Power rate rigging probe set

President Arroyo directed yesterday Energy Secretary Raphael Lotilla and other concerned officials to investigate allegations of price manipulation in the wholesale electricity spot market (WESM) that would lead to an increase in power rates in the coming months.

Presidential Anti-Graft Commission Chairman Constancia de Guzman also vowed to monitor the investigation of the Department of Energy (DOE) on the alleged price manipulation by the National Power Corp. (Napocor), the Power Sector Assets and Liabilities Management Corp. (PSALM) and the Manila Electric Co. (Meralco) so the PAGC would be ready in the event that the case is transferred to the commission.

"I already instructed the DOE and other government agencies concerned to look into the allegations of price manipulation in the power sector and to ensure that consumers will not be taken advantage of," the President said in her message to the Liga ng mga Barangay convention in Cebu.

"Reports of price manipulations are unacceptable. They should not go unpunished if culpabilities are established," she said.

Reports of price manipulation came after Mrs. Arroyo announced last August that consumers can expect lower electric bills as a result of the WESM, which was implemented by the government in pursuit of reform laws for the power industry.

She said electricity rates will be reduced by as much as 52 centavos per kilowatt-hour due to WESM.

WESM is a trading or bidding system where power companies could purchase electricity at lower rates from different power generators.

She said the government will find ways to stabilize power rates and ensure the protection of consumers.

Mrs. Arroyo said the government is mapping out preemptive measures against power shortages or blackouts in the future.

De Guzman said the PAGC cannot yet conduct its own investigation since the DOE has primary jurisdiction over the case.

"If there is prima facie evidence (on price manipulation), that’s the only time it can be referred to the PAGC to act on the presidential appointees and the criminal cases may (be filed) through the Ombudsman or the Department of Justice," she said.

She said the commission will monitor the case and when it is transferred to the PAGC there would be a faster disposition of the alleged scam.

De Guzman said there are several laws that could have been violated if the allegations are proven, including the Anti-Graft and Corrupt Practices Act, laws on the proper actions of public officials, and the Administrative Code of 1987.

Mrs. Arroyo said the free and open competition on the sale of electricity from power generators would result in more savings for consumers and businessmen.

She had earlier bared that more reforms will be undertaken to lower the expenditures on electricity not only by the power generating sector but also electric companies.

She said the measures include opening access and retail competition by distribution of utilities at the level of household, industries and businesses.

Meanwhile, Meralco, the largest power distributor in the country, denied that the firm is involved in manipulating the price of electricity in the open market.

"Meralco had nothing to do with the alleged increase in the price of electricity on the third month of the WESM," Jesus Francisco, Meralco president and chief operating officer, said in a statement sent to The STAR.

He was reacting to the report of Albay Rep. Joey Salceda on Wednesday that the Napocor, PSALM, and Meralco were responsible for the increase in WESM prices three weeks ago from P2.88 per kilowatt-hour to P6.88 per kwh.

Salceda, an economic adviser of Mrs. Arroyo, said there was no reason for the sudden increase except price manipulation by the three sellers since there was no significant change in supply and demand.

"The three sellers, in particular Napocor, which controls power generation, owe the public an explanation," he said.

He added that the high WESM price of electricity would soon be reflected in the monthly power bills.

Francisco said Meralco is a buyer and not a seller in WESM.

"We would like to stress that Meralco is not a seller in the market and is not in a position to manipulate the price," he said.

He said although the company owns two independent power producers (IPPs) or power plants that participate in WESM, they are in no position to set the price.

"We should like to stress that we in Meralco are always looking for ways to provide lower power cost to all our customers," he stressed.

Open market backed

Meralco earlier expressed support for the open market system, saying it would promote a competitive environment in the industry that could bring down prices.

Francisco said Meralco hopes that the recent unusual price hike could still be corrected.

That is actually the objective of the Electric Power Industry Reform Act of 2001 in creating WESM.

Rep. Alipio Badelles, House energy committee chairman, said a truly competitive environment could not be attained for as long as Napocor controls the power generation sector.

He said PSALM, the agency tasked to sell Napocor assets, should have sold at least 70 percent of the corporation’s power plants.

The Joint Congressional Power Commission (Powercom), chaired jointly by Badelles and Sen. Miriam Defensor Santiago, has started an inquiry into the reported WESM price manipulation.

Santiago said Powercom is prepared to take drastic measures to stop the anticipated increase in power rates.

She said the commission could even order a stop to the operation of the WESM if necessary.

Last Saturday, there was cause for concern over the escalating prices in the WESM as indicated in the average prices over the first three months of trading.

In the first month of trading in June, biddings resulted in an average price of P2.75 per kilowatt-hour, in the second month it rose again, and in the third month it went up to P4.853 per kwh.

Santiago said the increase was unreasonably high and raises suspicion that there is price manipulation among the WESM players.

During the public hearing of the Powercom at the Senate yesterday, Philippine Electricity Market Corp. president Lassee Holopainen explained that an investigation was conducted after the average price per kwh at the WESM increased dramatically in the third month of bidding.

He said the sudden increase was enough to warrant an investigation, saying that while volatility is expected in the market, they want to ensure that the cause is nothing other than economic reasons.

Holopainen said the investigation is ongoing so he could not yet determine whether there was price manipulation. — With Jess Diaz, Marvin Sy