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ERC urged to stop Meralco cartel creation

THE CONSUMER GROUP Matuwid na Singil sa Kuryente Consumer Alliance (MSK) has filed a petition with the Energy Regulatory Commission (ERC) to stop the creation of a Meralco cartel with five power generation companies whose  questionable midnight negotiated  power supply contracts could result in excessive charges  amounting to P12 billion a year for 20 years.

In a press statement, MSK executive director Evelyn Viray Jallorina said cartelization of the power sector is specifically prohibited by the Epira Law and the Energy Regulatory Commission has a clear mandate to investigate and prevent cartelization, abuse of market power, anti-competitive behavior and monopolization specially the power generation sector.

MSK identified the power generation groups unde the Meralco-Meralco PowerGen cartel as Aboitiz, DM Consuji, Global Business Power, San Miguel, and EGAT of Thailand,

In its 20-page petition, MSK alleged that in addition to the 4,011mw of 20 year power supply contracts which Meralco signed, its chosen strategic partners already own and would own 10,575mw of power generating capacity in the country by 2021,  resulting in a cartel with a total of 14,586mw of the country’s installed capacity and approximately corner 70% of the energy needs of the top three distribution utilities, Meralco, Visayan Electric, and Davao Light.

“Our national power demand is projected to be only 15,732 in 2020 and 20,090mw in 2025,” Jallorina said.
    
The consumer group claims that their studies showed that negotiated power supply rates are 10 to 15% higher than those with competitively bid contracts and those with truly independent companies.
    
MSK said the estimated excessive charges from these negotiated contracts will be at least P12 billion a year for the 20 year term of the contracts.
    
MSK is asking ERC to hold the approvals of the power supply agreements of Meralco and Meralco PowerGen with Redondo Power 225mw with 49% partner Aboitiz Energy; Atimonan One 1,200mw with minority partner Aboitiz; St. Raphael Power 400mw with DMConsunji who will own 50%; Global Luzon 600mw with  44% partner Metro Bank Group; Central Luzon Premiere 528mw with San Miguel Power; Mariveles Power 528mw with San Miguel Powerand San Buenaventura Power 450mw with 49% partner EGAT of Thailand.
    
Based on their ERC applications, Meralco had guaranteed the purchase of 28.074 Billion kwh a year of power from these sister generators, equivalent to 100% of its base-load power supply.
    
MSK said it is the duty of the ERC to suspend its processing and approval of the seven (7) midnight power supply contracts and make a determination first if those contracts will result to cartelization and assure the protection of public interest as provided for under Section 43(k) and 45 of the Epira Law.
    
“Evidently, the ERC commissioners committed a misjudgement for extending the CSP deadline.  What cannot be argued however is that at this time it is its responsibility to protect against cartelization under Section 43(k)  of the EPIRA Law  and their unwillingness to even investigate and make a determination as their commiserated duty motu proprio  (Section 45) would be hard to defend,” MSK said.
    
The power supply contracts were signed on April 26 and 27 2016 without benefit of competitive bidding or Competitive Selection Process as a result of the extension to April 30, 2016 by the Energy Regulation Commission of the original legal deadline of November 6, 2015.
    
The extension was supposedly to allow for those who had signed power supply agreements as of November 6, 2015 but needed additional time to prepare the documentation and file the respective applications with the ERC. Meralco’s contracts on the other hand were signed 171 days after November 6, 2015 and only 4 days before the new deadline of April 30, 2016 given by ERC, MSK said in its petition.
    
This concentration of generating capacity among the limited six (6) companies will also eliminate true competition in the WESM power spot market and would be harmful to the electric consumers.
    
According to Jallorina, cartelization of the power sector is specifically prohibited by the Epira Law and the Energy Regulatory Commission has a clear mandate to investigate and prevent cartelization, abuse of market power, anti-competitive behavior and monopolization specially the power generation sector..
 
MSK said the negotiated contracts are tantamount to self-dealing in a grand scale at the expense of the consuming public. Meralco’s public service franchise requires them to give consumers the least cost power. Why are they not subjecting them to competition, the consumer group asked.
    
16 years since the passing of the EPIRA law in 2001, we turned a Napocor monopoly in power generation into a private sector oligopoly.  And worse this cartel or oligopoly also dominates the distribution sector, a market power that Napocor never had, according to MSK.