By Lenie Lectura
A MEASLY P50,000 to P50 million in penalty awaits the power-generation companies found to have violated the must-offer rule of the government, but Energy Secretary Carlos Jericho L. Petilla wants the penalty increased to an amount commensurate to the firms’ actual gains.
“I think P50 million is too small. The penalty should actually be more than what they actually gained. We don’t want to set an environment in which it is cheaper to violate than to comply,” Petilla said on Monday morning after the launching of the Energy Virtual One Shared System (EVOSS) in Makati City.
On Tuesday the Energy Regulatory Commission’s (ERC) special investigation unit (IU) publicly released its own probe on the record-highpower rates in 2013. It has identified 12 generation firms that withheld their capacity during the October to December 2013 supply months, an act violating the must-offer rule of the Wholesale Electricity Spot Market (WESM).
Their anticompetitive behavior led to record-high hikes in the December bills of the Manila Electric Co. (Meralco) which, according to the ERC IU report, was also included in the list of violators.
ERC Executive Director Francis Saturnino Juan said after the report was released that the range of imposable fines under Electric Power Industry Reform Act (Epira) is from P50,000 to P50 million.
When Petilla was asked how much should be meted out against the violators, he had this to say, “The existing penalty is antiquated. I leave it to the ERC to decide but the penalty should be commensurate to the profit they made plus more.”
In fact, he said, the P50,000 to P50-million penalty range is too small, compared to the penalty imposed by the Philippine Electricity Market Corp. (PEMC), operator of the country’s trading floor of electricity.
“We, at PEMC, imposed a fine of P240 million,” added Petilla, who chairs PEMC.
The PEMC launched its own probe last year. It cited the following power plants that refused to offer, sell, or schedule the maximum available output of reserve to the WESM.
Limay diesel power plant of Panasia Energy Inc.; Therma Mobile diesel plant of Therma Mobile Inc. (TMI); Bauang diesel plant of 1590 Energy Corp.; Malaya thermal power plant of the Power Sector Assets and Liabilities Management Corp. (PSALM); Casecnan hydropower plant of PSALM; CIP II Bunker C-fired power plant of CIP II Power Corp.; TAPGC diesel power plant of Trans Asia Power Generation Corp.; Makban geothermal power plant of AP Renewables Inc.; Subic diesel power plant of Udenna Management and Resources Corp.; San Roque Hydropower plant of Strategic Power Development Corp.; Mariveles coal-plant of GN Power Mariveles Coal Plant Ltd. Co.; and Calaca coal-fired thermal power plant of Sem-Calaca Power Corp.
Back then, PEMC ordered TMI to pay P234.9 million in penalty. There is now an ongoing court case on this.
PEMC also imposed a total penalty of P89 million against PSALM.
Petilla said the findings of PEMC and that of ERC’s IU are the same, except for including Meralco in the latter’s report and the penalties imposed.
“We, at PEMC, did not include Meralco for obvious reasons that it did not offer in the market, being a distribution firm. So, we can’t penalize Meralco,” said Petilla, adding that under Epira the sanction could only be in a form of penalty.
For its part, Meralco Legal Head William Pamintuan said the utility firm maintains in its assertion which it had articulated before the ERC, Congress and Supreme Court that it had acted strictly in accordance with the decision of the ERC approving the power supply agreement with TMO which took into account Meralco’s least obligation to its consumers.
“The records will bear that Meralco complied with applicable market rules and did not engage in any anticompetitive behaviour in its supply contract,” Pamintuan said.
Petilla, in his personal view, said the ERC IU report should have included “another conclusion” and not just alleging that the 12 firms could have committed anticompetitive behavior.
“It is not conclusive yet because it has to undergo another process, according to the IU. For me, it’s as simple as saying ‘there was anticompetitive behavior committed’ or there was none. Basically, my conclusion is that it’s similar to the findings of PEMC,” he said.
Petilla said it is the ERC, and not the PEMC, that could rule on whether there was anticompetitive behavior committed or none. “The penalties have already been defined by the PEMC. I was hoping that the ERC report should have put an end to [anticompetitive behavior].”
Still, Petilla said, the ERC IU report is “credible” because its findings were based on data that also came from PEMC. “The numbers are not going to lie. As far as the technicalities are concerned, it’s credible.”
The ERC, for its part, assured on Wednesday that it will come up with a more conclusive report after it reviews the findings of IU.
Juan said that concerned parties, particularly the 12 power firms and Meralco, would be accorded due process before the ERC en banc decides on the imposition of penalties, if warranted, and grant of other reliefs. “Yes, but after affording respondents due process,” Juan said in a text message when asked if the commission is expected to tackle the issue on anticompetitive behavior. The IU already filed formal complaints against the 12 firms before the commission. Juan said that upon receipt of the complaints, the ERC shall issue the orders for respondents to file their respective answers.
ERC Chairman Zenaida Ducut is up for retirement in July. Petilla could not stress enough the importance of the ERC’s role in the investigation. Petilla said it would not matter if the ERC investigation would be finished or not in time when Ducut steps down. What is more important is “the integrity level of the ERC commissioners in order to level the playing field.”
The energy chief also said that what’s important are the safety measures put in place in order to prevent a repeat of a market abuse.
“I think the ERC should pursue the liability aspect for it to make a conclusion but what is most important is that we have arrested the problem in order to prevent a repeat. We have done that by putting a cap and being stringent in the filing of reports of plant shutdown, etc.,” Petilla said.