‘Few power firms make collusion easy’

By: - Deputy Day Desk Chief / @TJBurgonioINQ
/ 03:09 AM December 21, 2013

MANILA, Philippines—The current setup in the power industry makes it easy for producers to collude with one another to jack up electricity rates, Senate Minority Leader Alan Peter Cayetano said on Friday.

Stating his observations after Wednesday’s hearing on the P4.15 per kilowatt-hour power increase, Cayetano said the limited number of traders on the electricity spot market helped to make collusion possible.


“And then the plants that shut down, they’re also the ones that can bid high on the WESM (Wholesale Electricity Spot Market),” Cayetano said in a briefing for reporters.

To prevent collusion, he said, the market should be opened to more power companies.


Cayetano said the decision of the Department of Energy (DOE) to lower the national reserve and the agency’s failure to plan with the power generators ahead of the shutdown of the Malampaya pipeline also made collusion possible.

“If you had a high buffer, the bids on the WESM would not have been that high,” Cayetano said.

Keeping a high reserve would make collusion difficult, he said.

“Remember, there are two ways of collusion, one is the bidding—fixing price—and then withholding capacity,” he added.

Just by looking at the system, “it is clear that it was built to make collusion easy,” Cayetano said.

Joint probe

The Senate committee on energy and committee on trade are investigating the P4.15/kWh rate increase that Manila Electric Co. (Meralco) wants to impose on its 5.3 million customers in Metro Manila and surrounding provinces in phases starting this month to recover P9.6 billion in generation cost.


The Energy Regulatory Commission (ERC) has approved the rate increase, the highest so far for Meralco.

Meralco blames the increase on the shutdown of the Malampaya gas pipeline from Nov. 11 to Dec. 10 for maintenance and the shutdown of seven power generators during the same period, forcing it to buy more expensive electricity from the spot market.

The pipeline shutdown also forced plants that use cheaper natural gas from Malampaya and supply power to Meralco to use more expensive fuel.

The Malampaya shutdown was scheduled but not those of the seven generators, giving rise to suspicions of collusion in the industry to force up power rates.

Lawmakers belonging to the Makabayan bloc asked the Supreme Court on Thursday to stop the rate increase and rule on the constitutionality of two provisions in the Electric Power Industry Reform Act of 2001 (Epira) that say power producers and suppliers are not public utilities and put their rates beyond regulation by the ERC.

On Friday, the National Association of Electricity Consumers for Reforms, Federation of Village Associations and Federation of Las Piñas Homeowners Associations filed a joint petition also asking the Supreme Court to stop the Meralco rate increase.

The three groups also asked the high court to void for illegality all the automatic power rate increases imposed by Meralco.

They asked the court to strike down provisions of the Epira implementation rules that allow the billing of customers for automatic increases in power generation rates without public consultation.

Besides Meralco, the ERC and the DOE were named respondents in the latest petition to the high tribunal.

Cayetano said there were safeguards in Epira but apparently some companies had gotten around these.

At Wednesday’s Senate hearing, the president of Philippine Electricity Market Corp. (PEMC), operator of the WESM, said all the power distributors were traders on the spot market.

Hearing this, Sen. Antonio Trillanes IV raised the possibility of conflict of interest, especially if plants were shut down so that the producers could gain from the sale of power on the spot market at higher rates.

ERC officials said gaming on the spot market and shutdowns without justification were signs of collusion.

To establish collusion, Trillanes asked PEMC to submit a list of the power generators that traded on the WESM during the shutdown so they could be “cross-referenced” with the owners of the plants.

No proof yet

Sen. Sergio Osmeña III, chair of the energy committee, said no proof of collusion had been found yet.

A preliminary investigation by the DOE showed that the power producers had reneged on their commitment to fill the supply gap as a result of the scheduled monthlong shutdown of the Malampaya pipeline, causing power rates to shoot up.

Cayetano warned that the Aquino administration stood to lose its economic gains in the past three years if it failed to stabilize the prices of commodities.

To stabilize prices, the senator proposed that the government suspend the collection of taxes on natural gas, which stands at P1.46/kWh, for three months. This would entail savings of P4.50/kWh.

“Unless the government does something quick and decisive, they’ll find us in a spiral next year and it will affect our economy,” he said.

Trillanes has filed a bill that would authorize the use of the Malampaya Fund for the maintenance, rehabilitation and replacement of energy infrastructure, as well as to finance direct subsidy for energy consumption by users.

Trillanes said it was high time the Malampaya Fund was used for the benefit of users of electricity.

In a recent ruling, the Supreme Court removed presidential discretion over the Malampaya Fund, which represents government revenue from the sale of natural gas from the Malampaya gas fields off the west coast of Palawan province. With a report from Jerome Aning


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TAGS: Alan Peter Cayetano, Antonio Trillanes IV, Electricity, Electricity rates, Malampaya fund, Manila Electric Co., MERALCO, power industry, Wholesale Electricity Spot Market
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