Gov’t agencies’ negligence caused electricity price hike

Government was caught napping. That is the emerging conclusion from parallel Senate and House inquiries into the record-high electricity price surge last November.

In four steps of the supply flow was the government remiss:

One, it failed to map out contingencies for the maintenance shutdown of the natural gas facility in Batangas province. This was despite full knowledge that such closure of the country’s biggest and cheapest electricity source was for one month every two years.

Two, the government did not run its 650-MW thermal power plant in Rizal province when needed most. Instead, it made false supply commitments to the wholesale electricity spot market (WESM), thereby creating an illusion of sufficiency.

Three, snoring contentedly, the government ignored consequent spikes in real WESM bids from private generating companies. Likewise unheeded were the cries of distribution firms and cooperatives about the effects on their customers’ wallets.

Four, extending the snooze, the government passed on to Luzon and Visayas consumers the resulting trebled electricity bills. The consumers were supposed to pay the steep bills from December to March. The Supreme Court gave them a temporary reprieve till it determines the validity of the pass-on generation rates. Until when, no one knows yet.

The Dept. of Energy (DoE) is required to ensure alternate power sources during the natural gas shutoff. It has a section that monitors supply situations and another that records historical trends. Energy Sec. Carlos Jericho Petilla says he indeed worked on such substitutes as soon as he took office in Oct. 2012. So why was the government caught flatfooted when the Batangas facility did close in November, a month later than scheduled in fact.

If the DoE had no long-term plan, then its Power Sector Assets and Liabilities Management Corp. (PSALM) could have pitched in during the supply crunch. Sen. Sergio Osmeña III says that had the PSALM restarted even only one of its two Malaya thermal units, the wholesale rate could have gone down from P22 to P12 per kwh.

But the PSALM had other things in mind. It made bids to the WESM that the Malaya plant couldn’t deliver, having been stagnant for two years now.

During the Congress hearings, the PSALM gave all sorts of excuses for its failures. At one point it blamed the privatized National Grid Corp. of the Philippines allegedly for not alerting it about an impending shortage — which it itself had masked with its false WESM bids. It also shrugged that restarting just one unit takes a week and costs P50 million, recoverable only after three months running. Yet it gets P600-million yearly subsidy from the government.

Petilla is the PSALM vice chairman. The chairman is Finance Sec. Cesar Purisima, with Economic Sec. Arsenio Balisacan, Budget Sec. Florencio Abad, Trade and Industry Sec. Gregory Domingo, and Justice Sec. Leila de Lima dominating the board of directors. They didn’t think of having PSALM coming to the rescue of millions of electricity users.

The WESM is operated, stock market-like, by the largely private Philippine Electric Market Corp. PEMC is chaired by Petilla, however. The frenzied selling of high rates to the Meralco, Luzon’s biggest distributor, should have roused him from slumber. It didn’t, not even when the bids surpassed P60 per kwh, way too high for electricity consumers at the end of the supply chain.

Naturally, Meralco and other distributors-retailers sought authority from the Energy Regulatory Commission to increase their bills to customers. They were not to profit from the hike; they were merely passing on the price at which they were forced to buy from the WESM during the natural gas shutoff.

The ERC approved without thinking. When consumers howled, Malacañang mechanically retorted that the hikes were unavoidable. It had appointed three of the four present commissioners (there is one vacant seat). When consumers cried louder, administration allies in Congress pinned the blame on the “ineffectual” ERC chairwoman, Zenaida Ducut, an appointee of the despised past Arroyo Presidency. Oust her, they yelled, for Ducut did seem to not know what her job was all about. But then, it was pointed out that the ERC’s decisions were collegial — by the four commissioners dominated by Malacañang men.

Meralco offers a way out of the impasse. It is petitioning the ERC to recalculate the power rate increases without the windfall profits of the generation companies. Congress investigators surmise that the power firms made before last Christmas a fat bonus equivalent to seven Christmases. For the sake of consumers, maybe the ERC can tell them to be content with just one. Thence, Meralco and the cooperatives would not need to pass on too steep generation charges. –Jarius Bondoc (The Philippine Star)