Meralco: We did not mean to inflate power charges
MANILA, Philippines – "Hindi po namin sinadyang pataasin. Hindi po namin alam kung ano price eh." (We did not mean to inflate [the power prices]. We did not know the price.)
Meralco lawyer Rey Espinosa was combative before the House committee on energy on Wednesday, January 22, when it resumed hearings on allegations that the power distributor inflated the power prices at the Whole Electricity Spot Market (WESM).
Before the lawmakers, Meralco sought to turn the tables against government. It blamed WESM itself and singled out government-controlled power generator PSALM for the "abnormal" increase in the power prices during the scheduled maintenance shutdown of the Malampaya gas field.
But Meralco's arguments were refuted by Bayan Muna Representative Neri Colmenares, who petitioned the Supreme Court to stop Meralco's power rate hike on the basis of supposed collusion. The SC issued a temporary restraining order and heard oral arguments on Tuesday, January 21.
PSALM's Emmanuel Ledesma Jr was equally combative during the hearing when he defended himself against Meralco's scrutiny.
The SC oral arguments and the House hearing exposed how the players in the power industry work together and why allegations of collusion are pervasive.
Occidental Mindoro Representative Josephine Sato raised concerns about the presence of a monopoly in the power sector.
"Three groups – Aboitiz, San Miguel, Lopez – control 65% of the...generation. If this is not monopoly, what is? And if there is a malicious charge of monopoly, collusion is not far behind," she argued before the committee.
How Meralco inflated the power rates
Meralco helped jack up prices at the electricity spot market when it instructed its supplier Therma Mobile Inc to sell power at an astronomical price of P62/kWh during the shutdown.
Colmenares said the average rate is P8/kWh. Therma Mobile's P62/kWh price was WESM's ceiling price.
During the shutdown of the Malampaya gas field, the "must offer rule" was imposed, meaning all power generators were required to sell in the spot market. Espinosa argued they asked Therma Mobile to offer high rates as a matter of strategy.
Meralco wanted to make sure there would be no takers because it needed Therma Mobile to save its supply for Meralco, which generally depends on Malampaya as its primary source.
The so-called strategy did not work, however. In the end, the Meralco consumer was set to pay for Meralco's move. The Energy Regulatory Commission approved its historic high rate increase of P4.15/kWh. Consumers are enjoying a respite because of the High Court's TRO.
A combative Espinosa argued it is WESM that should be investigated for the insufficient supply in the market. If there was enough supply, Therma Mobile would not have had any takers.
"Dapat nating tanungin kung bakit nag-clear yung presyo na P62 and bakit sila nagclear when sinasabi ng NGCP, naka-white alert siya, may adequate supply. So yun ang dapat na tanungin natin sa sarili natin," Espinosa argued. (We should ask why the P62-price was cleared when NGCP said they were on white alert and had adequate supply. That's what we should ask ourselves.)
But Colmenares scoffed at Espinosa's argument. "If it happened once or twice, we can probably say that Meralco made a mistake. But if you bid P62/kWh 25 times, and the price of electricity jacked up in the entire WESM...The price of power was about P6/kWh to P8/kWh but you bid for P62?" Colmenares argued.
"Tumaas mismo ang presyo ng kuryenteng bibilhin ng Meralco doon sa WESM. Pwede ka magkamali once or twice pero 25 times hindi na kami maniwala niyan," he added. (The price of electricity itself that Meralco was going to buy from WESM went up. You can commit a mistake once or twice but if 25 times, we're no longer buying that.)
The Energy Regulatory Commission is tasked to monitor the electricity spot market, but ERC chairman Zenaida Ducut told the committee that the commission is undermanned. It has only 4 personnel monitoring the spot market.
The ERC also took a hit for "hastily" approving Meralco's price increase.
Meralco vs Psalm
The committee hearing flared up when Meralco's Espinosa singled out government-controlled power generator Malaya, which violated rules when it did not sell in the spot market during the shutdown. This was also raised during the SC oral arguments.
If Malaya offered, and assuming it offered to sell at a low price, Espinosa said Therma Mobile's offer would not have been necessary.
Energy Secretary Jericho Petilla defended Malampaya even as he said that the power generator is under investigation. It supposedly placed a bid but was not synchronized with the grid.
Malaya, an old power plant, is under PSALM. Petilla said the government has been trying to sell it because it is a "perennial headache" but there have been no takers.
PSALM's Emmanuel Ledesma Jr was defensive. Malaya cannot afford to offer to the electricity spot market, he said, because it would mean incurring a lot of losses. He stressed before the lawmakers that his instructions from Finance Secretary Cesar Purisima himself was to stop the company from bleeding.
"The instruction of DOF [Department of Finance] was clear. May I quote: "PSALM is in a very deep financial hole. You are a finance person, ayusin mo 'yan (fix it)," Ledesma said. It is apparently the first time that Malampaya chose not to run while it was undergoing maintenance.
"Kapag pinatakbo ang Malaya, clearly may losses yan. Ang losses niyan malinaw po ipapasa yan as universal charge. Mapupunta po ang cost sa taong bayan," Ledesma argued. (There would have been losses had Malampaya continued to operate. The cost would have been absorbed by citizens.)
But Colmenares also assailed PSALM. Malaya should have followed the "must offer rule" and sold to WESM at a price where it would not incur losses, he said.
Ledesma also argued it is no guarantee that WESM prices would have been lower if Malaya participated.
Colmenares said Meralco should shoulder the costs of its own mistake.
"In any case, kahit magkamali ka e di problema mo yan. Magkamali ka, e di bayaran mo. Bakit mo ipasa sa amin yung pagkakamali mo? Hindi dapat bayaran ng taong bayan ang pagkakamali nila doon sa bid na P62 expecting that it will not be bought. That is Meralco's problem," said Colmenares.
(In any case, if you committed a mistake, it's your problem. If you commit a mistake, pay for it. Why pass on to us the cost of your mistake? Citizens should not pay for their mistake of bidding for P62.)
Other lawmakers are also looking at using the Malampaya Fund to cushion the impact of power rate increases. Petilla said the executive department is debating it as an option.
ERC is yet to complete its probe on the alleged collusion. – Rappler.com