Jan 16, 2014

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. 

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