THE 360-MW Magat hydropower plant in Isabela bought by the SN Aboitiz Power Corp. [photo courtesy of PSALM]

BUT EVEN as the NPC’s monopoly is finally being dismantled, the restructuring of the power sector is actually seeing a market that is headed for greater concentration. Family-owned distribution firms as the Lopez-controlled Meralco and the Aboitiz-owned Visayan Electric Company (VECO) and Davao Light and Power have even been thriving under EPIRA. Meralco has been a major player in the power distribution sector for the past 102 years, serving all of Metro Manila and parts of its surrounding areas. VECO's franchise area consists of Metro Cebu and six neighboring municipalities. 

“Just look at the WESM indicators of market concentration and you'll get the picture,” says Pascual, who points out that the Lopez and Aboitiz groups have been buying the NPC’s small hydropower plants.

Only four sets of electricity generators are involved in WESM: NPC, PSALM, Meralco's IPPs, and other IPPs. NPC and PSALM, both government corporations, account for 80 percent of available capacity in Luzon; Meralco IPPs take 19 percent while other IPPs have the remaining one percent. Meralco, by virtue of having sister companies and IPPs, gets to enjoy over 40-percent share in generated electricity.

If the private companies seem to be greedy, it’s because the law allows them to be so, says Espos. “Economically speaking, the business sector is expected to maximize profits,” she says. “But what the law should do is to provide them incentives so that they balance maximizing profits with the public interest.”

Espos says that EPIRA's objectives were for the most part good, only that everything went downhill from there. Any inconsistency with the law, she says, can only happen because the regulatory agency allows it. (see sidebar)

Lotilla, for his part, attributes whatever failings in the runup toward full competition to a still imperfect environment. He says that not all the needed elements are in place — like NPC assets not yet fully sold, Meralco's dominance on the distribution side, and so on. He says that until all its assets are privatized, the NPC remains a competitor to new plant owners in the power generation market. And since it’s a very young market, says Lotilla, it has to go “through birth pangs.”

A commission of power TO INTRODUCE competition in the generation sector, EPIRA called for the creation of a wholesale electricity spot market a year after it took effect. As a marketplace for the trading of electricity, the WESM is a venue for generators/sellers to offer their outputs and specify their prices to buyers. It also serves as a mechanism to encourage investors to participate in the generation sector and attract buyers of the NPC plants. Yet last year, a price manipulation scandal broke out involving PSALM's trading teams, which were found to have engaged in uncompetitive behavior in the electricity spot market. The Enforcement and Compliance Office (ECO) of the Philippine Electricity Market Corporation (PEMC), which oversees the power market, found PSALM liable for abusing its market power by simultaneously raising the market clearing prices for three plants: Ilijan natural gas plant, and the coal-fired thermal power plants in Sual and Pagbilao. But the Energy Regulatory Commission ordered its own investigation terminated, finding no prima facie evidence of market abuse against PSALM. The regulatory agency likewise dismissed ECO's findings as mere “speculation, conjectures or guesswork.” Maitet Diokno-Pascual, who has looked into ERC's handling of PSALM's market abuse, is aghast. “The ERC has a very extensive market data that showed exercise of market power,” she says. “But instead of using that as evidence, it looked for price-fixing between NPC and PSALM. It didn't find any precisely because that's not how the abuse took place.” The ERC is more known to the public as the agency that rules on petitions on power rate hikes. But the independent, quasi-judicial regulatory body has more than that on its plate, as the PSALM case shows. Pascual says that ERC’s “narrow understanding” of market power abuse will cost consumers P9 billion. That is the amount PSALM is collecting from WESM after the ERC decision, and which PSALM now wants Meralco and other utilities to collect from consumers. ERC is made up of five commissioners, all of them appointed by the president. Its current head is former Isabela Representative Rodolfo Albano Jr. Some have taken issue with the ERC’s independence, but independent industry consultant Edna Espos — who does not hide her dismay with the ERC for its handling of the WESM price manipulation case — says she has no quarrel with whoever heads the agency “for as long as they do it right.” The FDC’s Pascual, however, doubts if the ERC understands its accountability to the consuming public. At least on one occasion, she says, it has even held its hearing for a rate-increase petition in the very office of the private utility it is supposed to regulate. “Maybe,” she says, “it (ERC) sees itself as a guardian of the (power sector) reforms, as a partner of the industry players, more than a protector of public interest.” Both erstwhile government energy chiefs Raphael Lotilla and Francisco Viray are more understanding. “I think they're doing their best considering the environment they're working in,” says Viray, noting that everybody — the government, the private sector, the ERC — went through a learning curve with EPIRA. He also says the government set a very tight timetable for the law's implementation. Lotilla echoes his predecessor’s views. But he also says that there is a need to strengthen the ERC and suggests that there be more rules and guidelines “to effect things and help minimize the arbitrary exercise of discretionary power.” — Alecks P. Pabico/PCIJ