Power rates collusion

Unplanned shutdowns of  supplies suspicious
THE Energy Department was caught unawares by the dramatic increase in power rates imposed by the Manila Electric Co. this month, a congressional hearing was told Tuesday.

Energy Undersecretary Raul Aguilos, testifying before the House committee on energy, said Secretary Jericho Petilla has already ordered an investigation into allegations of collusion among independent power suppliers, which triggered a P3.44 per kilowatt-hour rate hike by Meralco, way above the anticipated P1.58 kWh increase.

Power rates hearing. Meralco chief operating officer Oscar Reyes, first vice president Ivanna De La Peña, and Energy Undersecretary Raul Aguilos explain to lawmakers what triggered  the increase in Meralco’s charges during a hearing in the House  on Tuesday. Manny Palmero
Aguilos admitted before the panel that the Energy Department itself was surprised by the announced increase in Meralco’s generation charges, which will be imposed in three parts starting December.

“We will investigate to see if there was collusion among power suppliers. It’s possible that there was collusion because why would their plants all break down at the same time?” Aguilos said.

He said the P3.44 increase “was not anticipated.”

“That’s why we came up with a study and found that there were unplanned outages in several plants: like Sta. Rita, San Lorenzo, Pagbilao, Masinloc, Gen Power, Calaca and Ilijan,”Aguilos said.

These unplanned outages jacked up electricity prices on the Wholesale Electricity Spot Market and raised Meralco’s costs, he said.

“These were actually the major factors why such a spike happened, because these were not anticipated. And that’s why the secretary wants this investigated, to identify the culprits and penalize them,” he said.

He added that the department may seek the assistance of the Philippine Electricity Market Corp. and the Energy Regulatory Commission, which authorized Meralco’s rate hike.

By the department’s own computations, the generation charge should have gone up only P1.58 per kWh as a result of the scheduled maintenance shutdown of the

Malampaya natural gas field from Nov. 11 to Dec. 10.

Meralco, the country’s largest power distributor, serves 5 million consumers.

Its chief operating officer, Oscar Reyes, said they too were affected by the unexpected problems at other power plants, noting that more than 40 percent of the power supply was crippled.

The company has staggered the collection of the P3.44 per kWh increase, with the generation charge going up P2 in December, and P1 in February and 44 centavos in March 2014.

Reyes also said the company had warned consumers a few months ago that rates would go up in December as a result of the Malampaya shutdown.

The huge increase, however, was the result of “a confluence of events.”

“One such event is the shutdown of the Malampaya pipeline, the country’s only source of natural gas. Two of the largest producers of electricity—Ilijan and Sta. Rita power plants, both run on natural gas sourced from Malampaya,” he said.

“Due to the shutdown of this pipeline, the two power plants had to use more expensive alternative fuel—biodiesel and liquid condensate – in order to continue generating electricity. These alternatives fuel sources are two to three times more expensive than natural gas.”

Based on a report submitted to the committee by Meralco, “independent power plants like Ilijan, Sta. Maria, Pagdilao, and San Lorenzo, among others” had “unplanned’ shutdowns,” forcing Meralco to get power from other sources.

Cavite Rep. Elpidio Barzaga, Jr. slammed the ERC for its failure to uphold the public’s interest in the power hike.

“Is the increase in the public interest? This will result in a domino effect on fares and the prices of goods,” Barzaga said.

Panel chairman Oriental Mindoro Rep. Reynaldo Umali asked the Energy Department to come up with a proposal on how they intend to address the problem.

In the Senate, Senator Antonio Trillanes IV filed a resolution to investigate the rate hike as well.

Senate President Franklin Drilon said he favored a review of the Electric Power Industry Reform Act (EPIRA) of 2001 to allow the use of the Malampaya fund to serve as a buffer for power consumers. This would benefit the entire country because a power rate hike would have a massive effect on the prices of other commodities.

The Employers Confederation of the Philippines (ECOP) said Monday that the power hike, seen as the highest on record, surely translate to higher prices because 30 percent to 40 percent of production costs come from electricity.

“If the cost of production goes up, so will the price,” said ECOP president Ed Lacson in a “24 Oras” report aired Monday evening.

ECOP said the government should subsidize power costs or suspend the value-added tax to offset the hike.

President Benigno Aquino III on Monday said the government is studying the possibility of using the Malampaya funds, sourced from the natural gas project in Palawan, to cushion the impact of the price hike.

But former Budget secretary Benjamin Diokno said the move may be illegal since the Supreme Court has already ruled that the fund can only be used for energy resource development projects, or those that encour-age energy companies to develop new sources of energy. – With Macon Ramos-Araneta


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