Power firms may be sued for economic sabotage

Power companies suspected of orchestrating the massive power rate increase in the franchise area of Manila Electric Co. (Meralco) could face charges of economic sabotage.

“This is nothing less than economic sabotage if you do this against the people. I think a very strong case can be made against the power companies, maintenance companies and everybody who tried to make an extra buck at the expense of the people,” House Minority Leader Ronaldo Zamora said in a briefing.


The Department of Energy (DOE) is investigating a possible collusion among power plants that shut down almost at the same time last month, prompting Meralco to purchase supply at a much higher price at the spot market and raising its electricity rate by P4.15/kilowatt hour (kWh).

“We might now have the most expensive power in the whole world. This is antijobs, antiinvestments and antipeople. We have to take very strong stand,” Zamora said.


No collusion

Economic sabotage is a capital offense punishable with life imprisonment.

But Sen. Francis Escudero, the chair of the Senate committee on finance, doesn’t buy the idea that there was collusion.

“I can’t see the collusion among the generating companies because if they agree to simultaneously stop operations, what will they earn? They won’t be able to sell electricity,” Escudero told reporters.

“Those selling expensive electricity in the WESM (Wholesale Electricity Spot Market) will be the ones that will earn a profit, not the plants that chose to shut down.”

Escudero would rather look into the role of the Energy Regulatory Commission (ERC) in allowing the unprecedented rate hike and the high cost of power from WESM.

He made the remarks even as Sen. Sergio Osmeña III set the hearing of the Senate committee on energy on power rate hike on Wednesday next week.


Mere coincidence

Of the P4.15/kWh to be passed on to 5.2 million consumers, spikes at the WESM contributed P2.38; natural gas plants, P1.04; and other factors, P0.02, according to Meralco.

Energy suppliers and industry observers said the temporary power rate increase may have more to do with coincidence rather than collusion.

Lopez-led First Gen Corp. and Team Energy said that their respective facilities’ maintenance shutdowns followed schedule, which was planned well in advance with regulators.

DMCI Holdings president Isidro Consunji said: “Collusion means we talked to others to time our shutdown to influence prices. That’s not the case. We did our best to keep running while Malampaya was down, and in fact Calaca 1 and 2 were both running since Nov. 9,” Consunji said.

Calaca 1 and 2 are both running, although the former is running below capacity due to technical issues, Consunji said.

Energy Undersecretary Raul Aguilos on Tuesday said that Meralco was supposed to pass only on an additional P1.58/kWh to reflect the impact of the scheduled shutdown of the Malampaya gas pipeline, which supplies fuel to three power plants contracted by Meralco.

However, Aquilos said that rate increase “spiked” to nearly three times higher than expected as several power plants went on emergency shutdown during the period.

‘Unplanned’ shutdown

He said the energy department came up with its own study and noted that there were unplanned outages in several plants: The 1,000-MW (megawatts) Sta. Rita and 500-MW San Lorenzo power plants of First Gas Power Corp. (First Gen); the 1,200-MW Ilijan plant of Kepco Philippines Corp.; the 730-MW Pagbilao power plant of Team Energy Corp.; the 600-MW Masinloc power plant of AES Philippines; and the 600-MW Calaca power plant of DMCI Holdings.

Industry data, however, showed that Sta. Rita Mod 30 (250 MW), Pagbilao 2 (375 MW), San Lorenzo Mod 50 (250 MW), Sual 1 (647 MW), Ilijan 1

(600 MW) and 2 (600 MW) and Calaca 2 (300 MW) were on scheduled shutdown.

GN Power 2 (300 MW) was on scheduled shutdown until Nov. 11 but it extended to Nov. 20. Calaca 1 (300 MW) was said to be on forced shutdown from Oct. 26 to Nov. 16, thus overlapping at some point with the Malampaya shutdown (at least according to Meralco’s presentations). But Consunji said it was already up and running on Nov. 9.

In Meralco’s presentations to the ERC and to the House of Representatives, spot prices surged to P15.51/kWh in Nov. (the highest level in recent history) from P6.16/kWh in Oct. due to tight supply and plant outages.

The highest price was recorded in Nov. 15 when Luzon grid was on yellow alert due to insufficient reserve, from 10 a.m. to 4 p.m. and from 5 p.m. to 7 p.m. Citing information from the operator of WESM, Meralco said this was due to the outage of Calaca 1 and GN Power 2.

Maintenance, down time

“Calaca 1 shut down in late October and was back up

Nov. 9. So maybe PEMC (the WESM operator) is the one that can clarify facts so that there is no cloud of doubt,” Consunji said.

An industry observer said, “You don’t have gas so why don’t you just do your mandatory maintenance, take advantage of the down time.”

Aboitiz Power Corp.’s subsidiary, Therma Mobile Inc. (TMO), which operates the diesel power barges moored in Navotas, said it did not benefit from any WESM price movement because it was paid an agreed rate under its power supply agreement with Meralco.

Asked whether his company saw anything wrong with the timing of the power plant outages, Meralco president Oscar Reyes said: “We have no reason to suspect power generators. I would like to think that we are all responsible in giving consumers electricity services…. We were also conscious of not contracting too much capacity since that also finds its way into the power rates.”

‘Making a killing’

Act Teachers Rep. Antonio Tinio accused Millennium Holdings (which runs Limay plant) of businessman Mike Valencia and the Aboitiz Group (Thermal Mobile and Bauang diesel power plant) of “making a killing” in WESM as the price of electricity soared from P13.74 per kWh before the Malampaya shutdown to P33.22 kWh over the last four weeks.

“We have to look into the ownership of the power plants that shut down at the same time as Malampaya. We will look closer into their alliances,” said Tinio.

Meralco is initially passing to consumers this month an additional P2.41/kWh out of the total P4.15/kWh increase. The rest of the adjustment will be done in two other months: P1.21/kWh in February and

another P0.53/kWh in March.

Alfredo Panlilio, Meralco head of customer retail services, said the firm avoided January because power generation prices were expected to be still high at that time. Prices are expected to stabilize from February onward, hence the timing of the second and third installments of the power generation rate hike.

Status quo ante order

The National Association of Electricity Consumers for Reforms Inc. (Nasecore) said it would ask the Supreme Court for a status quo ante order as soon as the newly approved power rate hike is implemented.

Pete Ilagan, Nasecore president, said he was meeting with his lawyers to discuss what to do about the petition.

He said he was targeting to file the legal action in the Supreme Court early next week. “We can’t ask for a [temporary restraining order] because the hike will already be implemented.”

Bayan Muna Rep. Carlos Zarate said his group and several consumer-oriented organizations would file a case and seek a temporary restraining order to suspend Meralco’s plan to impose the P4.15/kWh rate hike.

Malacañang on Wednesday floated the possibility of a refund if power producers are found to have colluded to jack up electricity rates.

Communications Secretary Herminio Coloma said the DOE “has instructed the ERC to look into the outages in several power plants that occurred while the Malampaya repairs were taking place.”

Malacañang earlier defended the increase in Meralco’s generation charge, saying it was neither “arbitrary” nor “unreasonable.”

Asked where the irregularity could be if there was no collusion among generation firms, Escudero said, “Well, if there’s any irregularity it is with the WESM.”

“This is where the supposedly excess power is sold. Ideally, it should be cheaper,” Escudero said.

The problem, Escudero said, was that in 2003 the DOE came up with an order setting the WESM ceiling at P62 kWh.

“Who would pay that high for electricity? I don’t even know where they got that maximum amount.”

Who made windfall?

Osmeña, the chair of the Senate committee on energy, said he wanted to know who made a windfall from the WESM after it sold Meralco electricity at very expensive rates.

This is one of the issues that the chair of the Senate committee of energy wants to determine when the panel takes its turn in grilling executives of the DOE, ERC and Meralco in a hearing next week.

“Who made a windfall? There were plants that were bidding at P62, P42, P35. I understand the average rate that Meralco purchased from the WESM was P35. That is huge you know,” Osmeña told reporters.

“Meralco buys its power at about P4.70 to P8.50….  So that’s rather huge,” he added.

The senator also wants to look into apparent coincidence of generating firms shutting down at the same time.

Meralco’s franchise area covers Metro Manila, neighboring towns, cities and provinces, which account for about a fourth of the country’s population.—With reports from Kristine Felisse Mangunay and Christian V. Esguerra



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TAGS: Collusion, Consumer issues, Department of Energy, economic sabotage, Electricity production and distribution, Francis Escudero, nergy, power companies, Ronaldo Zamora
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