ERC pushes ‘serious level of scrutiny’ on Meralco group
Monalisa Dimalanta
MANILA, Philippines — Now is a good time for a “serious level of scrutiny” amid advances made by Manila Electric Co. (Meralco) outside its core power distribution business, according to the chief of the Energy Regulatory Commission (ERC).
However, an analyst warned that an “excessive government intervention” can dampen investments in the sector.
ERC chair Monalisa Dimalanta said on Friday that reviewing potential competition risks posed by Meralco is just “timely.”
In particular, Dimalanta referred to the electricity distribution giant’s power supply agreements (PSAs) with its allied firms.
“I wouldn’t say long overdue because it is only in recent years that Meralco grew its generation and retail supply business, but it has grown fast,” she told Inquirer.
“The magnitude of the capacities of these natural gas plants contracted with Meralco — on top of other Meralco-affiliated plants also with PSAs with the parent [distribution unit], such as TerraSolar — as well as the pivotal role these gas plants play in the system as a whole merit such serious level of scrutiny,” the official added.
No more than half
Dimalanta said that no fixed capacity could trigger a probe. But the law states that power sourced from associated firms should not be more than half of the utility’s demand.
She said penalties could include the imposition of price controls, the return of ill-gotten profits, among others.
Dimalanta said these in response to questions related to Energy Secretary Raphael Lotilla’s recent remarks.
READ: Meralco under the microscope for market clout
Lotilla stressed the need to work closely with the ERC and the Philippine Competition Commission, given Meralco’s “complex organization.”
He also noted Meralco’s alleged high rates despite sourcing almost half of its power requirements from affiliates.
Meralco has long been a crucial player in the energy sector. Its distribution operations covers more than eight million customers. Such a subscriber base accounts for almost half of the country’s electricity needs.
The group has also cemented its name in the generation business, with subsidiary Meralco PowerGen (MGen) leading.
MGen has a diverse portfolio of power generation facilities, flaunting a 4,953-megawatt capacity from traditional renewable sources.
To ensure competitive prices
According to Dimalanta, keeping a close watch on Meralco’s energy deals is necessary to ensure competitively priced electricity. She cited the mandate of the Electric Power Industry Reform Act of 2001 (Epira).
“We need to remember that one of the objectives of Epira is to unbundle the supply chain to promote transparency and competition, and it is through competition that affordability is achieved,” she said.
The ERC chief said the regulator has started looking into Meralco’s power pacts with South Premiere Power Corp. and Excellent Energy Resources Inc.
Both firms’ facilities were tapped for the delivery of more than 2,00 megawatts of power to Meralco.
These natural gas facilities are jointly owned by MGen, San Miguel Global Power, and Aboitiz Power.
Good or bad intervention?
In a separate interview, Peter Garnace, equity research analyst at Unicapital Securities Inc., said discussions between regulators and antitrust agencies are a natural regulatory matter.
This is “to ensure that Meralco’s market power is kept in check—safeguarding consumer interests and promoting a fair, competitive energy landscape,” Garnace said.
He also said the current administration’s recent moves just show its commitment to increasing renewables capacity and making power cheaper.
“However, singling out specific players or excessive government intervention could stifle investment in the sector,” Garnace said.
Meralco chairman and chief executive officer Manuel V. Pangilinan earlier said the group does not earn on the generation side, but it continues to “get the brunt of the criticisms.”
