Carpio hits Meralco for 'price fixing'

by Ina Reformina, ABS-CBN News

Posted at Feb 04 2014 07:49 PM | Updated as of Feb 05 2014 05:35 AM

'Meralco should only pass on to consumers actual cost of electricity it bought from genco'

MANILA (1st UPDATE) - Supreme Court Senior Associate Justice Antonio Carpio on Tuesday compared Manila Electric Company's (Meralco) control of electricity prices in the energy market to illegal price-fixing in the stock market.

Carpio, in his interpellation of Meralco lawyer Victor Lazatin during the oral arguments on several petitions against the power rate hike, said Meralco acted as the "buyer and seller" at least 25 times during the Malampaya shutdown and at the Wholesale Electricity Spot Market (WESM).

He said Meralco controlled the clearing price of electricity at the ceiling price of P62 per kilowatt-hour, the highest possible price of power at the spot market.

Carpio said while Meralco bought power from Therma Mobile that has a contracted price of only P8.65 per kwh, it passed on to consumers the WESM price of P62 per kwh.

He said this is contrary to the Electric Power Industry Reform Act (EPIRA) that mandates that only the actual cost of electricity brought from generation firms should be passed on to consumers.

Lazatin, however, said Meralco cannot be faulted for this because it only followed WESM rules.

He said that while Meralco dictated Therma Mobile's P62 per kwh bid consistent with its power supply agreement, it did not know what the closing price would be.

Meralco warns of brownouts

Meantime, Meralco reiterated its plea for the lifting of the 60-day temporary restraining order (TRO) the Supreme Court (SC) handed down last December 23 on the implementation of the distribution firm's unprecedented P4.15 per kwh rate adjustment.

Meralco claimed that this will spare the economy from a spate of blackouts.

Speaking before the justices of the high court during the continuation of oral arguments on several petitions against the rate hike, Lazatin said that power outages will be inevitable once summer hits should the generation charge remain at P5.60 per kwh because of the TRO.

He argued that the demand for electricity spikes at an average of 8% in March, 16% in April, 17% in May, and 16% in June.

The increase in demand, however, comes with an expected decrease of over 2,000 megawatts in Luzon alone, brought about by low water levels that render hydro-power plants an unreliable source of power during summer, he stressed.

Meralco said that this will lead to higher fuel cost to power other plants, such as coal-fired powerplants, to address the energy demand.

"The fuel cost alone for bunker and diesel is approximately between P6.11 to P7.95 or almost P8. We anticipate that there will be a shortage if the SC will not lift the TRO on the generation charge and fix it at P5.60. The economic effects will include brownouts," Lazatin said.

Should the high court refuse to lift the halt order, Meralco said the magistrates might as well expand the TRO to include generation companies that continue to charge the distribution firm with the "high" generation charge in the last quarter of 2013.

"Meralco has received threatening demands from the WESM (Wholesale Electricity Spot Market), NGCP (National Grid Corporation of the Philippines) and 6 gencos not only for the December bill but also for the January bill asserting that it is not covered by the TRO by this honorable Court," Lazatin said.

Petitioners earlier expressed dismay at Meralco's "brownout threats," arguing that Meralco should sufficiently prepare for fluctuating power demands to cushion its impact on consumers, including planning ahead of time where to get its power supply at a low cost.

Meralco maintained that the petitions should be junked because the power hike issue should be heard by the Energy Regulatory Commission (ERC), not the SC, since the latter has the technical expertise on the power industry.

Meralco argued that it violated no constitutional provision, nor any provision of the Electric Power Industry Reform Act (EPIRA) which grants Meralco the authority to "automatically" pass on to consumers a corresponding increase in generation charge.

"Under EPIRA law and its implementing rules, Meralco has the right to charge at one time and if it was to implement this staggered, it it has to get the consent of ERC. The approval of ERC was done in accordance with rules... these rules are valid," Lazatin said.

Lazatin and co-counsel, retired SC Associate Justice Florentino Feliciano, argued that regulation is a matter of policy best left to the discretion of the state's political departments, not the courts.

Factual issues are not tried by the courts, they added.