David Celestra Tan, MSK
29 November 2019
3. Ex ERC Chair ZenaidaDucut (And Former ERC Executive Director Nino Juan)
We the consumers were not really happy with Ex Chair Ducut for most of her tenure. Mainly she failed to usher in the kind of reforms at the regulatory agency that will protect the consumers. She hesitated to correct the injustices of the systems that were put in place by her politico predecessors.
But she and her “ED” tried to do something right and correct one of the great travesty’s of the implementation of the Epira Law, just before they left the Regulatory agency in 2015.
Why are Meralco and their partners trying to corner the power supply contracts to the Meralco area for the next decades? Because they can.
This is courtesy of the humongous loophole engineered by their powerful lobbyists when the Epira Law’s IRR (implementing rules and regulations) was passed in 2003 where they successfully watered down the EPIRA laws Section 45 that mandated to promote competition in power generation and avoid concentration of ownership of the power plants by limiting the ownership, operation, or control of power plants that can be owned by an entity and their affiliated companies to only 30% of the regional grid and 25% of the national grid. Mathematically it means there would be at least four (4) generating companies that will compete in each area, thought to be sufficient to create beneficial competition for consumers.
This betrayal came in the form of Rule 11 of the EPIRA IRR that loosened the restriction of concentration of power generation facilities to only “control” instead of “ownership, operation, or control” as required under Section 45 of the EPIRA Law.
Blindly using Rule 11 as guideline, the ERC for its part had been determining and announcing every year the maximum limits of installed power generating capacities and no one had been in danger of breaching the limit. We believe that at some point they also realized that by using only “control” they are not implementing correctly the requirements of the EPIRA Law itself which clearly included three criteria which are “ownership, operation, or control”. They also noticed that power generation groups were just forming partnerships and joint ventures to circumvent the “concentration” limits.
(Why all three criteria? One of the aims of the Epira law is to create a truly functioning market competition where power plants cannot manipulate the availability and pricing of their power output. An owner, operator, or controller of a power plant are in positions to influence the availability, withholding, and pricing of power. Do we wonder why plants owned by those who will benefit from spikes in WESM prices have their plants go conveniently off-line at the same time? Thus all three must be restricted)
If Meralco is determined to monopolize the power generation sector through its own Meralco PowerGen, it is because they can under the treasonous Rule 11 of the Epira IRR. And they evidently knew this when they bought Meralco.
Why can’t they be happy owning 100% of the 50% power supply they are allowed to contract with a sister generator by Section 45 of the EPIRA Law and instead would want to after owning 50% of the 100%? Hint, because they can rent seek on the whole 100%.
Former ERC Chair Zenaida Ducut and her ED Nino Juan evidently knew this also and that it is against the public interest. So they tried to make amends to the consumers before they left. After months of staff work, on October 13, 2015 the ERC posted its draft new guideline inviting public comments as ERC Case No. 2015-005 RM.
“GUIDELINES FOR THE DETERMINATION OF INSTALLED GENERATING CAPACITY AND ENFORCEMENT, OF THE LIMITS ON CONCENTRATION OF OWNERSHIP, OPERATION OR CONTROL OF INSTALLED GENERATING CAPACITY UNDER SECTION 45 OF REPUBLIC ACT NO. 9136″.
“The proposed amended Guidelines, on the other hand, provides that in the determination of the Generation Companies’ market shares and potential breach of the 30% and 25% market share limitation, it shall be separately determined based on three (3) separate tests, as follows:
- Ownership test;
- Operation test; and
- Control test.
The generation company and its related group, if any, should comply with all the above mentioned tests. In the event that the generation company exceeds the limits in either of the tests required, the ERC shall consider the same as a breach of any of the market share limitation. If a generation company and its related group exceed the limits as periodically determined and set by the ERC in accordance with the Guidelines, it is obligated to inform and report such breach and the reason therefor to the ERC within the prescribed period from the occurrence thereof.
Thus, the Commission seeks the comments from the various industry stakeholders on the proposed amended Guidelines pursuant to Section 4s(a) of RA 9136.”
While the draft revision did not go far enough, it would have been a big step forward towards correcting the legal infirmity of Rule 11 but also the control of market concentration and domination.
Then the Darth Vader of the CSP Saga Ex ERC Chair Salazar waved his lightsaber and just like that the wonderful magic module vanished, frozen into outer space.
On that fateful day and session on March 15, 2016, when Salazar’s ERC postponed the implementation of the CSP by more than five months, they also quietly “held in abeyance” the rules on the determination of market concentration by passing Resolution 3 of 2016. According to the Alyansa para sa Bagong Pilipinas, the two actions were interrelated because the new contracts that will result from the CSP extension will run counter to the limits of the new rules on concentration of installed capacity.
Ex Chair Zenaida Ducut’s one act of atonement to the consumers is a brave and enlightened regulatory move. It may have been kicked into outer space limbo, waiting for our Luke Skywalker to retrieve and bring back to save mother earth.
At least it is one bright star to wish for, an idea that we know will some day be activated to give us consumers some relief and protection from the abuses of the dark forces. Thank you ex Chair Ducut and ED Nino Juan.
Who knows our Luke Skywalker might even come before 2022?
4. Senior Justice Antonio Carpio and the Supreme Court.
If I had the resources I would organize a national parade and 40 days of pomp and pageantry in honor of Supreme Court Justice Antonio Carpio and the Justices who supported him in two pro-consumer landmark decisions this year 2019 that will somehow put some discipline and wisdom into the starship ERC that had been lost in its regulatory orbit.
a) “You are an implementor not a policy maker”
In May 2019 deciding on the complaint of consumer group Alyansa Para sa Bagong Pilipinas the Supreme Court ruled that ERC exceeded its authority when they decided to postpone the implementation of the CSP policy from November 7, 2015 to April 30, 2016 that ABP alleged was intended to accommodate Meralco’s desire to negotiate power supply contracts with its sister companies instead of undertaking a CSP. Lo and behold, Meralco in 40 days was able to craft 7 PSA’s for 3,551mw with 5 different partners and beat the new ERC filing deadline in 3 days. Justice Carpio, in ruling that the ERC exceeded their authority in postponing the implementation of the CSP to April 30, 2016 instead of the DOE mandated November 7, 2015, Justice Carpio for the first time sent a clear message to ERC that they cannot just do what they want and that the DOE is the policy maker under the law and not the ERC.
The reminder just came in time to hopefully guide the new set of ERC Commissioners as they are just trying to learn the ropes in rate regulation and still seeking their regulatory reason for being, especially their “motu proprio” obligations to the consumers.
For the first time, the ERC may have been put in their right place. And the Supreme Court decision would send shockwaves to the ERC, DOE, and the Big Guys specially Meralco who had been acting with impunity, playing cat and mouse with each other at the expense of the consumers.
If we are now that much closer to a CSP regime that will assure true and open competition, we owe it to Justice Carpio. (let us just hope Secretary Cusi remains steadfast).
Concurring in the ruling were Chief Justice Lucas P. Bersamin, Associate Justices Diosdado Peralta, Mariano del Castillo, Estela Perlas-Bernabe, Marvic M.V.F. Leonen, Jose Reyes Jr., Ramon Paul Hernando and Rosmari Carandang.
Those who dissented were Associate Justices Alfredo Benjamin Caguioa and Andres Reyes Jr. while Associate Justice Francis Jardeleza abstained. (remember them!)
b) Justice Carpio was not done….thank God.
Just last month of October, Justice Antonio Carpio sent another stinging reminder to the ERC of its obligation to assure that distribution utilities provide power in the least cost manner.
In a decision written by Senior Associate Justice Antonio T. Carpio, the SC,deciding on the complaint of consumer group NASECORE said the ERC orders violated its (ERC’s) statutory mandate to approve rates that will provide electricity to consumers “in the least cost manner.”
With the ruling, the SC remanded the case to the ERC to determine the valuation of Meralco’s regulatory asset base, as well as the parameters whether expenses that are not directly and entirely related to the operation of a distribution utility should be passed on wholly or partially to the consumers, in order that electricity shall be provided to consumers “in the least cost manner.”
“ In partially granting the petition, the SC found that the ERC failed to properly consider COA’s findings as well as to comply with its statutory mandate to approve a rate that provides electricity to consumers ‘in the least cost manner’ as expressly provided in ERC’s charter.
The SC also reminded ERC that “Section 38 of the Government Auditing Code of the Philippines and Book V, Title I, Sub-title B, Chapter 4, Section 22 of the Administrative Code of 1987 specifically authorizes COA to examine accounts of public utilities in connection with the fixing of rates of every nature.”
We thank Justice Antonio Carpio, and the other Justices of the Supreme Court, for standing up for the electric consumers and for delivering clear messages to the wayward ERC who badly needs the reminding. We are eternally grateful. Let us hope it helps them find their way back into being a regulator in the public interest.
We the badly battered electric consumers in the Meralco area needs to recognize and be grateful to our Knights in their Shining Armor – Sec. Ikot Petilla, Sec Al Cusi, Pres. Duterte, Ex ERC Chair Zeny Ducut and her ED Nino Juan, and SC Justice Antonio Carpio.
These are the government officials who had to against the tide of government apathy, regulatory and policy capture and decided to boldly steer the whole government boat towards the right direction for the consumers. Certainly there are many private individuals who driven by true concern for consumers have been stepping up selflessly at personal peril to bat for consumers. We similarly need to salute them. Neri Colmenares, Aya Viray Jallorina, Pete Ylagan, and the indefatigable Uriel Borja?
Some day we hope our Camelot, our Sky Walker, will come along to save us from the injustice of Rule 11 of the EPIRA IRR. He or She might yet come before 2022.
There is reason to take heart and hope.
Next: Traitors of Our Times
MatuwidnaSingilsaKuryente Consumer Alliance Inc.