DOE warns of oligopoly in power sector

THE Department of Energy (DOE) said an oligopoly exists in the power sector more than a decade after the government dismantled the monopoly of state-owned National Power Corp.

In the 18th Status Report on the implementation of the Electric Power Industry Reform Act of 2001, the DOE said the elimination of Napocor’s monopoly was accompanied by the rise of “companies [that] threaten to replace government.”

The report cited the emergence of San Miguel Corp. after only three years in the business. The food and beverage giant’s share of the power sector stood at 21 percent as of April this year with its 3,149-megawatt generating capacity, which is four percentage points away from breaching the ceiling set by regulators. San Miguel’s power-sector assets were secured through the government’s privatization program.

“Due to this aspect, there is a need for ERC and DOE to review the level of interest that these companies hold, specifically the amount of their control/ownership of the existing and additional capacity in the generation sector,” the report said.

The DOE said state-run Power Sector Assets and Liabilities Management Corp., which oversaw the privatization program, should also examine the status of interested buyers with regard to their market share.

Besides San Miguel, traditional power players First Gen Corp. of the Lopez group and Aboitiz Power Corp. control a significant amount of the makret with their 17 and 16 percent shares equivalent to 2,512 and 2,346 megawatts, respectively.

The Epira mandates the privatization of Napocor’s power plants in a bid to improve efficiency and arrest public sector debts by using the asset-sale proceeds to pay off the state firm’s obligations.

To date, PSALM has control over 19 percent of the country’s power-generating capacity, while Napocor has eight percent. The generating assets held by PSALM are Napocor’s contracted capacities with independent power producers located mostly in the Luzon and Visayas grid.

Bulk of Napocor’s remaining assets pertain to power plants in Mindanao. The company also controls generating plants in areas not connected to the main grid such as far-flung areas and remote islands. –EUAN PAULO C. AÑONUEVO REPORTER, Manila Times