Power to the People: Shedding light on PH’s privatized energy industry (Part 1 of 2)

written for The Philippine Online Chronicles.

image from change.org

image from change.org

The 60-day temporary restraining order (TRO) issued by the Supreme Court on the Manila Electric Company’s (Meralco) implementation of a P4.15/kwh power rate increase ends on February 23. Despite widespread protests and appeals by politicians, businessmen, middle-class homeowners and poor residents alike, Meralco is still hell-bent on imposing the hike and has asked the Supreme Court to lift the TRO. The giant power company has even resorted to blackmail, saying that sans the increase, consumers should be prepared to endure blackouts come summer.

Malacanang, notwithstanding declarations that it is against the lifting of the TRO, has announced time and again that it is “powerless” to stop the three-tranch hike. This brought to fore pertinent questions: Is the PH government really defenseless against Meralco’s impositions? Why does the Philippines have the most expensive power rates in Asia? What is the real state of the Philippines’ power industry?

Automatic pass-on

In its petition to the SC, the Makabayan bloc sought a TRO against the increase – a P482 increase for every household that consumes at least 200/kwh per month to be collected on a staggered mode starting December 2013 to March 2014 – the highest one-time power rate hike in history. It cited as basis the lack of due process in the Energy Regulatory Commission’s (ERC) decision to allow the increase and the constitutionality of the process by which the ERC and Meralco transacted the request.

The petition also appealed to the high court’s judicial power to stop the increase based on Section 1, Article VIII of the 1987 Constitution “to determine whether or not there has been grave abuse of discretion amounting to lack of excess jurisdiction on the part of any branch or instrumentality of the Government.”

Simply put, the ERC, tasked to regulate and protect the interests of consumers, displayed abuse of its mandate and betrayed public trust when it allowed Meralco to increase its rates based on a mere request letter by the latter. Further, the ERC and Meralco exposed their connivance to implement in haste the exorbitant and burdensome power rate hike, unmindful of how the increase will affect majority of low- and middle-income consumers.

In its letter to the ERC dated December 25, 2013, Meralco claimed that the abrupt increase was due to the regular maintenance shutdown of the Malampaya plant. It added that the closing down of two other plants, Pagbilao 2 and Sual 1, also for regular maintenance schedules, made the increase inevitable. There was a shortage of supply, it said, and they had to make emergency purchases to keep up with the demand.

The added cost, of course, would be automatically passed on to consumers. The ERC granted their request, without so much as a hoot despite the ongoing investigation by the Department of Energy (DOE) on the sudden and seemingly colluded simultaneous shutdowns.

According to the Makabayan petition, the ERC acted “in violation of its mandate to protect the public from anti-competitive practices and abuse of market behavior of industry players and the Constitution which prohibits monopolies and combinations in restraint of trade.” In this case, the ERC turned a blind eye to the suspicious “coincidence” and allowed Meralco to the turn it into a convenient excuse to increase power rates.

Powerless?

Malacanang, singing to the same tune, was as quick to announce that “their hands are tied” and that they had “no magic wand” to stop the increase. It offered no redeeming pro-consumer alternative to the increase and instead justified it by saying that it is within the bounds of the law because the power sector has long been “denationalized” and almost totally deregulated under the the Electric Power Industry Reform Act of 2001 (EPIRA).

The EPIRA was passed by then Pres. Fidel Ramos amid efforts to privatize the National Power Corporation (NAPOCOR). Through the EPIRA, Ramos committed to buy all power supply from power producers, consumed or not. As a result, the NAPOCOR incurred an immediate P200 billion debt that has been passed on to consumers since it was first implemented.

The EPIRA also promised to unbundle the power sector to weed out inefficient and incurring losses, establish a Wholesale Electricity Spot Market (WESM) to create an open and competitive power market that will reduce electricity rates as a result.

On June 2011, Pres. Benigno Aquino III signed into law the extension of the “lifeline electricity rate” or subsidy for consumers for another 10 years. This, when in the rationale of the EPIRA, the lifeline rate would have been rendered unnecessary 10 years after its implementation because power rates in the country would have been affordable even by poor consumers.

Now, 13 years after the EPIRA was signed into law, the Philippines has the most expensive power rates in Asia. Thinktank IBON reported that power rates rose to more than 112 percent from 2001-2011.

WESM, despite its promise of “free competition”, now appears to be controlled by big players in the power industry. Bayan Muna representatives have found proof that Meralco, in collusion with another big power generation company, Therma Mobile, manipulated the market price of electricity at WESM in the periods of November and December 2013.

Therma Mobile bid for P62/kwh in November and December despite the P8.65/kwh contracted price with Meralco. At the SC oral hearings on the TRO, Therma Mobile was forced to admit that they were ordered by Meralco to do so, resulting in Meralco passing on the padded price to consumers.

(to be continued)

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One Response to Power to the People: Shedding light on PH’s privatized energy industry (Part 1 of 2)

  1. Pingback: Power to the People: Shedding light on PH’s privatized energy industry (Part 2 of 2) | adarna's attic

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