Friday, November 24, 2006 Probe set on power price manipulation
THE Energy Regulatory Commission (ERC) will look into the manipulation of electricity costs by the Power Sector Assets and Liabilities Management Corporation (Psalm).
"We are still awaiting the results of the investigation conducted by the Market Surveillance Committee (MSC) and reportedly confirmed by the Philippine Electricity Market Corporation (PEMC) board. There is no formal receipt of the report yet. Nevertheless, upon receipt of such report, the ERC will act with dispatch on this because of national interest," said ERC chairman Rodolfo B. Albano Jr. on Wednesday.
Citing Section 45 of the Republic Act (RA) 9136 or the Electric Power Industry Reform Act (Epira), Albano said the ERC may motu proprio take cognizance of the investigation results or if disputed by Psalm, treat it as a petition for dispute resolution.
Albano also said the ERC's actions shall include the verification of the facts stated in the investigation report and the determination of whether the concerned entities acted within the limits of their respective authorities.
Moreover, in resolving the investigation or dispute, he said the ERC may, in the exercise of its authority and if warranted by the evidence adduced, impose price controls and order the disgorgement of excess profits.
"We assure the public that ERC will act with dispatch and utmost impartiality on this matter. We remain true to our mandate to promote competition, encourage market development, ensure customer choice and penalize abuse of market power," Albano added.
This, as Psalm admitted that "their offer prices increased" during the third and fourth month to recover production costs and losses.
In the investigation report submitted by the, Psalm trading teams "acted in collusion to fix the price in the wholesale spot electricity market (WESM)."
"While the traders said they were acting independently of each other, it is rather unnatural for all of them to shift to the same strategy of bids based on production cost at the same time," the MSC report said.
The three trading teams confirmed that "price offers starting last August 30 were based on total production cost recovery."
The investigation also showed that the three plants from Ilijan, Sual and Pagbilao simultaneously placed a bid of P10,000 megawatt per hour (mwh) during the 10 to 11 a.m. trading period last August 30 considering the their costs of production were "different".
The Enforcement and Compliance Office (ECO) said in the previous trading day, the offers of the three plants for the first block were different and only ranging from P2,000 to P5,000 mwh.
"There is nothing wrong with increasing offer prices particularly if driven by scarcity of supply during peak hours. On the contrary, to induce artificial scarcity by withholding some of their capacity to justify increasing offer prices is totally different and considered uncompetitive behavior," report said.
It noted the "non-competitive manner of recovering the losses Psalm incurred during the first two months", which prompted power cost to shoot up by 73 percent from the first month and 58 percent in the second month.
Energy Secretary Raphael Lotilla, meanwhile, said sanctions would not be imposed on Psalm because it was anticipated that mistakes would happen since WESM is a new concept in the market, which is why they have given it six months to operate.
"The financial penalties were suspended for the first six months in anticipation that mistakes can be made," Lotilla said, stressing that the suspension of the penalties was not made only now.
He added that while it is clear that MSC found that movements of the prices in the WESM are clearly fixed, he stressed that measures have been imposed to correct the error.
Lotilla also said they have laid out measures that would ensure that the mistake would not happen again as well as make sure that the increase would not be passed on to consumers.
The measures include transferring 70 percent of the total energy output of the independent power producers (IPPs) power plant under contract with the National Power to the IPP administrator' facilitation of the universal levy; and issuance of additional trading guidelines.
Lasse Holopainen, head of PEMC said they have settled the figures for the third month while the fourth month is still being computed.
"We already have the preliminary numbers but we have to validate it first," Holopainen said during a press briefing at the Senate.
It would be recalled that Manila Electric Company filed a complaint before the Energy Regulatory Commission (ERC) following the increase in the price of electricity at WESM from the average price of P2.788 per kilowatt hour to P4.88 per kWh during the August 26 to Sept. 25 trading period.
Lotilla said although the ECO did not find Psalm as having acted in "bad faith", they would still have to answer to the ERC, which has jurisdiction over it.
Malacañang, for its part, said it is confident of the ability of the Wholesale Electricity Spot Market (WESM) to repair itself considering that it has only been in existence for five months.
"We are confident in the capacity for self-repair by the Wholesale Electricity Spot Market which is still in its infancy," Press Secretary Ignacio Bunye said.
But Bunye, who is also Presidential spokesman, said the energy department is stepping up its monitoring of the WESM to prevent a recurrence of the reported price manipulation by Psalm.
He said President Gloria Macapagal-Arroyo will consider the recommendation of the PEMC, the operator of the WESM, to transfer control and management of at least 70 percent of the energy output of independent power producers (IPPs) to the IPP administrators who should come from the private sector.
He also said the President is committed to defend consumer welfare and act on the basis of public interest. (MSN/JMR/Sunnex)
