Oppose Meralco's Threat to Trigger Brownouts if TRO is not Lifted! Revoke Meralco's License and Repeal EPIRA!

Meralco, the electricity monopoly, threatened its 5.3 million consumers with brownouts if the temporary restraining order (TRO) on its scandalous 4.5 peso per kilowatt hour is not lifted.

The threat was made by Meralco lawyer Victor Lazatin during the Supreme Court hearings on the rate hike on Feb. 4.

Consumers will not tolerate this blackmail.

On the pretext of losing vast amounts of money, this monopoly, which made 17 billion pesos in profits in 2013, is trying to derail the investigation of its role in the suspicious series of events that led to the rate increase. Meralco has put the blame on seven of its power suppliers that went offline when the Malampaya natural gas plant underwent maintenance from Nov. 11 to Dec. 10, 2013, allegedly forcing Meralco to go to the Wholesale Electricity Spot Market (WESM) for its power deficit. But documents submitted to the Supreme Court showed that it was Meralco’s order to a power supplier--Therma Mobile—that it controls to bid at the maximum allowable price of 62 pesos per kilowatt hour no less than 25 times during that period that was responsible for the skyhigh clearing price at WESM.

Meralco gamed the market, to the detriment of its consumers whom it is obligated to supply at the least possible cost. Moreover, Meralco would not have resorted to buying at WESM’s inflated prices had it made provisions for reserve power from its suppliers in the event of a foreseeable event like the Malampaya shutdown. As President Aquino himself has said, ““There is periodic maintenance [of Malampaya] required. That’s a foreseeable event. If you know what producers of fuel will not be able to produce, then you have to find a substitute. So preparation should have been made for foreseeable events.”

But the problem goes beyond Meralco. It goes beyond the Energy Regulatory Commission, which is the classic example of a regulator that is in the pocket of the regulated. It goes beyond the Department of Energy, which has shown itself to be completely incompetent in planning for the energy needs of the country. The main source of the problem lies in the Electric Power Industry Reform Act (EPIRA), which has placed power generation, transmission, and distribution completely in the hands of the private sector.

Privatization has resulted in monopoly control, inefficient power delivery, and sky-high prices, not in more efficiency, less concentration, and lower prices. Meralco, whose profits have risen over 100 per cent since EPIRA went into effect in 2001, is a monstrous example of EPIRA’s failure.

13 years of exploiting consumers is enough! We demand the revocation of Meralco’s license and the repeal of EPIRA.

Social protection, unemployment insurance for Filipinos – ILO, TUCP Partylist

DAVAO City – In a public forum dubbed “Sustainable and Dignified Living for All” organized by the Trade Union Congress Party (TUCP Party List) at ALU Hotel in Davao City today, Mr. Jeff Lawrence Johnson, the country Director for the Philippines of the International Labor Organization (ILO) stressed the importance of having protection of workers against continuing global economic crisis resulting in high global unemployment and increasing threats to lives and livelihoods posed by climate change.

Mr. Johnson said that unemployment is a problem, but the real problem now especially in the Philippines is vulnerable employment.

As of 2013, unemployment rate in the Philippines stood at seven percent (7%) while the gross domestic product (GDP) remained high at around seven percent (7%).

“It is good news that the Philippines still has strong economic growth, but how is this translated to the people. The real challenge for the Philippines is how to achieve sustainable and inclusive growth,” added ILO’s Johnson.

Forty percent (40%) of those with employment are in vulnerable jobs – lowly paid, family workers are unpaid, without security of tenure. ‘The income gap has to be addressed,” remarked Mr. Johnson.

“Social protection such as unemployment insurance will reduce the problems some of the major problems currently faced by the government. If Vietnam can implement unemployment insurance, I see there is no reason the Philippines can’t do it. The challenge for the Congress of the Philippines is how to pass a legislation on unemployment insurance,” said the ILO-Philippines country director.

Responding to Mr. Johnson and speaking before the media and leaders of labor federations in Mindanao, Visayas and Mindanao, TUCP Party –List Raymond Democrito Mendoza committed to file a bill that will mandate guaranteeing unemployment insurance to everyone.

The solon said that the House bill on unemployment insurance that he will file will be in addition to the bill that he co-authors which promotes the welfare of workers in the informal sector – the Magna Carta for Workers in the Informal Economy (MCWIE). The The Committee on Labor and Employment of the House of Representatives conducted its first hearing on the bill on January 22.

In the recently concluded General Assembly of TUCP-Partylist in Davao City on February 3, the Party highlighted the problems of poverty, inequality, and the increasing number of those in precarious jobs in the country.

TheTUCP Partylist Agenda in the next two years will be geared towards realization of quality well-being and life of dignity for everyone. This includes advocacies that promote the interest and welfare of workers, consumers, and other basic sectors of the society on urgent issues such as security of tenure and jobs, stopping contractualization of workers, and pushing for living wage. The Party list shall also pursue steps in the next two years towards expansion and institutionalization of social protection programs which include job guarantee, unemployment insurance, and universal access to social services such as healthcare, water, and electricity.

Workers call for reformatting of the power industry

The power industry needs not just a reboot but a major reformatting to better serve the country’s current and future energy needs and to satisfy the people’s clamour for affordable and sustainable power.

 

This, according to the labor coalition Nagkaisa, should be the new frame in seeking amendments or replacement to the failed Electric Power Industry Reform Act or EPIRA.

 

The group made this challenge as some of its leaders attended the Department of Energy’s (DoE) consultations on EPIRA amendments while its members called for the law’s scrapping in a demonstration held outside the Legends Hotel in Mandaluyong City. 

 

“A bad law like EPIRA may need some amendments to address the current mess.  But a wrong policy such as wholesale privatization can only be addressed by replacing it with a new one, a better one,” stated Josua Mata, one of the convenors of Nagkaisa.

 

Mata, who is also the secretary general SENTRO, told the DoE that workers will engage the amendment process in Congress and at the same time work for its replacement when such is probable amid the incurability of EPIRA and the viability of other options.

 

Another convenor, Louie Corral of the Trade Union Congress of the Philippines (TUCP), said amendments are necessary on issues of cross-ownership; the generation being a ‘non-public’ utility, reforms in the ERC (composition and rate-setting methodology); privatization of the transmission system and the Agus-Pulangi hydro complexes in Mindanao; retail competition and open access; and on electric cooperatives, among others.

 

It can be recalled that in a petition letter submitted to President Aquino during the Labor Day celebration of 2012, Nagkaisa raised the following issues to the Executive, some of these require legislative actions:

 

1. Removal of oil and power from EVAT coverage;

2. Stopping the indexation of/or pegging the prices of natural gas and geothermal steam to international prices of oil and coal;

3. Stopping the ERC’s implementation of Performance Based Rate (PBR) methodology as this allows power firms to increase rates in anticipation of future expansion and other capital expenditures; and,

4. Reforming the Energy Regulatory Commission (ERC).

 

The group also bats for the re-nationalization of the transmission lines and the permanent stay in the planned privatization of the Agus-Pulangi.

 

Partido ng Manggagawa spokesperson, Wilson Fortaleza, another convenor said the country and the people will not accept another 13 years of failed rule under EPIRA.

 

“It’s time to rethink and come up with a new model of public power that is completely different from what the industry is, before and under EPIRA. Fortunately we are blessed with so much national potential to do that.  It is only the government that thinks it can’t be done without the prescribed track imposed by the ADB and World Bank,” said Fortaleza.

Government’s political will to stop P4.15/kWh power rate hike; Meralco and IPPs are not ‘scot-free’

The P4.15/kWh power rate increase announced and started to be collected by Meralco last December is not the first of the power rates increases that we have had. But it is definitely the first rate increase that high – more than three hundred per cent (300%) than the usual power rate hikes that we’ve had so far in the country – and it is probably one of the highest, if not the highest rate of increase in the world. This makes the power rates in the Philippines – a lower middle income country where 60 percent of its labor force live with about $2 or less a day – undoubtedly the highest in Asia, and also one of the highest in the world.

It is already immoral that consumers are always held hostage and taken advantage of by the power firms – Meralco, its independent power producers and other generation companies in this case. And it is greed at its highest form when these immoral acts are done even under a situation when the country is in a state of national calamity.

The Malampaya scheduled maintenance shutdown and forced power outages that Meralco claims are unacceptable excuses for this high increase in its electricity charges for the period November-December 2013. The power firms must exercise prudence in their charges to consumers; they should not be allowed to pass on to the consumers the unwarranted costs resulting from their wrong business decisions or practices nor they be allowed to continue doing business scot-free if they are engaging in predatory pricing and other abusive and anti-competitive business practices.

The Trade Union Congress Party (TUCP Party-list) recognizes the initiatives of the Committees on Energy in both Chambers of Congress and of the Executive Department to find solution to this mess. But it should not be quick-fix remedy; it should be able to hit the nail where the head is. Using Malampaya funds to pay for the high generation rate may not be our best solution, it just makes the power companies scot-free from their anti-competitive and abusive practices that resulted in this record-high power rates charged to customers.

We want to find immediate recourse to stop this unfathomable and unconscionable power rate increase of Meralco. It is also our desire to look for long-term redress in order to protect all electricity consumers against future unjust power rates hikes or spiralling cost of electricity.

When the Electric Power Industry Reform Act (EPIRA) was passed almost thirteen years ago, the intention was not only to stop the financial bleeding of the National Power Corporation and its consequent financial burden to the government and the taxpayers; above all, the objective was to ENSURE QUALITY, RELIABLE, SECURE, and AFFORDABLE supply of electricity.

The P4.15/kWh power rate increase of Meralco goes against the above and other objectives of EPIRA such as ensuring transparent and reasonable price of electricity to enhance the competitiveness of Philippine products in the global market; to ensure fair and non-discriminatory treatment of public and private sector entities in the process of restructuring the electric power industry; and to protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power.

THE GOVERNMENT IS NOT HOPELESS IN THIS CASE. IT CAN DO SOMETHING TO STOP THE P4.15/kWh MERALCO POWER RATE HIKE as well as PREVENT UNWARRANTED RATES INCREASES IN THE FUTURE. IT IS JUST A MATTER OF POLITICAL WILL TO REALIZE THESE.


• The President can exercise his police powers as public interest so requires. He can ask the power companies to lower their profit margins.

This can be done. In fact, this was already done by the Department of Energy (DoE) and the Philippine Electricity Market Corporation (PEMC) when they lowered the price offer cap of generation companies at the Wholesale Electricity Spot Market (WESM) to P32/kWh from P62/kWh – this was based on their testimony at the Energy Committee hearing last week. If the price cap can be reduced by half of its original amount, then there could be so much leeway or room for negotiation to lower the amount to be collected by generation companies that supplied power last November-December 2013 between P62/kWh and P32/kWh. At P62/kwh, as the clearing price in WESM between November-December 2013, all power companies that supplied power at that period have undoubtedly raked-in so much profit.


• The Energy Regulatory Commission should withdraw its December 9 approval of Meralco rate hike. Instead, it should immediately conduct due process where consumers can participate, and determine as well if there was gaming or market abuse before granting the power rate increase being sought by Meralco and the generation companies.

The approval of the Meralco price hike by the ERC without undertaking public hearings and concomitant investigations as to the simultaneous shutdowns of the Malampaya plant and the other independent power producers and the market behaviour of Meralco is violative of the EPIRA mandate for the ERC to protect consumers against anti-competitive behaviour and market abuse.

Red alert bells should already have been ringing when ERC saw a Php. 4.15 per kwh tariff increase and a WESM where some IPPs were selling at Php. 62 per kwh. The ERC should already have been forewarned as to the danger of overrecovery of generation costs.

Apologists for the power industry want us to accept that when the Malampaya facility was shutdown for scheduled maintenance and when coincidentally the other power providers of MERALCO were hit by force majeure outages, all of these fell within the allowable market activities of the EPIRA and also within bounds of the implementing rules and regulations of the ERC. They would have us believe that some IPPs saw the opportunity and just took advantage of the rules and the law to make significant profits, that no one is at fault and therefore no one is to blame.


• The Executive Branch can step-in to either lower the price cap on offers at the Wholesale Eelectricity Spot Market or totally suspend the operations of WESM if public interest and or national security is at stake.

The P32/kWh price cap that the tripartite government body decided to implement should be made retroactive from the time the country was put under a state of national calamity. This will compel recourse so that MERALCO and the power producers enter into cheaper bilateral contracts between themselves. Without WESM, the power producers have no choice but to sell under bilateral contracts to MERALCO which constitutes 70% of the market, and has market dominance. In short it should be a buyer’s market (in this case, MERALCO), thus generation companies will be forced to lower their rates.

• The rate-setting practices and methodologies such as the Performance-Based Rate Methodology (PBR) as well as the Automatic Generation Rate Adjustment (AGRA) should be suspended and replaced by a more transparent mechanism of determining the power rates.

Both PBR and AGRA violate the EPIRA mandate of having a transparent and reasonable price of electricity. The automatic rate adjustment for generation costs violates due process and the mandate of EPIRA against market abuse; the automatic rate adjustment is tantamount to a surrender by the ERC of its regulatory powers.

The grant of an automatic rate adjustment prevents consumers from raising valid concerns and real objections even as it mandates the collection of additional charges from them. It effectively precludes any prior challenge to the claims of MERALCO for additional generation charges without subjecting those claims to the legal standards of whether those economic costs being recovered by MERALCO are PRUDENT and REASONABLE, as to whether such constitutes the obligation of MERALCO to provide its customers power “AT LEAST COST,” and whether in passing through the generation charges, MERALCO acted in compliance with its obligations under its franchise.

• Revoke franchise license of abusive or misbehaving power companies.

• The 16th Congress should change EPIRA in order to strengthen protection of consumers from market power abuse. These changes shall include:

o Declaring power generation a public utility, thus subject to profit regulation

o Replacing the current un-transparent rate-setting methodology (PBR) with a simplified and transparent formula based on a 12% ceiling on profits and net income

o Effective prohibition of cross-ownership between the generation, distribution, and transmission sectors.

o Ensuring representation of workers and consumers in the Energy Regulatory Commission as well as in the oversight body over WESM

o Ensuring shareholding dispersal to broaden ownership base, de-monopolize the power industry, and prevent or limit market control of few companies or families.