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Legislator hits price gouging by power suppliers through WESM

10 December 2013 No Comment

PRESS STATEMENT

December 10, 2013

Reference : ACT Teachers Rep. Antonio Tinio (0920-9220817)

 

ACT TEACHERS Rep. Antonio Tinio on the Meralco power rate hike approved by ERC:

 

A mere 11.5% of supply purchased by Meralco from private power producers through the WESM accounts for 70% of the P3.44/kWh price increase that will be passed on to consumers in the coming months.

 

This seemingly absurd situation points to a massive failure on the part government, particularly the Energy Regulatory Commission, to regulate and protect the public from the predatory behavior of a handful of power producers,  who were able to dictate the price of electricity sold in the WESM.

 

Three power producers were able to dictate the price of electricity in the spot market during the critical month of October 26 to November 25. These are the Aboitiz-owned Therma Mobile, the Bauang Diesel Power Plant, likewise operated by the Aboitiz group, and the Limay Combined Cycle Plant owned by Millennium Holdings, Inc. of businessman Mike Valencia. From an average rate of P13.74/kWh before the Malampaya shutdown, the spot price skyrocketed to an average of P33.22/kWh.

 

Needless to say, the bulk of the price increase to be borne by consumers will be cornered by these three power producers in the form of unprecedented profits arising from their successful manipulation of the WESM.

 

The predatory behavior is best illustrated by the behavior of the Aboitiz group’s Therma Mobile during this period. Initially, it had a short-term contract with Meralco to provide 234 mW of electricity at a cost of P8.65/kWh. However, Therma Mobile  delivered only 100 mW at this price and chose to sell the rest of its capacity on the WESM, resulting in the jacked-up prices.

 

Most telling of all, information provided by the Philippine Electricity Market Corp., which administers the hate WESM, shows that during the critical month when Malampaya was down, electricity was being sold on the spot market at the bid cap of P62/kWh even during periods of low demand and Sundays, further indicating price manipulation.

 

This unprecedented increase has shattered yet another illusion peddled by the advocates of privatization. WESM was and continues to be touted as a mechanism that would reduce electricity rates by bringing market forces to bear on the price of peak power. The harsh reality is far different: a handful of players can manipulate the market and gouge the public seemingly at will, with the government regulator, ERC, unwilling to intervene.

 

Yet again, the privatization of the power industry is exposed as a failure, the EPIRA as a law that enables private power corporations to gouge massive profits from consumers, and the ERC as a regulator that aids and abets this highway robbery. #

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