• Web of Power

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    Giovanni Tapang, Ph.D.

    Giovanni Tapang, Ph.D.

    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.

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    4 Comments

    1. Step by step should be the complainant’s procedure. Use this as an opportunity to demand transparency from Meralco and all the Power Generators supplying Meralco. Their current annual reports are not transparent enough for the consumers to see their costs and expenses. Meralco also hid its list of Fixed Assets which need to be replaced after 10 to 50 years.

      Demand for 2001 to 2013 transparent Balance Sheets, transparent Statements of Income, Costs and Expenses, and Sources & Uses of Funds. These will establish accurate bases for the right pricing. And it will prove that the monopolist and oligopolists have been overpricing for many years.

      I hope we do not waste this opportunity to demand the very sources of evidences we need to prove that these companies have been overpricing, so that (as a matter of fact) the Filipino People deserve lower price and refund from past years of overpricing.

    2. Kapag pumasa sa congress ang batas na kumakasela EPIRA LAW ay pwede nang ipaputol ang isang hinliliit sa left hand. Kapag sa Senado ay pumasa pa din, yaon namang kanang hililiit. Kapag pinirmahan ni ABNOY, BANOY upang maging batas ay Ari ko na ipapuputol ko!

    3. It has been pounded in the minds of all Law students and Lawyers (Including judges and Justices) that when the spirit/intent and the letter of the law clashes, it is the intent/spirit that prevails over the letter of the law all the time. Since the intent of EPIRA is to reduce the cost of electricity but the opposite happens then it is Unconstitutional there are ifs or buts. What I have been worrying is why it is taking so long to decide for the Supreme Court to declare the obvious. Meanwhile all the officers of ERC and DOE should be penalize or remove from office asap due to grave abuse of discretion of Misfeasance of duty. Pres. Noy should initiate the move to remove them with vigor the way he did with Corona.

    4. I read the excuse for the delay in the investigation being conducted by ERC on the rate increase of Meralco that it lacks qualified personnel to perform the task adding that they are unable to attract quality electrical engineers with their salary range of merely 9,000/mo. This is like telling us consumers that, as pnoy has admitted, thereis nothing they could do about the rate increase because try as they might they are just too incompetent to do anything. We will just have to sit on our asses and bear the inevitability of it all not even the Supreme Court can make a determination of the reasonableness of the rate increase absent a competent advise from the very agency that has been tasked to guard against unreasonable rates. This puts us consumers in a rut and what is worst is generation rates of producers are by law not subject to review or control and are automatically passed on as generation charges on our bills. Talk about collution among the power sector it is actually a conspiracy between the power producers, distributors and the government against the hapless citizens who can just gape at whats happening and bamboozled with all the gobble de gook spewed by these characters in the grand moro-moro on going.