Workers call for reformatting of the power industry

The power industry needs not just a reboot but a major reformatting to better serve the country’s current and future energy needs and to satisfy the people’s clamour for affordable and sustainable power.

 

This, according to the labor coalition Nagkaisa, should be the new frame in seeking amendments or replacement to the failed Electric Power Industry Reform Act or EPIRA.

 

The group made this challenge as some of its leaders attended the Department of Energy’s (DoE) consultations on EPIRA amendments while its members called for the law’s scrapping in a demonstration held outside the Legends Hotel in Mandaluyong City. 

 

“A bad law like EPIRA may need some amendments to address the current mess.  But a wrong policy such as wholesale privatization can only be addressed by replacing it with a new one, a better one,” stated Josua Mata, one of the convenors of Nagkaisa.

 

Mata, who is also the secretary general SENTRO, told the DoE that workers will engage the amendment process in Congress and at the same time work for its replacement when such is probable amid the incurability of EPIRA and the viability of other options.

 

Another convenor, Louie Corral of the Trade Union Congress of the Philippines (TUCP), said amendments are necessary on issues of cross-ownership; the generation being a ‘non-public’ utility, reforms in the ERC (composition and rate-setting methodology); privatization of the transmission system and the Agus-Pulangi hydro complexes in Mindanao; retail competition and open access; and on electric cooperatives, among others.

 

It can be recalled that in a petition letter submitted to President Aquino during the Labor Day celebration of 2012, Nagkaisa raised the following issues to the Executive, some of these require legislative actions:

 

1. Removal of oil and power from EVAT coverage;

2. Stopping the indexation of/or pegging the prices of natural gas and geothermal steam to international prices of oil and coal;

3. Stopping the ERC’s implementation of Performance Based Rate (PBR) methodology as this allows power firms to increase rates in anticipation of future expansion and other capital expenditures; and,

4. Reforming the Energy Regulatory Commission (ERC).

 

The group also bats for the re-nationalization of the transmission lines and the permanent stay in the planned privatization of the Agus-Pulangi.

 

Partido ng Manggagawa spokesperson, Wilson Fortaleza, another convenor said the country and the people will not accept another 13 years of failed rule under EPIRA.

 

“It’s time to rethink and come up with a new model of public power that is completely different from what the industry is, before and under EPIRA. Fortunately we are blessed with so much national potential to do that.  It is only the government that thinks it can’t be done without the prescribed track imposed by the ADB and World Bank,” said Fortaleza.

Government’s political will to stop P4.15/kWh power rate hike; Meralco and IPPs are not ‘scot-free’

The P4.15/kWh power rate increase announced and started to be collected by Meralco last December is not the first of the power rates increases that we have had. But it is definitely the first rate increase that high – more than three hundred per cent (300%) than the usual power rate hikes that we’ve had so far in the country – and it is probably one of the highest, if not the highest rate of increase in the world. This makes the power rates in the Philippines – a lower middle income country where 60 percent of its labor force live with about $2 or less a day – undoubtedly the highest in Asia, and also one of the highest in the world.

It is already immoral that consumers are always held hostage and taken advantage of by the power firms – Meralco, its independent power producers and other generation companies in this case. And it is greed at its highest form when these immoral acts are done even under a situation when the country is in a state of national calamity.

The Malampaya scheduled maintenance shutdown and forced power outages that Meralco claims are unacceptable excuses for this high increase in its electricity charges for the period November-December 2013. The power firms must exercise prudence in their charges to consumers; they should not be allowed to pass on to the consumers the unwarranted costs resulting from their wrong business decisions or practices nor they be allowed to continue doing business scot-free if they are engaging in predatory pricing and other abusive and anti-competitive business practices.

The Trade Union Congress Party (TUCP Party-list) recognizes the initiatives of the Committees on Energy in both Chambers of Congress and of the Executive Department to find solution to this mess. But it should not be quick-fix remedy; it should be able to hit the nail where the head is. Using Malampaya funds to pay for the high generation rate may not be our best solution, it just makes the power companies scot-free from their anti-competitive and abusive practices that resulted in this record-high power rates charged to customers.

We want to find immediate recourse to stop this unfathomable and unconscionable power rate increase of Meralco. It is also our desire to look for long-term redress in order to protect all electricity consumers against future unjust power rates hikes or spiralling cost of electricity.

When the Electric Power Industry Reform Act (EPIRA) was passed almost thirteen years ago, the intention was not only to stop the financial bleeding of the National Power Corporation and its consequent financial burden to the government and the taxpayers; above all, the objective was to ENSURE QUALITY, RELIABLE, SECURE, and AFFORDABLE supply of electricity.

The P4.15/kWh power rate increase of Meralco goes against the above and other objectives of EPIRA such as ensuring transparent and reasonable price of electricity to enhance the competitiveness of Philippine products in the global market; to ensure fair and non-discriminatory treatment of public and private sector entities in the process of restructuring the electric power industry; and to protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power.

THE GOVERNMENT IS NOT HOPELESS IN THIS CASE. IT CAN DO SOMETHING TO STOP THE P4.15/kWh MERALCO POWER RATE HIKE as well as PREVENT UNWARRANTED RATES INCREASES IN THE FUTURE. IT IS JUST A MATTER OF POLITICAL WILL TO REALIZE THESE.


• The President can exercise his police powers as public interest so requires. He can ask the power companies to lower their profit margins.

This can be done. In fact, this was already done by the Department of Energy (DoE) and the Philippine Electricity Market Corporation (PEMC) when they lowered the price offer cap of generation companies at the Wholesale Electricity Spot Market (WESM) to P32/kWh from P62/kWh – this was based on their testimony at the Energy Committee hearing last week. If the price cap can be reduced by half of its original amount, then there could be so much leeway or room for negotiation to lower the amount to be collected by generation companies that supplied power last November-December 2013 between P62/kWh and P32/kWh. At P62/kwh, as the clearing price in WESM between November-December 2013, all power companies that supplied power at that period have undoubtedly raked-in so much profit.


• The Energy Regulatory Commission should withdraw its December 9 approval of Meralco rate hike. Instead, it should immediately conduct due process where consumers can participate, and determine as well if there was gaming or market abuse before granting the power rate increase being sought by Meralco and the generation companies.

The approval of the Meralco price hike by the ERC without undertaking public hearings and concomitant investigations as to the simultaneous shutdowns of the Malampaya plant and the other independent power producers and the market behaviour of Meralco is violative of the EPIRA mandate for the ERC to protect consumers against anti-competitive behaviour and market abuse.

Red alert bells should already have been ringing when ERC saw a Php. 4.15 per kwh tariff increase and a WESM where some IPPs were selling at Php. 62 per kwh. The ERC should already have been forewarned as to the danger of overrecovery of generation costs.

Apologists for the power industry want us to accept that when the Malampaya facility was shutdown for scheduled maintenance and when coincidentally the other power providers of MERALCO were hit by force majeure outages, all of these fell within the allowable market activities of the EPIRA and also within bounds of the implementing rules and regulations of the ERC. They would have us believe that some IPPs saw the opportunity and just took advantage of the rules and the law to make significant profits, that no one is at fault and therefore no one is to blame.


• The Executive Branch can step-in to either lower the price cap on offers at the Wholesale Eelectricity Spot Market or totally suspend the operations of WESM if public interest and or national security is at stake.

The P32/kWh price cap that the tripartite government body decided to implement should be made retroactive from the time the country was put under a state of national calamity. This will compel recourse so that MERALCO and the power producers enter into cheaper bilateral contracts between themselves. Without WESM, the power producers have no choice but to sell under bilateral contracts to MERALCO which constitutes 70% of the market, and has market dominance. In short it should be a buyer’s market (in this case, MERALCO), thus generation companies will be forced to lower their rates.

• The rate-setting practices and methodologies such as the Performance-Based Rate Methodology (PBR) as well as the Automatic Generation Rate Adjustment (AGRA) should be suspended and replaced by a more transparent mechanism of determining the power rates.

Both PBR and AGRA violate the EPIRA mandate of having a transparent and reasonable price of electricity. The automatic rate adjustment for generation costs violates due process and the mandate of EPIRA against market abuse; the automatic rate adjustment is tantamount to a surrender by the ERC of its regulatory powers.

The grant of an automatic rate adjustment prevents consumers from raising valid concerns and real objections even as it mandates the collection of additional charges from them. It effectively precludes any prior challenge to the claims of MERALCO for additional generation charges without subjecting those claims to the legal standards of whether those economic costs being recovered by MERALCO are PRUDENT and REASONABLE, as to whether such constitutes the obligation of MERALCO to provide its customers power “AT LEAST COST,” and whether in passing through the generation charges, MERALCO acted in compliance with its obligations under its franchise.

• Revoke franchise license of abusive or misbehaving power companies.

• The 16th Congress should change EPIRA in order to strengthen protection of consumers from market power abuse. These changes shall include:

o Declaring power generation a public utility, thus subject to profit regulation

o Replacing the current un-transparent rate-setting methodology (PBR) with a simplified and transparent formula based on a 12% ceiling on profits and net income

o Effective prohibition of cross-ownership between the generation, distribution, and transmission sectors.

o Ensuring representation of workers and consumers in the Energy Regulatory Commission as well as in the oversight body over WESM

o Ensuring shareholding dispersal to broaden ownership base, de-monopolize the power industry, and prevent or limit market control of few companies or families.

Workers ask Senate to declare EPIRA a failure

WITH the committee on energy resuming its probe on the spike in Meralco rate today, the labor coalition Nagkaisa, pressed the Senate as a whole to declare the Electric Power Industry Reform Act (EPIRA) a failure and consider crafting a new policy framework for sustainable energy and energy democracy.

The group, which held another picket outside the Senate building, said that unless there is a declaration to that effect, public hearings and investigations will offer no material relief to consumers.

Nagkaisa explained that since 2008, consumer groups have attended, submitted position papers, and argued against the ills of EPIRA before committee hearings of both houses of Congress, including those conducted by the powerful Joint Congressional Power Committee (JCPC). Yet no actions were made to address those concerns.

"Public hearings end with another scheduled hearing then nothing happens until another controversy arises. Workers are really tired of wishy-washy intervention on a social problem of this scale," Nagkaisa said, referring to the crises of escalating power rates and diminishing supply.

Nagkaisa asserted that since the enactment of EPIRA which led to the deregulation of the generation of generation sector, privatization of Napocor assets, creation of the spot market, and the introduction of performance-based regulation.  Fraud became the norm in the power industry as shown by rising prices and cartelization.

The group reminded the Senate that in 2008, Senator Miriam Santiago who chaired the JCPC then stated in her opening remarks in one of JCPC's public hearings that EPIRA is a failure; the Senate is a failure as well as the Executive.

"That is seven years ago and the people will not accept another decade of unrewarding probes to a mess that has been there since day one of the implementation of EPIRA," said the group.

Nagkaisa has been protesting the power hikes which they believed were caused by flawed policies under EPIRA.

Workers to ‘gods of Faura’: Stop power firms’ blackmail, fraud

While politicians and businessmen have joined President Aquino for the National Day of Prayer and Solidarity to the victims of natural and man-made calamities, workers in Metro Manila belonging to the labor coalition Nagkaisa, trooped to the Supreme Court to seek relief and ultimate deliverance from unjust power rate hikes. 

 

The fifteen (15) justices, also known as 'The gods of Faura', were set to hear oral arguments tomorrow on several petitions seeking injunctions to Meralco's P4.15/kWh rate increase.  Prime in the agenda to resolve are questions on whether or not the Energy Regulatory Commission (ERC) committed grave abuse of discretion in approving Meralco rate hike; whether or not automatic rate adjustment is valid; and whether or not the generation sector is not a public utility and therefore beyond regulation by ERC, among others.

 

"We pray that the justices deliver us from a decade-old fraud and industry blackmail," said Nagkaisa in a statement released during their picket at the gates of the Supreme Court building. The group was referring to frauds committed under the Electric Power Industry Reform Act (EPIRA), including the latest allegations on collusion and market abuse among power firms and the latter's threat of rotating blackouts had they fail to collect rate increases. 

 

Nagkaisa asserted that since the enactment of EPIRA which led to the deregulation of the generation of generation sector, privatization of Napocor assets, the creation of spot market, and the introduction of performance-based regulation, fraud became the norm in the power industry as shown by rising prices and cartelization.

 

"It is no secret that owners of power firms, the so-called Voltage 5 (Aboitiz, Lopez, San Miguel, Henry Sy, and Pangilinan) have been earning record high profits from record high tariffs of their power-related firms," said Nagkaisa.

 

The labor coalition recalled that lowering the cost of power was the pledge of the Arroyo administration when it prodded Congress to pass the EPIRA upon assumption to power 13 years ago today. 

 

Nagkaisa explained further that since 2008, many of its convenor groups have attended, submitted position papers, and argued against the ills of EPIRA before committee hearings of both houses of Congress, including those conducted by the powerful Joint Congressional Power Committee (JCPC).  Yet no actions were made to address those concerns. 

 

It likewise chided the Executive for peddling the line that the only choice for now is between expensive power, or having no power at all.

 

"We hope the Supreme Court brings light to a dark decade of power hikes, naked greed, and blackmail amid unreliability of power supply," concluded Nagkaisa! 

Workers back Pres. Aquino: IPPs, Meralco stop passing the buck to consumers

The Trade Union Congress Party (TUCP), a party-list with broad membership of workers in the country, welcomed the statement of President Benigno S. Aquino III that power firms should not pass on to the consumers unwarranted costs resulting from their wrong business decisions or practices.

Rep. Raymond D.C. Mendoza of TUCP Partylist said that the power firms – both the independent power producers (IPPs) contracted by Meralco and Meralco itself – must exercise prudence in their charges to consumers. 

It is already immoral that consumers are always held hostage and taken advantage of by these power firms. And it is greed at its highest form when these immoral acts are done even under the situation when the country is in a state of national calamity.

Pres. Aquino declared a state of national calamity three days after typhoon Yolanda hit the country in November last year, thereby freezing the prices of basic commodities and services at the level before the disaster or calamity occurred. 

In December 2013, MERALCO began the staggered collection of P4.15 per kilowatthour increase in power rates due to increase in its generation costs, but this was stopped by the 60-day restraining order issued by the Supreme Court before Christmas last year. MERALCO claimed that the scheduled maintenance shutdown of Malampaya from November 11 to December 10 purportedly compelled it to get more expensive power from the wholesale electricity spot market wherein the main sources are diesel plants.

Malampaya provides natural gas to independent power producers (IPPs) which have power purchase agreements with MERALCO. These IPPs which provide 40% of the electricity needs of Luzon are the 1000-MW Sta. Rita and 500-MW San Lorenzo facilities of First Gen Corporation owned by the Lopezes, and the 1,200-megawatt (MW) Ilijan owned by Kepco Philippines Corporation. 

The TUCP party-list solon said that the actions by MERALCO and these IPPs were unacceptable. He cited the following reasons why this should not be allowed:

• The scheduled maintenance of Malampaya was planned ahead of time, thus the cost consequences should have already been considered in the power supply agreements of Meralco with the independent power producers and this was already imputed in the MERALCO rate. If MERALCO did not prudently build this into their rate or in the power supply agreements then it should bear the loss, not the consumers. 

• Meralco has long been in this business to know that it is both unwise and imprudent not to insure against all risks. If there is a force majeure outage, MERALCO and the power producers that it contracted for power supply should be insured against possible spikes in costs under such circumstance. MERALCO must not pass the burden to consumers when MERALCO should actually insurance itself from the force majeure outages as its power suppliers as well as acts of God. If MERALCO did not enter into any form of insurance or contract stipulation as to who will pay for the alternative supply in case of an outage (i.e. such as in sourcing it from the wholesale electricity spot market or WESM), then it has acted imprudently and must bear this cost. 

• The natural gas IPP plants are combined-cycle plants – the most expensive type of plant – thus it is highly doubtful that the true replacement cost such as diesel power can be more expensive than these.

"The fact that some power plants were charging P62 per kilowatthour taking advantage of WESM is evidence of price gauging and gaming of the market," the solon added.
Rep. Mendoza reiterated a wide range of interventions that the President can exercise his police powers when public interest so requires. He can

• Suspend the operations of WESM, to compel recourse so that MERALCO and the power producers enter into cheaper bilateral contracts between themselves. Without WESM, the power producers have no choice but to sell under bilateral contracts to MERALCO which constitutes 70% of the market, and has market dominance. In short it should be a buyer's market – in this case, MERALCO;

• Conduct an independent investigation;

• Ask the power players to lower their profit margins because public interest requires it.