Cartel eyed in record increase of power rates
The Department of Justice (DOJ) will investigate the record increase of P4.15 per kilowatt hour (kWh) in power rates being staggered starting this month in Metro Manila and other areas as the Department of Energy (DOE) starts probing Manila Electric Co. (Meralco) and its power suppliers.
The DOJ, through its Office for Competition (OFC), announced Monday its investigation after a group of lawmakers and activists petitioned it to conduct an inquiry into the matter, citing possible cartelization that led to Meralco’s sharp increase in generation charge this month.
The DOJ has been designated as the competition authority in the country in Executive Order No. 45 series of 2011.
Created under the executive order was the OFC, which can receive any form of complaint as a basis for inquiry or further study on possible violations of laws prohibiting cartelization, monopolies, or combinations in restraint of trade as defined in competition laws.
Justice Secretary Leila de Lima said she expected a report and recommendation from the OFC to be submitted by January next year.
“This is a test case for the OFC,” De Lima said.
National interest
At a news briefing that was attended by multisectoral group leaders led by Akbayan Rep. Walden Bello who had met with her, De Lima said she had directed the OFC to do its investigation as early as last week because the power rate hike was of national interest.
Meralco has 5.2 million customers in its franchise area that covers 31 cities and 80 municipalities in Metro Manila; the entire provinces of Bulacan, Rizal and Cavite; and parts of the provinces of Laguna, Quezon, Batangas and Pampanga.
The franchise area is home to 24.7 million people, roughly a quarter of the entire Philippine population.
“It is worth looking into,” De Lima said, noting that the OFC has the mandate to ensure the constitutional policy of ensuring that competition thrives.
“Collusion is the very antithesis of the competition,” she said.
The OFC will determine whether there was indeed collusion or market abuse by the power firms.
“We need to know exactly whether the increases are justified,” she also told reporters.
Antitrust law
Asked what possible charges could be filed against firms found to be in collusion, De Lima said these could be violations in the antitrust law, and restraint of trade and unfair business practices.
De Lima said she received the letter-complaint handed to her by Bello.
The letter-complaint was signed by Bello, Akbayan Rep. Ibarra Gutierrez III, Ricardo Reyes of Freedom from Debt Coalition, Ma. Teresa Diokno of the Center for Power Issues and Initiatives and Wilson Fortaleza of the Partido Manggagawa-Nagkakaisa Labor Coalition.
They asked the DOJ through the OFC to conduct an inquiry and further study the possible violations by Meralco, First Gas Power Corp., SMC Global Power Holdings, Aboitiz Power, Team Energy Corp., AED Philippines and DMCI Holdings of laws prohibiting cartelization, monopolies and combinations in restraint of trade as defined in competition laws.
Bello told reporters that his group could not believe that the six power suppliers would all have unscheduled outages while the Malampaya gas plant was being serviced. The power shortage prompted Meralco to buy expensive electricity from the Wholesale Electricity Spot Market (WESM).
“We believe there is prima facie (evidence). There is big circumstantial evidence that there was collusion and market abuse,” Bello also said.
To be called to the investigation are the six power companies, according to De Lima. The DOJ will also invite members of the academe and other experts to give their side on the issue.
De Lima said she would also ask the DOE to give its side on the collusion allegations.
The OFC will also determine whether the Energy Regulatory Commission (ERC) was able to fulfill its mandate, she said.
As part of their separate probe, the DOE and the ERC have asked Meralco and power suppliers to share information with regulators, according to Energy Secretary Carlos Jericho Petilla.
Philippine Electricity Market Corp. (PEMC) is also looking into WESM data. PEMC operates WESM, which is said to have reflected power price spikes amid the recent maintenance shutdown of the Malampaya natural gas facility.
Petilla said that this early, company officials had not been summoned to shed more light on how the power generation and related charges (such as taxes) surged to P4.15/kWh amid several plant outages and the switching by three Meralco suppliers to alternative (and more expensive) fuel during the Malampaya shutdown.
“We cannot summon them when we are in the middle of gathering info. We are asking them to provide info though and allow the ERC team to inspect their plants,” Petilla said.
Petilla said the DOE, ERC and spot market operator PEMC formally convened an investigation on Dec. 13 although they started gathering data earlier.
“As to the implementation of the increase, this is not under DOE responsibility,” Petilla said when asked whether the department could halt the staggered implementation of the P4.15/kWh power rate increase.
Meralco, which delayed new billings by a week to consult with regulators on the proposed staggered implementation, is initially passing on to consumers some 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 P0.53/kWh in March.
There have been allegations both against Meralco and its power suppliers.
‘Synchronized’
Lawmakers, activists and the DOE have questioned the decision of several power plants to simultaneously go on emergency shutdown while the Malampaya gas pipeline was undergoing maintenance work (from Nov. 11 to Dec. 10.) that further drove up energy prices. Plants using natural gas had to shift to more expensive fuel just to keep on generating power.
Others have criticized Meralco for allegedly not seeking securing supply contracts early enough, thus leaving itself vulnerable to spot market volatility in November.
“We have to analyze first the behavior of the market in the past four weeks and will ask them to explain depending on our findings,” Petilla said.
Amid reports of other distribution utilities in Luzon also hiking power rates, the DOE director for the electric power industry management bureau, Mylene C. Capongcol, said via text message, “We will look into this.”
Meralco’s supply mix
At a recent briefing of the ERC, Meralco officials said electricity from bilateral contracts (with plants that switched to more expensive fuel) accounted for about 50 percent of the power that Meralco tapped in the supply month of November.
Spot market prices at WESM, which were even more expensive, accounted for 11 to 12 percent and the rest came from other arrangements, such as the peaking supply deal with Aboitiz Power Corp.’s subsidiary, Therma Mobile Inc., Meralco said.
Various parties such as Bayan Muna insist that there has been a pattern of “suspiciously synchronized power outages” over the years and that spot market prices have been trading at high levels even in times of low demand such as Sundays and holidays.
“Now these power utilities are singing the same old tune again. The Malampaya facility—supposedly scheduled for a maintenance shutdown only once every two years—is now being shut down almost every year, and, as always it is also accompanied by unscheduled outages of other power plants” Rep. Zarate said.
“As can be seen, this has become an annual event and the consumers are always the victims and at the losing end.”—Christine O. Avendaño and Riza T. Olchondra
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