Power supply woes artificial: Lack of state control blamed for looming huge power rate hikes

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Transmission Lines. Photo courtesy of NGCP
Transmission Lines. Photo courtesy of NGCP

MANILA, 7Dec2013 – The supposed tight energy supply is only artificial, and had government not relinquished effective control over energy development to profit-oriented private business, the public would have been spared from the impending huge increase in power rates.

Research group IBON made this assertion following reports that the Manila Electric Co. (Meralco) will hike rates by Php2-3 per kilowatt-hour (kWh). The final figure for the rate hike will be announced on Monday, according to Meralco.

IBON argued that the power supply problem could have been prevented if the maintenance shutdown of the country’s energy sources and power plants were effectively controlled by government. But because it relies too heavily on private business, government has no handle in determining the maintenance schedule of power plants in a way that ensures energy security and protects public interest. This makes the public vulnerable to possible manipulation of supply to bloat power rates.

According to Meralco, the shutdown of Malampaya and of the other power plants forced it to buy from the Wholesale Electricity Spot Market (WESM) where electricity is being sold at a higher price. IBON noted that the private investors who control the power plants are the same investors that dominate the WESM. Thus, it raises a legitimate suspicion that the simultaneous maintenance shutdown of the power plants could have been staged to raise demand for volatile WESM power.

The group explained that the maintenance shutdown of Malampaya started on November 11, the same date that President Aquino put the country under a state of calamity because of Yolanda. Energy officials already knew then that it will trigger a big spike in power rates. At that time, energy supply in Luzon was already tight due to a series of maintenance shutdowns of major power plants. But instead of ensuring that Malampaya will remain operational, especially in a state of national calamity, government’s response was lacking as the source of 40% of Luzon’s power needs was cut off, triggering a new round of huge rate hikes.

Meralco has already implemented a huge increase in power rates in November, raising its rates by Php1.24 per kWh. It cited the maintenance shutdown of several big power plants as the main factor behind the rate hike. These were Malaya power plant Unit 2, Pagbilao plant Unit 2, Sual plant Unit 1, and Sta. Rita Module 20. A number of power plants were also on forced outage, such as the San Lorenzo Module 60, Masinloc plant Unit 1, Calaca plant Unit 2, Quezon Power, and Sual plant Unit 1 in Pangasinan.

IBON urged Congress to investigate the shutdown of Malampaya and the power plants as well as the WESM to determine if the big power investors are abusing the public through their unhampered control over the energy sector. The group cited its October survey showing that 64% of Filipinos already find it difficult paying for power and water.

More importantly, IBON said that policy makers must reconsider government’s energy development program, in particular the Electric Power Industry Reform Act (Epira) of 2001. The group pointed out that the privatization and deregulation of the power sector under Epira have stripped government of its duty to secure energy supply at a reasonable cost and protect the public interest.

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