Noy: Gov’t looking into basis of power rate hike

TOKYO (via Smart/PLDT) – The government is looking into the basis cited by the Manila Electric Co. (Meralco) for raising electricity rates by more than P4 per kilowatt-hour, which the Energy Regulatory Commission (ERC) readily accepted.

“The ERC is the sole entity. ERC does not report to us, they are independent from us. But we want to make sure that the basis for  (the adjustment) was correct,” Aquino told Manila-based reporters here on Friday. 

“And right now there are doubts as to whether it was correct. We are not sure,” he added.

The Department of Energy (DOE) led by Secretary Jericho Petilla will handle the investigation.

Meralco cited the rise in generation cost for its steep adjustment in electricity rates of P4.15 per kwh.

The scheduled maintenance shutdown of the Malampaya natural gas facilities as well as the “forced shutdown” of other key power plants had prompted Meralco to get its supply from other more expensive sources, including the Wholesale Electricity Spot Market (WESM).

Aquino said there was indeed damage to the geothermal plant in Leyte caused by Super Typhoon Yolanda and that supply was reduced to 100 megawatts from 500 or 600 megawatts.

He said that while the supply deficit had to be filled, maintenance of power plants should be scheduled and not done simultaneously.

“In this particular case, some were done simultaneously and we are checking if it’s all right. Were there changes in schedule or disruption of flow? I’m not ready to comment on exactly what led to this until Secretary Petilla is finished (with the investigation),” Aquino said.

“It’s hard to speculate. You commit to having your plant shut down on scheduled maintenance. You did not commit to that schedule, you disrupted the entire balance,” he said, adding that such anomaly or oversight could inflict “injury to the economy.”

Earlier, lawmakers said deliberate disruption of power plant operation is tantamount to economic sabotage.

But in case the DOE sees something wrong with the ERC’s action or inaction on the rate hike, Aquino said they would have to turn to Congress for help in addressing the matter.

“One more time, the ERC is not under us. We cannot order them,” he said. He added it could be possible that the damage to Leyte’s geothermal plant was due to force majeure.

Subsidy source

Aquino also said he does not see the possibility of tapping the Malampaya funds to subsidize electricity cost and the transport sector, saying there are legal impediments to using the funds for purposes other than energy development.

He also told reporters that his officials would try to determine whether it’s legal to use the President’s Social Fund (PSF) for the repair of typhoon-damaged power facilities. He said a Supreme Court ruling limits the use of the Malampaya funds to energy development projects.

“The PSF looks like an option but I am not sure if it can cover the whole amount,” he said.

Aquino said more than 200 transmission towers were damaged or knocked down by Yolanda.

“Now, I’m still having the lawyers look if it is at all possible to use Malampaya (funds) in the purpose of re-establishing all of these distribution lines. But so far the initial advice, and their study is quite extensive, it seems the latest Supreme Court definition does not allow it,” he said. “If you don’t follow the SC ruling, what will happen?”

The President said they were looking for ways to address concerns over rising electricity rates even as the National Grid Corp. of the Philippines is likely to request for higher rates from the ERC in order to recoup losses.

He said there is a provision in the presidential decree creating the PSF that allows the use of the fund for restoring damaged infrastructure.

“I might be paraphrasing. I might have overdone the paraphrasing and changed the intent. But that is how I understood it,” Aquino said.

He added Congress may have to review the law on Malampaya funds to find out if there is legal basis for using it for electricity subsidy or infrastructure rehabilitation.

Aquino also said he had instructed Petilla, Executive Secretary Paquito Ochoa Jr., Finance Secretary Cesar Purisima, Justice Secretary Leila de Lima, Budget Secretary Florencio Abad and the Office of the Chief Presidential Legal Counsel to review pertinent laws and find out if and how Malampaya funds could be tapped for a different power-related program.

Aquino said the government was able to provide subsidy to some members of the public transport sector when oil prices hit an all-time high due to conflicts in the Middle East about two years ago.

EPIRA review

In Manila, deputy presidential spokesperson Abigail Valte said Malacañang is open to Speaker Feliciano Belmonte Jr.’s call for a review of the Electric Power Industry Reform Act (EPIRA) in light of the rising electricity costs.

“As already expressed by (Presidential Communications Operations Office) Secretary (Herminio) Coloma, there is a need to look at this closely and thoroughly so we can see what needs to be amended,” Valte said in an interview with radio station dzRB. “We are open to such review.”

Valte noted that Aquino has ordered the DOE to see what can be done to ease the impact of higher power rates on consumers.

“The study is still ongoing with regard to the power rate hike so we can see what can be done to cushion its effects,” she said.

The EPIRA was enacted in 2001 as part of the efforts to reduce electricity rates and promote competition in the power sector.

More than a decade after the law’s implementation, electricity cost in the country remains prohibitive and considered one of the highest in the world.

Valte said consumer groups are free to go to court to contest the rate hike.

“When it comes to court action or any legal remedy, that is available to consumers or to anybody who has the legal standing to do so,” Valte said. 

“We also understand such sentiments, so the President has given instructions to see what can be done,” she added. 

At the House of Representatives, opposition lawmakers scored Petilla for downplaying the effects of the power rate hike and for allegedly defending power firms suspected of manipulating prices at the Wholesale Electricity Spot Market (WESM).

Petilla’s belittling the impact of the power plant shutdowns was “tantamount to saying that it is all right to have a cartel in the power sector and we just have to bear the burden when they collude to increase power rates,” Bayan Muna party-list Rep. Carlos Zarate said.

“Instead of defending the interest of consumers, the DOE is more active in protecting the profits of power producers and Meralco, a behemoth in the power industry and one of the country’s top corporations,” he said.

Citing studies by the Ibon Foundation, the lawmaker said that with only a few players controlling the industry, collusion is expected.

“Secretary Petilla should concentrate on how to lower power rates and not in being a spokesperson for the power cartel,” he said.

ACT Teachers party-list Rep. Antonio Tinio said three power producers dictated the price of electricity in the spot market from Oct. 26 to Nov. 25 – the Limay plant of Millennium Holdings Inc. owned by businessman Mike Valencia; and Therma Mobile and Bauang diesel power plant of the Aboitiz Group.

He said that from an average of P13.74 per kwh before the Malampaya shutdown, the spot price skyrocketed to an average of P33.22 per kwh over the past four weeks.

Zarate said under EPIRA, corporate profits are given priority over consumer welfare and economic development.

“The privatization and deregulation of the power industry is actually a boon only to the corporate players but a bane and a scourge to the people,” he said.

Aboitiz Power Corp., meanwhile, denied that subsidiary Therma Mobile benefits from WESM price movements.

“Therma Mobile is only paid the rate covered by its Power Supply Agreement with Meralco and does not benefit from the high market prices. This rate has provisional approval from the Energy Regulatory Commission,” AboitizPower president and chief executive officer Erramon Aboitiz said.

Meralco has full control of the use of the 100 MW from Therma Mobile, including pricing and volume offers to the WESM.

Meralco utilized the 100-MW capacity starting Nov. 12. The remaining 130 MW will be available by mid-2014 once a connection line is made available.

Meanwhile, a new coal-fired power plant is set to rise in Quezon province.

Chuckie Rivera, communications manager of Quezon Power Ltd. Co. which operates the Mauban power plant, said the new power plant would be run by San Buenaventura Power Ltd. Co. 

“We are still working out the initial stage of engineering, procurement and construction process for this new power plant, which has almost the same equipment and processes in power generation, just like Quezon Power,” Rivera said.

“This new power facility will comply with the country’s environment standards and laws and will use engineering methods and operational standards to maintain and preserve the environment and the host community,” Rivera said. – With Paolo Romero, Iris Gonzales, Alexis Romero, Michelle Zoleta