After Meralco, it's Wesm's turn

DIE HARD III
Herman Tiu Laurel
11/8/2010



First it was the Manila Electric Co. (Meralco); now it’s the Wholesale Electricity Spot Market (Wesm) and the National Power Corp. (Napocor); another time, it will be the National Grid Corp. of the Philippines (NGCP); and then it’ll be Meralco’s turn again. The power rate gouging just goes on and on, constantly keeping our power rates the highest ever in Asia — and getting higher still!

Last week, just as torrential rains compelled authorities to release overflowing water from hydro-electric dams such as Angat, raising public expectations for a further reduction of November power rates, given this bountiful hydro power source, Meralco announces that it will raise power rates anew by 98 cents per kWh due to higher electricity prices from the Wesm. Translated, this means that virtually half of the increase (at 55 cents per kWh) from P3.68 to P4.85 per kWh will come from Meralco while the other half will be used to account for Napocor’s so-called “under-recoveries” the past months.

The Electric Power Industry Reform Act (Epira) requires Meralco to take at least 10 percent of its power supply from Wesm, which auctions power from all independent power producers (IPPs), supposedly to introduce competition (and lower prices). But these rates are actually manipulated by power distributors that also own IPPs. Napocor’s “under-recoveries,” on the other hand, accrued from government’s artificial intervention in times when it had to mitigate the Wesm’s overcharging by ordering temporary low rates.

The Wesm counts among its participants the IPPs and the buyers-distributors. A common sense view of power cost is that this should not be subject to volatility except for fuel and currency fluctuation, which we actually pay for with the corresponding price adjustments.

However, the Wesm bidding or auction also supposedly factors in demand and its fluctuations, a factor that is extremely vulnerable to manipulation. As demand is affected by conditions of supply, these conditions can be easily manipulated by such claims as the “breakdown” of some plants, “unscheduled maintenance” (as with Malampaya gas), “jellyfish invasions” (at Sual), and even supposed El Niño effects (that could easily be neutralized by foresight and preparation), among many others.

Moreover, the Wesm is managed by the Philippine Energy Management Corp. (Pemc) whose operations (including salaries, expenses, etc.) we, the consumers, pay for to the tune of P622.868 million in 2009 (which was still apparently not enough as the firm sought an additional P108 million late last year), and P800 million this year just for “trading” alone.

The Wesm is without a doubt the same system that California adopted, which gave way to the infamous Enron scandal. Back then, Enron executives manipulated power supply by asking power plants to shut down on various pretexts (such as breakdowns and maintenance), then jacked power prices sky high before leveraging their stocks in the market until the company’s collapse. As a result, the state of California found itself with $50 billion in losses. But then, the Enron executives were later sent to jail; while the Wesm executives here continue to hoodwink the nation.

The local Wesm has been scandal-ridden since its inception, with public investigation being called by Malacañang, the Senate, Congress, and the Pemc itself, as in the 2010 case wherein the Pemc asked the Energy Regulatory Commission (ERC) to intervene against the Wesm based on a letter-complaint from two power utilities for “drastic price spikes” from Jan. 26 to Feb. 25 this year.

Generation prices in the Wesm, accounting for Meralco’s total 55-centavo hike in its November rate, can go as high as P19 per kWh, which is probably close to what it is today. But Meralco itself had just raised its distribution rates in the past months.

By maintaining a tacit modus operandi with the Wesm, the Power Sector Assets and Liabilities Management Corp. (Psalm), Napocor, and the ERC to alternately petition for, approve, and implement power rate hikes, Meralco is perceived to be obfuscating the fact that its franchise area continues to have the highest power rate in Asia, by dazing and off-balancing consumers who are unable to spot a culprit — who’s none other than all of them plus the whole corrupt system, including the legislature and the judiciary, that has propped up the Epira law.

To refresh, the Belmonte Congress in April 2001, before it was set to be replaced by a newly-elected set of legislators, approved the Epira for P0.5 million (supposedly from Meralco) plus P10-million National Electrification Administration (NEA) projects per congressman. The Senate, too, allegedly concurred in exchange for favors from the energy lobby. The judiciary, for its part, has repeatedly sustained the Epira law from consumer suits; thus, ensuring its preservation. Except for Rep. Magtubo in 2001 and Reps. Toby Tiangco and Bernadette Herrera today who have spoken out against the power plunder, Congress has kept quiet the past 10 years.

The foreign interests behind the Epira should also not escape mention. They have worked through the local oligarchs and the Asian Development Bank (ADB) as the latter attached in 2001 its approval of a $950-million loan to the passage of the said law. A weak and illegal Arroyo government, as well as Congress, was naturally unable to resist the financial and political lifeline held out by the ADB.

But just what is the interest of these groups in instituting such laws and mechanisms that complete the process of privatization?

All the IPPs and distribution companies, and now the transmission grid, the NGCP (a.k.a. National “Greed” Corp. of the Philippines), are indebted to foreign financiers and have foreign partners or principals. Listing in the stock market allows these foreign financial predators to cash-in regularly on their windfall profits.

At the same time, as the nation gets deeper into debt, these vultures will gain more access and control over our strategic energy needs — which is no different from what they have done to our food, water, and health.

There is no solution except for consumers to revolt. Monday, as this column comes out, is another day to register our protest with 10 minutes of lights out against power plunder from 7 to 7:30 p.m. Let’s do this before they ultimately control our entire lives and territory.

(Tune in to Sulo ng Pilipino, Monday, Wednesday, and Friday, 6 to 7 p.m. on 1098AM; watch Politics Today with HTL, Tuesday, 8 to 9 p.m., with replay at 11 p.m., on Global News Network, Destiny Cable Channel 21; visit our blogs, http://newkatipunero.blogspot.com and http://hermantiulaurel.blogspot.com)