Senators on lower power market price cap: Why only now?

MANILA, Philippines – Senators welcomed the lower price cap for electricity traded on the Wholesale Electricity Spot Market (WESM) but asked why it took public outcry before power regulators made the move.

Senate Energy Committee Chairman Sergio “Serge” Osmeña III said he has long been “complaining” that the previous price ceiling of P62 per kilowatt-hour (kWh) was too high. The cap meant that P62/kWh was the highest possible price that power generators can sell their excess capacity on the WESM.

Osmeña was reacting to the joint resolution of the Department of Energy (DOE), the Philippine Electricity Market Corp (PEMC) and the Energy Regulatory Commission (ERC) to temporarily lower the new offer price ceiling from P62/kWh to P32/kWh pending a study on the “appropriate” price cap. The resolution was issued on Friday.

In an interview with radio DZBB on Sunday, December 29, Osmeña said it is likely that the lowered cap will become permanent.

“Because P62/kWh is too high. I saw that P32/kWh will also be very acceptable, and you will still have bidders. I checked the graphs [industry players and regulators] submitted last week and saw that P32 will still be an acceptable rate,” Osmeña said.

The DOE, PEMC and ERC make up the WESM tripartite committee monitoring the spot market. The agencies lowered the price ceiling following public backlash over the highest power rate hike in Metro Manila. The Supreme Court issued a 60-day restraining order on the implementation of the rate hike. (READ: 13 things Meralco consumers should know about the hike)

Osmeña’s energy committee is probing the hike amid reports of collusion among power plants that went on unscheduled simultaneous outages coinciding with the scheduled maintenance shutdown of the Malampaya natural gas field. The shutdowns forced Meralco to buy more expensive power from the WESM.

Senator JV Ejercito, a committee member, asked why the agencies lowered the cap only now.

“Pwede pala. Kumbaga sinubukang ilusot. Kung ‘di nagreact ang taumbayan, ilulusot po. Nakikita natin ang ganitong instances, pwede palang i-regulate, i-control ang pagtaas, bakit ‘di sunubukan? Sinubukan pang palusutan,” Ejercito said in a separate DZBB interview.

(It can be done but they tried to push through with the hike. If people didn’t react, they could have done it. We see in these instances that they can regulate and control the increase, how come they didn’t try it? They tried to hike the prices.)

Ejercito said the move showed the regulators failed to do their duty.

“Hinayaan nilang magtaas nang magtaas, iyon pala kaya pala. Noong may public outcry, may tripartite resolution, decision na pigilan ang pagtaas ng kuryente. Sabi ko talagang nababawasan ang tiwala sa atin.”

(They allowed power prices to go up when apparently they can lower the cap. After the public outcry, now there’s a tripartite resolution, decision to stop the increase. I said this is why our trust in these agencies is eroding.)

Like Osmeña, Ejercito wants the lower WESM price ceiling to be made permanent. Yet Senator Antonio Trillanes IV disagreed. Trillanes issued the resolution calling for a Senate probe into the power rate hike.

“It should be temporary because the study could yield an even lower figure. As it is, P32/kWh is still quite high,” Trillanes told Rappler.

Trillanes though agreed with his colleagues that the regulators could have lowered the ceiling much earlier.

“We brought [up] this reduction of the price cap by half during the committee hearing and I’m glad they reacted. I agree that they could have done this earlier [but] then again, better late then never. This is a remedial measure to avert future spikes in power rates.”

The Philippines has one of the highest power rates in Asia. The recent price hike prompted lawmakers to call for a review of the industry. 

‘Palace studying Malampaya subsidy bill’

Power distributor Manila Electric Co (Meralco) announced in December that it is raising charges by P4.15/kWh, the biggest power rate hike in recent history. Meralco was set to raise charges in 3 tranches: P2.41 per kWh in December, P1.21 per kWh in February 2014 and P.053 per kWh in March.

To ease the burden on consumers, Osmeña is proposing a bill that will amend a Martial Law-era law to allow President Benigno Aquino III to use the Malampaya fund to subsidize the power rate hike. Trillanes filed a similar bill earlier this month.

The Malampaya fund consists of royalties collected from operations of the Malampaya gas and oil fields in the waters off Palawan province.

The Palace is still studying whether or not it can tap the Malampaya fund for the subsidy and to repair power and transmission lines toppled by Super Typhoon Yolanda (Haiyan). Aquino ordered the study following a Supreme Court decision limiting the use of the fund for energy development and exploitation programs.

Osmeña said Budget Secretary Florencio Abad sent him a text message two weeks ago about his proposal. Osmeña has called on the President to certify the bill urgent.

“They’re seriously studying it. I hope after the holidays, there will be action from the President,” the senator said.

Osmeña said once he gets the go signal from the President, he will file the bill when the Senate resumes session on January 20, and have it passed before the end of the month.

The senator said passing the bill will be a short-term solution to the country’s power problems. “We can use P10 billion from the P130 billion balance of the Malampaya fund so we can pay one time the rate hike.”

Lawmakers eyeing BNPP, coal plants

Osmeña said despite the DOE probe into the alleged collusion and the Supreme Court oral arguments on the rate hike, his committee will still continue its investigation. The second hearing is scheduled on January 23.

He said he will give the DOE until January 15 to present its findings to the committee.

In the long term, senators are looking into possible amendments to the 12-year-old law regulating the power industry, the Electric Power Industry Reform Act of 2001 or EPIRA.

Osmeña said another long-term solution is to pass a bill preventing delay in the construction of coal-fired power plants, calling it a “critical economic investment.”

“We are having a power shortage because the power plants we need here in Subic, Masinloc, Iloilo, Mindanao are slapped with a writ of kalikasan,” he said. “The construction of these plants are delayed by environmentalists when the cases can be decided immediately.”

A writ of kalikasan is a legal remedy for parties who believe their constitutional right “to a balanced and healthful ecology” is threatened or violated and is meant to stop an environmentally destructive act.

Osmeña said the Philippines must “compromise” and accept coal plants if it wants to address the power shortage. “There is no other solution in the world with reasonably priced power.”

As for Ejercito, he recommends the reopening of the mothballed Bataan Nuclear Power Plant (BNPP).

“If we build coal [plants], that is so expensive and it will take 4 to 5 years but BNPP is already built. It will take one and a half to two years [to reopen] and it’s a clean source of energy. We are getting desperate. Other countries are leaving us behind in terms of foreign direct investment because of the high power cost,” Ejercito said. 

What are your thoughts on their proposals? Let us know in the comments section below. – Rappler.com