Aquino warns power firms: Don’t pass added costs

BATANGAS CITY—President Aquino said power firms found to have passed on unwarranted additional costs to consumers should face the consequences.

“My position personally is, if it was a commercial decision that was wrong, government never promised that they will be shielded from their wrong decisions,” the President said.

“And it follows, if it was a wrong decision—again, I emphasize ‘if,’—it’s not right to pass [the burden of] a wrong business decision to consumers.”

Aquino was referring to the increase of P4.15 per kilowatt hour in the generation charge that Manila Electric Co. (Meralco) wanted to collect from its customers because of the surge in the cost of power it was getting from power generators when certain plants went into preventive maintenance late last year.

The simultaneous shutdowns that coincided with the maintenance of the Malampaya gas plant sent Meralco rates skyrocketing as the utility firm was forced to buy high-priced power from the Wholesale Electricity Spot Market (WESM) and from plants that had to use more expensive fuel.

The President pointed out that the maintenance shutdown of the Malampaya natural gas plant was a “foreseeable event” that “happens every two to three years.”

“There are certain allegations that there were wrong business decisions that led to their buying from [WESM]. They bought from WESM at spot prices that were really high. Our impression is there are people who really made a very significant profit from this situation,” Aquino said.

“Wasn’t the [maintenance shutdown] foreseeable? It seems they didn’t prepare for it. Who was at fault?” he asked in Filipino.

An initial probe by the Department of Energy found collusion among power plants.

No power crisis

Acting on petitions from consumer groups and lawmakers, the Supreme Court has issued a 60-day temporary restraining order on the Meralco rate increase.

Aquino is cool to proposals that he exercise emergency powers to allow government to expedite the construction of power plants and avert a purported power crisis.

He acknowledged that the government was empowered under the Constitution to “temporarily take over or direct the operation of any privately owned public utility or business affected with public interest.”

This could be done “in times of national emergency, when the public interest so requires,” according to Section 17, Article 12 of the Constitution.

“I don’t think we’re in a situation where we have to employ Section 17 of Article 12,” Aquino told reporters after leading the groundbreaking ceremony for the 414-MW, natural gas-fired San Gabriel power plant here.

He distanced himself from the proposed emergency powers, saying it was made “by certain members, I understand, of Congress.”

“I never asked for the emergency powers,” he said, days after his own ally, Eastern Samar Rep. Ben Evardone, floated the proposal.

Aquino said emergency powers were intended to address a specific problem, and his administration, through the Department of Energy, was still trying to determine what really triggered the increase in generation charge.

Epira amendments

Also being studied were possible amendments to the Electric Power Industry Reform Act (Epira), particularly the one covering the powers of the Energy Regulatory Board, he said.

The President also sought an explanation behind the planned power rate adjustment under a state of national calamity, which he declared three days after Supertyphoon “Yolanda” battered Leyte and neighboring provinces.

“And in a period of national calamity, prices were supposed to be frozen for items on this particular list, and I assume power would be one of the items there,” he said.

Trillanes bill

In the Senate, an administration senator on Tuesday filed a bill seeking to allow the President to negotiate power contracts for a year.

Sen. Antonio Trillanes IV’s Senate Bill No. 2051, or what he called the proposed Electric Power Crisis Act of 2014, would allow the President “to enter into negotiated contracts for the construction, repair, rehabilitation, improvement and/or maintenance of power plants, projects and facilities.”

Trillanes said he filed the bill “in view of the threat of rotating blackouts in the franchise area of Manila Electric Co. this coming summer months, as aired by Meralco, the country’s biggest power distribution utility, in the pleading it recently filed with the Supreme Court.”

“Armed with the extraordinary powers granted under this bill, it is expected that the President would be able to address the looming energy crisis, if not immediately, at least on the short and medium term,” Trillanes said in the measure’s explanatory note.

Unlike the Electric Power Crisis Act of 1993 under the Ramos administration, Trillanes’ bill does not provide for the granting of sovereign guarantees for obligations to be incurred by the power producers or for “take or pay” provisions that obligate consumers to pay even for unused electricity.

The sovereign guarantees and “take-or-pay” provision are prohibited under Trillanes’ bill. These provisions have been widely blamed over the past couple of decades as some of the factors that drove the cost of electricity upward.

Ban on cross-ownership

In the House of Representatives, Evardone, who had pushed for emergency powers for the President to address the energy sector’s problems, filed a bill to prohibit cross-ownership among power generation and distribution companies, as a move to prevent collusion that could lead to skyrocketing electricity prices.

Evardone said the failure of Epira to ban cross-ownership had led to rising power costs.

“Under Epira, only a few corporations dominate in both the generation and distribution sectors. This setup has recently fueled allegations among players in the generation sector and/or with those in the distribution chain,” Evardone said in the explanatory note of his bill.

He noted that Epira banned any distribution or generation company from owning a share in National Transmission Corp. But there is no such ban between generation companies and distribution utilities.

The absence of such a prohibition has led to soaring electricity rates, according to him, since the only safeguard coming from Epira was the prevention of distribution utilities getting more than 50 percent of their total power demand from bilateral contracts with related generation companies.

Evardone’s bill states that no distribution utility or its subsidiary, affiliate, stockholders, officials or any of their relatives within the fourth civil degree of consanguinity should be allowed to hold any interest in any generation company, and vice versa.

Should the bill pass, power firms should divest themselves of such existing interests within a year.—With reports from Norman Bordadora and Leila B. Salaverria

 Originally posted: 5:35 pm | Tuesday, January 14th, 2014

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