide general public, an undeniable characteristic of a public utility.
I have started looking at the web of control and ownership in the power sector. It turns out that the owners of generation companies also own distribution companies. San Miguel Corporation controls a large chunk of Meralco and controls more than 20 percent of the generation capacity in the country. Aboitiz also controls around 15% of the supply and holds many electric cooperatives and distribution in the Visayas. The same is true with the Lopez group of companies.
Dealing with both electricity supply and distribution puts these companies in a very strategic place to control, manipulate, and benefit from rate increases. With an inutile ERC and government in place, consumers are left to bear the burden of warrantless increases of electricity rates.
As Makabayan asks the Supreme Court to strike parts of EPIRA for being unconstitutional, it is high time to remove the law that allows all these increases to happen. Congress must junk the law and put in a nationalized power industry that caters to our development needs and makes power affordable for all.