Palace: Too soon to rule out power rate fixing

Sen. Sergio Osmeña III (Inquirer file photo), Energy Secretary Jericho Petilla (AP file photo), Communications Secretary Herminio Coloma (Inquirer file photo)

Malacañang is apparently not buying Sen. Sergio Osmeña III’s pronouncement that there was no collusion among the energy market players to manipulate power rates when the Malampaya natural gas plant shut down for maintenance work for one month last year.

Communications Secretary Herminio Coloma said it was difficult to draw conclusions at this point, when the internal investigation ordered by President Aquino and the Senate inquiry into the issue have yet to be concluded.

“There is still an ongoing inquiry by the Department of Energy (DOE) and the Department of Justice (DOJ) through its Office for Competition, and the President is still awaiting the findings from the inquiry,” Coloma said on Saturday.

Coloma was reacting to an interview that Osmeña gave dwIZ Radio on Saturday in which the senator placed the blame for Manila Electric Co.’s (Meralco) P4.15 per kilowatt hour (kWh) rate adjustment on Energy Secretary Jericho Petilla and other energy officials rather than on Energy Regulatory Commission (ERC) Chair Zenaida Ducut for approving the Meralco rate increase petition.

Osmeña, chair of the Senate energy committee that is conducting an investigation into Meralco’s record-high rate increase that has roiled consumers and lawmakers, also ruled out any collusion among the power sector players.

Nothing definitive

“These matters are still being assessed and no definitive conclusions have been reached,” Coloma said when asked if there were enough grounds to make Petilla liable.

“Perhaps it is best that we wait for the Senate committee report,” he said.

The investigations at the Senate, DOE and DOJ were prompted by the unprecedented P4.15/kWh adjustment that Meralco is seeking to collect from its 5.3 million customers to pay for the P9.6 billion it supposedly incurred in additional generation costs when the Malampaya facility that supplied power to the distribution utility shut down for a month last November and December, exacerbated by the unscheduled shutdown of other power plants as well.

Meralco said it was forced to buy power from the wholesale electricity spot market (WESM) at the rate of P62/kWh, which directly led to the higher generation charge it is passing on to its customers.

The rate increase was to have been implemented in December, February and March but the Supreme Court issued a temporary restraining order last December to stop Meralco’s going ahead with the increase.

Aquino’s position

Legislators and even President Aquino himself have noted why, if the Malampaya shutdown was a scheduled biennial event, Meralco could not have planned for it.

“There is periodic maintenance required. That’s a foreseen event or foreseeable event. If you know that your producer of fuel will not be able to produce, then you have to find a substitute. So preparations should have been made for foreseeable events,” Mr. Aquino said on Thursday, as quoted by Coloma.

It appears that the President is inclined to agree with militant House party-list members who believe that the price of electricity went up “because energy players colluded or manipulated the price to go up.”

“Our impression is, there are people who really made a very significant profit from this situation under the Epira (Electric Power Industry Reform Act of 2001). There is a need to look into possible collusion and abuse of market power. And if there were unjustifiable profits, the ERC can order a disgorgement of these profits,” Mr. Aquino said, again as quoted by Coloma.

‘Petilla to blame’

But Osmeña is more inclined to blame Petilla and the state-run Power Sector Assets and Liabilities Management Corp. (PSALM).

At the Senate hearing last Thursday and again in the dwIZ interview on Saturday, he argued that if Petilla as energy secretary had ordered the 600-megawatt Malaya thermal plant to offer its capacity at the WESM, the price of energy at the spot market would have been reduced.

He insisted that the DOE and the PSALM, which owns Malaya, were to blame for their failure to activate the plant, which serves as a reserve power facility.

“The DOE and the PSALM erred… by not dispatching [electricity from] Malaya. That’s their big error,” he said.

Instead of Ducut, Osmeña said Petilla should be the one to resign.

“He’s the one supposed to move. He’s the one responsible,” he said.

He told dwIZ on Saturday that Petilla should quit “if he still doesn’t know how to do his job.”

“If he doesn’t understand [how the WESM works] after one and a half years as secretary, I suggest that he resign. Because I will bring 100 witnesses to tell you that this is the way the WESM works,” Osmeña said.

Osmeña was reacting to remarks attributed to Petilla that the government, under the Epira law, was proscribed from influencing the cost of electricity—which, as Osmeña apparently believes, could have been done by operating the Malaya plant to ease the supposed supply shortage when Malampaya shut down.

Osmeña said Petilla and energy officials were “lying through their teeth” when they said the government couldn’t influence energy prices by operating its own power assets.

He noted that Petilla himself said the government needed to own a power plant.

“All right, so now you own a plant. What happened when there was an emergency, you didn’t operate it anyway, you idiot,” Osmeña said.

Petilla and PSALM officials told the Senate hearing on Thursday that the systems operator, the National Grid Corp. of the Philippines, had not notified the PSALM about any insufficiency of supply for Malaya to come into play. They noted that a summary report from the WESM itself showed no “insufficiency of supply.”

Petilla did not respond to text messages and calls regarding Osmeña’s call for his resignation.

‘Ducut not to blame’

Osmeña said the calls for Ducut to resign were “for the wrong reasons.”

“She has a fixed term but I’m not protecting her,” he said.

“Those who filed [a complaint against her] don’t understand how the electricity market works. She can do nothing [about the price adjustments],” he said.

The Akbayan party-list group on Thursday filed a complaint against Ducut in the Office of the President, accusing her of gross neglect of duty for not looking out for the interest of consumers when the ERC approved the Meralco rate increase.

They also asked that Ducut be preventively suspended while the charges against her were being investigated.

“I will not blame Chairman Ducut for approving the rates that were obtained in the clearing price in the WESM,” Osmeña said.

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