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Market abuse? DOJ sets probe amid Meralco price hike

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DOJ will look into allegations of unfair business practice by power firms to increase the price hike of Meralco 3 times more than expected

PROBE. Justice Secretary De Lima orders probe on possible market abuse by power firms amid Meralco price hike. Photo by Buena Bernal/Rappler

MANILA, Philippines – The Department of Justice (DOJ) will investigate possible violations by power firms that may have led to the P4.15-per-killowatt-hour (kWh) price hike of the Manila Electric Co. (Meralco), Justice Secretary Leila de Lima announced on Monday, December 16. 

De Lima, who ordered the investigation motu proprio, said the DOJ Office for Competition will file a report on the probe that outlines recommendations to the legislative and executive branches of government by January 2014. 

DOJ’s public announcement came on the day activists and lawmakers filed a letter to the DOJ asking for a thorough investigation into the matter.

Meralco’s rate increase for December is the highest ever to be imposed by the power company. The increase resulted from the shutdown of the Malampaya gas field and outages of power plants where Meralco sources its power requirements from. Meralco was forced to source power from plants that uses diesel, which is more expensive than natural gas.

Approved by the Energy Regulatory Commission (ERC) on December 9, the generation component of the price hike will come in 3 tranches. The generation charge will increase by P2.41 kWh in December 2013, P1.21 kWh in February 2014, and P0.53 kWh in March. 

Several quarters questioned the simultaneous shutting down of plants of Meralco’s suppliers as they said a possible collusion happened, sabotaging market competition.

‘Market abuse’

In the letter addressed to De Lima, the petitioners argued that the simultaneous shutdown of other power plants owned by different corporations may have caused the increase to be 3 times higher than expected.

Mentioned in the petition-letter were firms whose power plants experienced simultaneous outages: First Gas Power Corporation, San Miguel Corporation, Global Power Holdings (as the holding company of Kepco Philippines), Aboitiz Power Corporation, Team Energy Corporation, AES Philippines, and DMCI Holdings Incorporated.

Akbayan Partylist Rep Walden Bello, who is among the petitioners, said “there is strong circumstantial evidence” that a possible collusion among the power firms occured.

Bello also called on President Benigno Aquino III “to exercise his moral authority” by asking Meralco to reverse its “unprecedented” price hike. 

“After all, the President has scolded tax evaders,” he added, pertaining to the time Aquino warned tax-evading businessmen.

De Lima said DOJ will look into other “unfair business practice” that may have occurred, adding that a case may be filed against violators. A review of existing energy laws or a passage of a new one may also be recommended.

PROTEST. A protester calls on DOJ to investigate possible market abuse amid Meralco price hike. Photo by Buena Bernal/Rappler

Parallel investigations

The Department of Energy (DOE) also earlier vowed to investigate how Meralco arrived at the price increase as well as the simultaneous outages of the power plants. Results of the DOE’s investigation will be released December 30

The DOJ will act through its Office for Competition and will closely coordinate with the energy department, de Lima said.

A Senate inquiry set on Wednesday, December 18, will also look into whether Meralco’s record-high power rate hike is justified.

Other signatories of the petition-letter filed at DOJ were: Akbayan Partylist representative Ibarra ‘Barry’ Gutierrez III, Ricardo Reyes of Freedom from Debt Coalition, Maria Teresa I. Diokno of the Center for Power Issues and Initiatives, and Wilson Fortaleza of Partido Manggagawa-NAGKAISA Labor Coalition.

Petitioners hope the recommendations from the DOJ probe will not only deal with the Meralco case but also be able to cover the collusion of companies as a recurring offense. –

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