Will the ERC and DOE Remake Themselves as a result of the Supreme Court Ruling on Meralco CSP? (Part 3)

David Celestra Tan, MSK
14 June 2019

In the ongoing saga of the MVP Group’s money making schemes to also monopolize power generation and charge Meralco customers self-negotiated sweetheart electric rates for the next 20 years,  the cause oriented group Alyansa Para Sa BagongPilipinas (ABP) had petitioned and the Supreme Court had spoken that ERC’s extension of the date for the effectivity of the CSP policy is beyond its authority and therefore illegal. Consequently all power supply contracts that were applied with the ERC after November 7, 2015 should undergo competitive selection process or bidding.The biggest lot of those is Meralco’s seven (7) PSA totaling 3,551mw with a guaranteed 28 Billion kwh a year sales for 20 years, fully 80% of the energy needs of the National Capital Region.

In its ruling GR 227670 the Supreme Court not only ruled on that issue but also reiterated enlightening provisions of the Constitution on other aspects of jurisdiction, governance, and autonomy related to ERC that the regulatory agency had been ignoring for a long time. If heeded, these constitutional reminders would have long term implications on the ERC and DOE as oversight institutions for the public interest.

Here are some excerpts of the Supreme Court Decision:

  1. On Page 2 on unfair competition and protection of public interest

Section 19, Article XII of the 1987 Constitution provides: “The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.”

The State grants electricity distribution utilities, through legislative franchises, a regulated monopoly within their respective franchise areas. Competitors are legally barred within the franchise areas of distribution utilities. Facing no competition, distribution utilities can easily dictate the price of electricity that they charge consumers. To protect the consuming public from exorbitant or unconscionable charges by distribution utilities, the State regulates the acquisition cost of electricity that distribution utilities can pass on to consumers.

As part of its regulation of this monopoly, the State requires distribution utilities to subject to competitive public bidding their purchases of electricity from power generating companies. Competitive public bidding is essential since the power cost purchased by distribution utilities is entirely passed on to consumers, along with other operating expenses of distribution utilities. Competitive public bidding is the most efficient, transparent, and effective guarantee that there will be no price gouging by distribution utilities.

x-x-x

Section 6, Article XII of the 1987 Constitution provides: “The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands.”

Indisputably, the use of electricity bears a vital social function. The State, in requiring competitive public bidding in the purchase of power by distribution utilities, has exercised its constitutional “duty x xx to intervene when the common good so demands. “

  1. Page 16 Functions of DOE and ERC

Thus, the very first mandate of the ERC under its charter, the EPIRA, is to “enforce the implementing rules and regulations” of the EPIRA as formulated and adopted by DOE. Clearly, under the EPIRA, it is the DOE that formulates the policies, and issues the rules and regulations, to implement the EPIRA. The function of the ERC is to enforce and implement the policies formulated, as well as the rules and regulations issued, by the DOE. The ERC has no power whatsoever to amend the implementing rules and regulations of the EPIRA as issued by the DOE. The ERC is further mandated under EPIRA to ensure that the “pass through of bulk purchase cost by distributors is transparent [and] non-discriminatory. “

  1. Page 20 Independent Power of the ERC

In the present case, where there is no exercise of the ERC’s quasi-judicial powers, the ERC is legally bound to enforce the rules and regulations of the DOE as authorized under the EPIRA. The ERC has no independence or discretion to ignore, waive, amend, postpone, or revoke the rules and regulations of the DOE pursuant to the EPIRA, as it is horn book doctrine that rules and regulations issued pursuant to law by administrative agencies, like the DOE, have the force and effect of the law.  In fact, the first duty and function of the ERC under its charter is to “enforce the implementing rules and regulations” of the EPIRA as issued by the DOE. Certainly, the ERC has no power to ignore, waive, amend, postpone, or revoke the policies, rules, regulations, and circulars issued by the DOE pursuant to the EPIRA.

  1. Page 21

In any event, even in quasi-judicial cases, the ERC is bound to apply the policies, rules, regulations, and circulars issued by the DOE as the ERC has no power to ignore, waive, amend, postpone, or revoke the policies, rules, regulations, and circulars issued by the DOE pursuant to the EPIRA. To repeat, the DOE’s rules, regulations, and circulars issued pursuant to the DOE’s rule-making power under the EPIRA have the force and effect of law which the ERC is legally bound to follow, whether the ERC is exercising executive, quasi-legislative, or quasi-judicial powers.

 

(Emphasis are ours)

ERC

Considering that the legality of the Meralco power supply contract applications have delayed the power development of the country by 3 years, the compelling question is what will the affected institutions, ERC, Meralco and its 5 partners, and DOE, do? Will they continue fighting the legal issue, protract the impasse,  and not care about the delay in the nation’s power supply? Will the consumers be held hostage again and will the government passively watch as Luzon’s power supply deteriorate?

The new ERC will be tested on what they hold important, Self-interest or public service? Will they continue fighting for their domain over the power sector and put self-empowerment first over focusing on averting a power crisis by starting in earnest to making enough of the Meralco projects comply with legitimate CSP?

 a. Jurisdiction, power, and autonomy of ERC

Is the ERC willing to temporarily loosen its grip on its empire?

Almost from the beginning, the series of trapo politicians that were made Chairmen of this supposed public interest agency from 2003 to 2018, worked hard at protecting its power and jurisdiction over the power industry domain. As politicians steeped in the culture in Congress, they evidently wanted absolute power over a sector that the private entrepreneurs and oligarchs discovered they can profit handsomely, especially if they capture the regulators. The seasoned politicians effectively kept at bay past attempts by the DOE, Congress, and the Courts to influence the regulatory agency’s power by arguing they are an independent body and stigmatized any input from other government agencies as “meddling”.

This assertion by ERC of absolute power led to the regulatory agency’s total disregard for power policies set by the Department of Energy, the mandated policy making body under the EPIRA law. ERC routinely tries to appear to be in synch with the policies set by the DOE but in the process of implementation, they exercise so much privilege that they often violate if the not the word but the spirit of the DOE policies.

In fact, on the ruling by the Supreme Court years ago that Meralco as a public utility should be entitled to only a 12% annual return on their investment, the ERC evidently felt they were above the Supreme Court when they adopted the rate setting methodology PBR that effectively deregulated the profits of Meralco who is now making officially 25% return on equity.  Asked in a hearing on PBR, two senior commissioners declared in open court that they did not have to follow because the Supreme Court ruling was “no longer applicable when ERC changed the methodology to PBR and that the 12% return is no longer valid because “economic conditions had changed”. (Who brainwashed them?)

It is under this kind of hubris that the ERC evidently felt they can get away with fooling around with the implementation of the CSP policy from November 7, 2015 to April 30, 2016, despite them turning down Meralco’s request as late as January 2016 to be allowed to do swiss challenge type CSP.

What happened in February 2016 that made ERC change its mind and incongruously “clarified the implementation date of the CSP to April 30, 2016, a full 176 days after the original date? Most Filipinos can guess correctly on this one.

b. ERC’s mandate under the Epira Law

RA 9136 or the EPIRA Law of June 2001 indeed gave ERC a lot of power, many of them even motuproprio and all for the purpose of protecting the public interest. The most important of which is insuring the fair and reasonableness of the rates. It is true that previous ERC’s invoked those other non-rate setting powers like Section 43 sub-sections f,o,r,  whenever convenient but rarely in the genuine intent to serve the public interest.

Now the Supreme Court is saying they must implement only the policies laid down by the Department of Energy which had the effect of law. And we interpret that to mean not to exceed or contradict one whenever a policy had been established by the DOE.

A current case in point, the DOE had issued in February 2018 a Guideline for the procurement of power supply for the Distribution Utilities. And the ERC has been working on coming up with its own implementing guidelines of such policy. It is now in its 3rd draft and interestingly, while the DOE circular and expressed clarifications did not provide for unsolicited proposals or swiss challenge type biddings, ERC’s guidelines is devoting fully 1/3 of its pages to rules on unsolicited proposals and swiss challenge.

So the question is will the new ERC now respect the authority of the DOE to set policies and rules and not freelance and exercise privileges with their own implementation rules?

c. Will there an advent of a New DOE?

DOE is the reverse of ERC. They were given a clear mandate by the law to insure that there would be sufficient supply and least cost power with broad policy powers.  For many years they seem to have accepted that their job is to formulate and issue policy. And be contented that the implementation is left up to the discretion of the ERC, NEA, NPC, PSALM, come hell or high water.  One recent Secretary of Energy lamented that they don’t have enforcement capability, a sad perspective.

For the last 15 years one reality has been hitting DOE and that is when things are going wrong in the power sector, regardless of privatization and deregulation, it is the DOE that the people and the legislators are holding responsible.

Yellow and Red Alerts

In the recent case, yellow and red alerts started lighting up in the Luzon grid, and the JCPC called the power players to hearings. It was admirable that the DOE officials were trying to explain except they really could not provide the answers and solutions to the mysterious coincident downtimes of the power generators in Luzon.  The reason is it is really Meralco, to whom those power plants are contracted to, who is capable of ensuring the performance of these power plants and shepherding their downtime schedules.

It is evident they themselves feel it is DOE’s responsibility to make sure there is enough power supply and reserves and that the prices do not skyrocket. But they must stop thinking that their job is passive and only persuasive in making things happen.

Now the Supreme Court had clearly spoken.  It is the job of the DOE to establish policies and guidelines and those will have the effect of law.  ERC’s job is to implement the policies set by the DOE.

It is true that in the past the ERC was forced to write more implementing guidelines to executive the vague and motherhood guidelines set by the DOE or where the later had not written one.  For example, the implementation of Section 45 of the Epira law on limiting the market share of the owners of Meralco to only 50% of the power utility’s demand and energy needs. Some people managed to dilute the Epira law by writing a different way of implementation under Rule 11 of the Epira IRR in 2004. This has been paving the way for the MVP Group that controls Meralco to covet 100% of the contracts of Meralco’s power supply….. because they could.

But since the DOE had evidently not even recognized the illegality of Rule 11 through the years, the ERC had been implementing it in their own way and in their own time.

Now the DOE needs to step up and provide clear guidelines, monitor their implementation, and take proactive action if say power supply is not materializing on time.

This will require DOE to remake itself from a passive issuer of policies and rules and gatherer of statistics on evolving power development, to a proactive enforcer and pursuer of power development objectives if the private sector is not getting it done on time or the right way. The people is expecting that from the government and DOE.

The Supreme Court message is clear…..but will the ERC and DOE heed the call?

 

We will see soon enough in the rest of the year.

 

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph

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Wake Up Calls For All of Us On Power Yellow Alerts…Whose Job is it Anyway?

David Celestra Tan, MSK
23 April 2019

The Yellow and Red alerts of power shortages should wake up all of us towards the reality that a power crisis can be upon us and can have devastating impact our economic boom years. The blame game is going wild so let us take stack and see who should be waking up and for what reality.

1. You, I, and the Public

We the consumers have a lot of waking up to do. It is quite scary that in the face of a power crisis we the consumers would lose however it is resolved.

If the power crises happens we will be down on our knees begging for electricity at any price, by any method, and no matter how dirty. To avert these blackouts, new power plants will need to be built. And guess whose new power projects are being rammed through our throats? 4,005mw of MeralcoPowerGen’s all coal projects no less….and counting.

In case you have not heard, seven of these contracts totaling 3,551mw are stuck in legal controversy since 2016 brought about by ERC itself. The Prices and terms that will be charged to you and I were just negotiated between Meralco and its sister companies. One called Atimonan One with 1,200mw has a published rate with ERC at P3.75 per kwh but if updated to current exchange rate, inflation, and coal fuel, is actually now P5.65 per kwh. And who knows what else are hidden in the secret provisions that they asked not to be disclosed to the public? In short, if those MeralcoPowerGen contracts are approved as we, the ERC, and the DOE, and probably the Supreme Court are being manipulated to agree to, we the consumers are screwed and stuck with sweetheart prices and terms for 20 years. And those pass on charges are not small. PowerGen is cornering 80% of the energy needs of Meralco.

That happened in April 2016, three (3) years ago. Since then, no new power projects were announced, either by Meralco, Aboitiz, and their cartel partners. The power development of the country is at a standstill and it seems everything is being bet on those Meralco contracts. Meralco by the way as the largest distribution utility is exerting its market control since no major power project will happen without them agreeing to be a buyer. And they will not agree unless….you know the rest of the story.

It is depressing to wake up to the reality that we as consumers are screwed either way. If it were a game of chess, “mate natayo” even before we realize there is even a game going on. And what is worse is the feeling that no one is truly protecting us in this country of ours. Sure we hear all these government officials saying they are doing things to protect the public, to assure supply. So does Meralco using that line in vain.

MSK as your advocacy group has been trying to point out regulatory flaws but the regulators especially the last batch were evidently apathetic to public interest. We hope we have a better one in the new batch but so far it is not encouraging if we go by the guideline for power supply procurement that they are drafting. Loopholes for circumvention of true CSP are evidently being built into it. Hayy.

( See our article Who is to Blame for the Delays of the 1,200mw Atimonan One and 600mw Redondo Power Coal Projects? Meralco, Consumer Groups, or ERC? Matuwid.org June 5, 2018)

At this stage though it is no longer what Meralco and ERC did but how do we move forward with new power projects. And Meralco, the new DOE, the new ERC, and the Chairmen of the Energy Committees of Congress and the Senate, the JCPC, the Supreme Court, and even the President of the Philippines, could have taken proactive moves to break the impasse and get the country moving so a power crises is prevented…..while there is still time to prevent it.

Eerily, no one is moving. Sadly, when something happens, we the consumers are disadvantaged. And no one is protecting us. Why are we always in a lose-lose situation….and they the vested interests are always in a win-win position?

2. Your beloved Distribution Utility Meralco

The first move should have been coming from Meralco, the distribution utility itself. It is them who have the contractual mandate with the consumers by virtue of their public service franchise to assure the provision of adequate power supply in the least cost manner.

But they will not move because they are conflicted and protecting their power generation interest. Meralco clearly is putting higher priority to being the sister company of their MeralcoPowerGen instead of being the public service provider to the consumers. And they appear to be willing to push the country to the brink of power crisis so that they can get their way.

But “we are looking after the public interest”Meralco would argue. That is why they want all seven (7) of our power supply contracts approved by the ERC starting with their 1,200mw Atimonan One and the 600mw Redondo Power in Subic. Why can’t they initiate a happy compromise (front door or backdoor) where they get to implement their earlier projects for commissioning in 2020 and 2021 and subject to true CSP the balance those that are needed for 2022 to 2025? Should it really be all or nothing? Their way or no way?

Meralco should act like your distribution utility looking after the public interest.

3. The new Department of Energy

We are calling them new because the Meralco deals were done in April 2016, a month before the last Presidential elections and before President Duterte is able to appoint his own Energy Secretary. (That’s another reason those contracts became known as “midnight”)

Under the EPIRA Law of 2001, the Department of Energy has the specific tasks of assuring there is adequate supply of power through enabling policy and proactive promotion of investments in power and energy.

They could have been excused from proactively getting involved in resolving the effective freeze in power generation projects in 2017 as they try to learn the ropes but by 2018 alarm bells should be ringing. The country is on its way to a power crisis and the DOE needs to do something and make things happen.

Why not be the catalyst for a national consensusfor a solution? The Alyansa Para saBagongPilipinas and the Bayan Muna,the cause oriented groups that filed the cases in the Office of the Ombudsman and the Supreme Court against ERC and the seven (7) Meralco contracts, should not be above participating in a national resolution if it is to the public interest.

Then if not resolving the legally questionable Meralco contracts, why not the DOE push for new tenders for power supply under true CSP rules. Why not hold tenders for LNG power plants? If the Meralco cartel members are not willing to participate there are many highly qualified and proven power generators who can participate. Such truly competitive biddings will have the added benefit of answering for the country the question of which is better for the consumers, negotiated or openly tendered power supply?

Are there factions within the DOE that are participating in allowing the country to slide to the brink and helping create an environment where the public will be so scared of a blackouts that they will not care if the power supplies were anomalous and overpriced and violative of its own CSP policy?

4. The Supreme Court

The ERC, DOE, and Meralco are all pointing at the Supreme Court for their collective inability to resolve Meralco’s seven power supply projects. And the longer the highest court of the land takes to make a ruling on whether ERC has the legal right to extend the deadline for the CSP, the closer the country is pushed to the brink of the power crisis.

Our Honorable Justices will need to wake up to this reality. The ruling of the Supreme Court is now part of the problem instead of a solution.People believe that there is really no major constitutional divide on the issue. Most people predict anyway that the Supreme Court will rule that the ERC had the legal authority to extend the implementation of the CSP but will leave it up to the office of the Ombudsman on whether the previous batch of ERC Commissioners abused that authority.

5. The Country’s Conglomerates and Economic Powerhouses

Let us wake up to the reality that Meralco’s cartel oligopoly are also the major business conglomerates that are having a field day in the current consumer driven economic boom. They are in real estate, construction, retailing, telecommunications, banking, tourism, water, roads, and media. Their market caps are soaring.

Count on them to exploit opportunity and profit from the people’s adversity. Meralco is happily negotiating emergency power supply contracts “to protect the consumers” with the same people whose power plants are conveniently shutting down.

Predictably, media is exploiting the hysteria over the yellow alerts and putting pressure is on for ERC and DOE to approve the Meralco contracts. They are blaming the ERC for being “indecisive”. Two illustrious columnists in the major daily controlled by the Meralco group, called out DOE Usec Fuentebella for inaccurately assuring the public of no power shortage. Then she went for it.

“What we need are new power plants.Some of the country’s power plants are so old, some as old as dirty old men. It’s not surprising that, perhaps, just like these men, these plants conk out too every now and then. Clearly, there’s an urgent need for new power plants, but the private sector’s investments have been hampered by regulatory challenges.”

Another one asked “who is minding the store” and taking to task the Department of Energy for the impending power crisis.

It could also be a wake up call to these diversified conglomerates that the customers they abuse in power, water, toll roads, telephones and internet, are the same people who provide the market for their shopping malls, condominiums, and travel.And it is the same economy that if thrown into a power crisis will sabotage the whole economy and the market for the rest of their empires.

6. President Rodrigo R. Duterte

Many of these conglomerates are having a heyday because they have the blessings of the President for their projects and many are enjoying the profits from the economic boom that the Presidents leadership is bringing about.

But maybe the President can also wake up to the reality that this same people that he is helping are also willing to push the country to the brink of a power crisis to serve their selfish interest and in the process sabotage a good legacy of progress for the people that his Presidency has been working so hard to create. So much for gratitude and true friendships. Or are those relationships co-terminus with the President’s term?

7. “Whose Job Is It, Anyway?”

Our impending power situation reminds us of a story about four people named Everybody, Somebody, Anybody and Nobody. There was an important job to be done and Everybody was sure that Somebody would do it. Anybody could have done it, but Nobody did it. Somebody got angry about that, because it was Everybody’s job. Everybody thought Anybody could do it, but Nobody realized that Everybody wouldn’t do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have.

And how was your holy week!

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org

For private comments send to email david.mskorg@yahoo.com.ph
For public comments please send below.

Yellow and Red Power Alert, Things to Ponder, The Outdated and Onerous Genco Contracts, and Permanent Solutions (Part 2)

Part 2 of 2

 

4. The Onerous Guaranteed Payments for Downtimes in the PSA in Main Grid

These power plants will predictably blame technical reasons for the outages. These are however the “effects” and not the “root causes”.

It might surprise many people but the solution to these Power Plant shutdowns are not technical but contractual and financial.To explain, the PSA’s in place now and new ones being signed are still the old 1990’s era, BOT type contracts where the IPP is guaranteed his full capacity fees and fixed costs even if his power plant is down for maintenance and not available to deliver power.

These are in the form of maintenance downtime provisions in the PSA where the IPP is excused from delivering power.  Typically 45 to 60 days per year for coal plants. There is nothing wrong with legally excusing them from delivering power when their power plant have technical problems or need to be shutdown for preventive maintenance.

What is wrong is continuing to pay them full capacity fees and fixed costs during the shutdown period. And these payments are passed on to the consumers as part of AGRA, the new name of the old reviled Purchased Power Adjustment (PPA). 

These give financial incentives to IPP’s for being down or expressed another way, there is no financial benefit to them to AVOIDing and minimizing downtimes. If these IPP’s are not paid during their downtimes and only paid when they are actually providing a service to the consumers,  their financial dynamics will change, giving them the incentive to make investments in making their power plants reliable.

 Still another way of expressing this guaranteed payments whether down or not, is that electric consumers are being charged for 12 months of service but only getting power from the IPP for 10 months, especially for base-load plants. This is so onerous to the Filipino consumers.

Even for those power plants with “Reserve power contracts” and providing “ancillary services”, they should be paid capacity fees and fixed costs only when they are validated to be on line and available to provide the power if called. Not when they are down.

Downtime allowances in PSA’s should only be an excuse from delivering the service but not for guarantee of continuing capacity payments even if they are not performing a service. We are now in the Build Operate and OWN era, no longer BOT, where at the end of the contract, the power plant is Transferred to the distribution utility.

Ironically these onerous guaranteed payments for downtime allowances are still in the seven (7) midnight Meralco PSA’s signed with subsidiary MeralcoPowerGen. And even in the 460mw expansion of Mauban coal plant with partner EGAT. We suspect that this contract provision is among those trade secrets that Meralco had petition to keep confidential from the public and ERC is agreeing to be hidden from public scrutiny.

These onerous provisions must be prohibited in the Guidelines for procurement being drafted by the DOE, ERC, and NEA for being patently anti-consumer.

Until this is cured, there will always be downtime anomalies because there are financial incentives to being down or no financial benefit to avoiding downtimes.

 (see our Article on Outdated PSA Provisions Need to be Updated, matuwid.org December 6, 2018)

5. The Onerous Guaranteed Payments for Downtimes in the PSA in the Off-Grid

In the Off-Grid areas these guaranteed payments during downtimes similarly cause brownoutsand also the bloating of the missionary subsidies in hundreds of millions. In the Island of Palawan, President Duterte no less complained about the brownouts and the Electric Coop was blamed. It turned out 35% of the brownouts resulted from a power supply contractor whose temporary generators have been unreliable and another 35% resulting from outdated and incompleted transmission lines service of Napocor that have failed to keep up with the demand of the fast growing tourist island.

What is aggravating the brownouts are also contractual in nature. The Electric Coop agreed to pay a power provider for 6mw reserve capacity but it can only be used by the power provider when his regular engines are down for maintenance. The Coop is paying P5 million a month extra or P60 million a year but if the Palawan grid is short of power it cannot call this unit into service because it is only to back-up the contractors own units. So why is the Coop and why is missionary subsidy being paid for 6mw that can only be used by the contractor to meet his 20mw contractual guarantee and cannot be called by the Coop for his own use? And ERC had approved this contract provision.

 On the subject of off-grid areas, the Philippine Grid Code and the Small Grid Code issued by the DMC of ERC, do not provide for maximum size of units to be installed in the island as a % percent of total demand. The maximum size of each generator determines the amount of reserve capacity that the island needs to have. Ideally technical studies and small grid experience show that this should be limited to about 10% of system demand. In a 50mw island, the maximum generator size should be about 5mw. For reserve capacity known as N-1 and N-2 is based on the extra units equivalent to the size of the largest unit.  Hence the larger the disproportionate sized generator, the larger the reserve units that the consumers will pay for.

 In a 50mw island N-1 reserve will be 5mw and n-2 would be only 10mw.

If the largest unit is undefined and allowed to be say 8mw or 15mw coal boiler, the reserve unit will be equivalent to 15mw and not 5mw at higher costs to the consumers.

 6. Long Term Solutions

a. Obviously, guaranteed payments during downtimes must be prohibited from PSA’s. In fairness to consumers,payments must be provided only for delivered service. There must be a disincentive to being down and a financial incentive to make their power plants reliable with minimum downtime.

This is the root cause of the downtimes and Alerts especially those occurring during inopportune times like summer. This can be incorporated in the government guidelines for procurement and made part of the CSP template.

b. Distribution Utilities like Meralco who are the contracting parties to the Power Supply Agreements, must be required to have continuing Generating Capacity Management Coordination and Monitoring. It is their duty to their consumers.

c. The DOE can have a permanent monitoring and coordinating function for the synchronization of maintenance downtime schedules specially avoiding the critical months of summer and Christmas season.

d. The technical terms of the bidding for future supply under CSP must include a prescription on the maximum sizes of the generating units that can be offered. This must be in the Small Grid Code, in the NEA Guidelines, and in the DOE and ERC Guidelines. This is Not only for reasonable size and cost of reserve capacity but also for better systems adjustments for load variations in these off-grid islands.

In many islands, the load variation is only 5% of peak demand. In a 50mw island, the load variation is 2 to 2.5mw.  It is hard and uneconomical for an 8mw reserve engine to fill this in without disrupting the other smaller engines synchronized to the island grid.

Yellow and Red alerts will recur in the country unless we take steps to address their real causes.  Of course Meralco and their cartel members would like us all to believe that the solution is more supply. And that to address our fears of brownouts we must forget about the anomalous terms of their seven (7) midnight contracts and have it approved.

There needs to be a compromise in the national interest. The matter has been allowed to drag on for so long and we are playing into the hands of the involved proponents.

We agree that some resolution are now urgently needed but Meralco needs to also compromise. Their negotiated rates need to be made reasonable and the terms of the PSA cannot be onerous. The ERC needs to see that. Better half of it is converted to LNG. Given the urgency of the power supply, we wonder why the Supreme Court does not see that it is to the national interest to decide on the legality of the ERC extension of the CSP implementation, one way or the other.

Why should the electric consumers be always on the losing end?  We pay when they are down, we suffer when there is a power shortage, and we still pay for the consequent spikes in the WESM prices. When will we have a savior?

 

A Blessed Holy Week and Happy Easter to Everyone!

 

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org

For private Comments send to david.mskorg@yahoo.com.ph
Public comments submit below.

Yellow and Red Power Alert, Things to Ponder, The Outdated and Onerous Genco Contracts, and Permanent Solutions (Part 1)

part 1 of 2

David Celestra Tan, MSK
11 April 2019

Everyone is again scrambling on what to do in the face of the power shortage alerts. It is yellow, it is red, WESM prices spike, and the always inevitable fears of collusion. Of course there is the predictable, which is “we told you so, we need our new power projects”despite the legal and negotiated rate and terms issues. A supposed “group of consumer welfare advocates” are even incongruously chiming in by blaming ERC for its “indecisiveness” evidently on approval of Meralco’s 7 midnight contracts.

Anyway, let us ponder some aspects of this yellow and red alerts.

1. Whose Power Plants are down now?

According to newspaper reports, the following power plants have been mentioned. Sual Unit 1, SW Luzon Masinloc Unit 2 344mw, Pagbilao Unit 3 382mw, SLTEC Unit 1 150mw, Calaca 2 of DMCI 100mw, Malaya 2 350mw. A total of approximately 1,500mw.

a. Things to Ponder No. 1
The power plants in question (except Malaya) are owned by Aboitiz Group, San Miguel, EGAT of Thailand, DMCI, all members of the Meralco chosen 5 and partners of MeralcoPowerGen that controlled all the project companies in the seven (7) midnight contracts that the Meralco power oligopoly is trying to ram through the system.

b. Things to Ponder No. 2
Meralco’s power suppliers using coal have mind boggling rates from September to December 2018. AES in Masinloc charged P16.4591 per kwh in September, P13.7889 in October, P10.3589 in November, P8.7697 in December, and 6.9598 in January. It is now partly owned by Meralco Mauban partner EGAT of Thailand.

The Aboitiz owned Pagbilao charged P7.0179 per kwh in September, P7.04 in October, P6.7847 in November, and P7.5231 in December.

San Miguel Sual charged P7.8325 per kwh in September, P9.7960 in October, P8.0332 in December, and 7.4205 in January.

For February 2019, Masinloc rate was 11.51, Quezon Mauban of EGAT 7.76, SMEC Sual 6.91, and Aboitiz Pagbilao 6.33.

Comparatively, other coal generator rates were only P5.50 per kwh and natural gas plants approximately P5.28 per kwh during these periods.

(see matuwid.org website)

The reasons for these high coal generators rates were not because of high coal rates but evidently due to the guaranteed capacity payments to these power generators even if they were not generating full power. That means they have been down for maintenance for those months of September to December 2018 and some in January and February. So why are they still down for maintenance now that consumers needed their power during these summer months of March to May 2019?

(By the way, your organization MSK had filed a petition with ERC asking that these high rates from September to December 2018 be investigated. We have yet to hear from them).

2. Collusion

There could be collusion but it is unlikely that the government can pin anyone down. Power plant operators know what they are doing…and they are sisters with one of the supposed victims, Meralco. (Other one is the consumers)

Even when there are market evidence, our regulatory and justice system will be such that anyone found guilty will not even pay the penalty. Remember the market failure of 2013 when WESM went up to P62 per kwh and resulted to a P4.15 per kwh jump of 80% in generation costs? And even if they pay, it is only a total of P500 million compared to the damage to the consumers of P9 billion.

It is the motuproprio job of the ERC to investigate and penalize but so far they have been quiet.

We cannot expect too much from the Philippine Competition Commission who by their young lawyers’ mindsets will not call harmful “cartel” or “oligopoly” and “collusion” even if they are staring them in the eyes, unless they get the perpetrators to sign a document of admission. (good luck with that!) The young PCC seems have yet to find itself as a watchdog for the consumers and an institution to install preventive and preemptive rules against collusion, market monopoly, and etc. Too early to expect much consumer protection from them.

3. DOE’s Decisive Action

A shining armor in this dark times is the decisive action of the Department of Energy in containing further damage to the community and consumers. Beyond the predictable call for extensive investigation, per media reports they have been actively meeting with electric power industry participants for a concerted remedial solutions. They activated the “interruptible load program” that mobilizes the self-generators. It may only be 200mw but it helps in rotating brownouts.

The terms and conditions of the power supply agreements between these Genco’s and Meralco are being looked into specially their outage allowances, replacement power. Secretary Alfonso G. Cusi is quoted to say “the DOE recognizes that short-term answers are not enough. We are taking a holistic approach that focuses on the establishment of institutional solutions that would benefit consumers in the long term. The DOE fully intends to pursue policy directions to create permanent solutions to the otherwise temporary yet recurring challenge of red alerts.”

These are good take charge responses to avert a possibly disastrous power situation. However, the country needs a permanent monitoring of the plant availability performance of these IPP’s and a proactive management and coordination of power plant maintenance schedules specially during critical seasons like summer and Christmas holidays. The Department of Energy can make this maintenance scheduling part of the tasks of its Electric Power Industry Monitoring Board, instead of just passively tallying the power generation projects being pursued by the private sector.

The Senate Energy Committee under Sen Sherwin Gatchalian is expected to similarly try to conduct an investigation and let us hope they do and get to the bottom of these power shortages. More importantly, let us hope those investigations will result to change in rules for permanent solutions.

Actually it should be the job of Meralco if they are truly looking after the interest of their customers to manage and synchronize the scheduling of the downtimes of their contracted power suppliers. We don’t hear them doing this proactive scheduling that not only can avoid surprise brownouts but also to protect their customers from the price spikes that are consequences of power shortages.

Next: The Onerous Power Supply Contract Provisions and Permanent Solutions

 

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org

For private Comments send to david.mskorg@yahoo.com.ph

DOE SEC CUSI AND THE EC ASSN PHILRECA

David Celestra Tan, MSK
20 March 2019

We cannot help but notice the continuing tug of war between Department of Energy Secretary Alfonso G.Cusi and the leaders of the Philippine Electric Cooperative Association or Philreca over the chronic non-performance of many electric coops and what should be the long term solution.

Philreca’s membership and officials apparently got riled by a letter written by Secretary Cusi last January 9 to House Speaker Gloria Macapagal Arroyo endorsing the cancellation of the distribution utility franchises of 17 seriously distressed electric coops. Philreca reacted like a threatened lion.

While most EC’s listed were inarguably ailing and needed serious revamps, like Daneco, Aleco, Zamcelco,  and others, there were others that were curiously thrown in the list that though problematic with bad management and complicated political interference are nonetheless still not ailing and not even close to being distressed as defined by RA 10531, like Masbate,  Oriental Mindoro, and Mainland Palawan.

It is not clear how Secretary Cusi came to writing such a bold letter prematurely, and who did the staff work for such an important step by the Department of Energy. He may have been thrown into frustration with President Duterte himself calling out the bad performance and brownouts in Puerto Princesa and Masbate. Or he may be taking a page from President Duterte’s “shock and awe” style to get people’s attention and shape up?

Prematurity realized and recommendation reassessed

Nonetheless, within a few days Secretary Cusi evidently realized the prematurity of the letter and withdrew the recommendation for updating of data and reassessment as announced by DOE Undersecretary Wimpy Fuentebella.

It was equally a bold move for the Secretary to correct his own course once he realized the action was too early. Courage and humility are virtues of good leaders and statesmen. It is good to see them slow down when going too fast, changing direction when off-course, and going full speed towards a destination. Focus should always be on doing the right thing. No one of us should be too big to correct our mistaken directions.In these the Secretary seem to have handled it well.

Secretary Cusi took a step further and appear to have extended the right hand of peace and dialogue to the electric coops, assuring them that the performance reviews and fact finding efforts are to get to the deep-seated problems of the electric coops, that the assessments will be objective, and the Philreca leaders and members are invited to participate in the search for long term solutions. According to the DOE press statement, the EC’s were assured of due process.

Philreca’s Curious reaction

Philreca curiously seems would have none of it despite the hand of peace and dialogue clearly extended by the Secretary. They fired off a memo in defiance asking the EC’s to submit their performance reports only to the NEA….and let the DOE get it from them. A regretful and unnecessary disrespect. They apparently are treating Secretary Cusi’s letter as an irreversible shot across their bow,  a line in the sand over which they are willing to do battle. Seems perplexing and pointless.

As many observers did, we feel Philreca’s saber rattling and muscle flexing is surprising and looked like they are more interested in picking a fight against a magnified enemy a posture that some people could ascribe only to a desire to raise their profile before the coming elections where Philreca is running as a party list for Congress.

In an unfortunate “let us show you who you are messing with” gambit, Philreca saw it appropriate to wage a signature campaign to petition the removal of Secretary Cusi. Maybe Philreca is not realizing, but these uncooperative moves are starting to make them look like they don’t want to be looked into and giving the impression that they have things to hide.

Still others say the Philreca has some “hugot” in the way they are reacting to Secretary Cusi, who EC’s felt are not supportive of them when he refused to endorse some big funding for rural electrification.

Some EC’s are suspicious of a hidden game plan to “sell” the Coops with the emergence of parties who are close to Speaker GMA to be aggressive applicants to take over DU franchises after their apparent successful takeover of the Panay Electric Company in Iloilo.

Focus must be on the EC problems and how to solve them for the long term

Philreca as a national association of electric cooperatives we would think is very familiar with the long running problems not only of the 17 electric coops but for most coops in the country and should welcome this opportunity to look into their deep causes and prospects for a resolution.

Philreca does not exist for its own reason but, as the national association of electric cooperatives, should exist for their members and the pursuit of their good as electric utilities.  It should have been flexing its muscle for many years to strengthen the electric cooperatives, to address their regulatory, political, institutional, and financial problems. The kind of problems that Secretary Cusi seems trying to address now.

In many ways, the openness of the government to consider “private sector takeover” as an option is due to the failure of the EC’s to correct themselves.  They have been relying too much on NEA, looking for someone else to blame instead of looking within.

The EC’s have this wonderful culture of “cooperativism” or “bayanihan” in coming to each other’s aid whenever anyone is damaged by natural calamities. That kind of “cooperativism” should have worked wonderfully in seeking solutions for failing electric cooperatives who may have political, governance, or financial calamities, and should have been harnessed by Philreca in creating long term solutions for their members.

Secretary Cusi’s  EC initiative may have started with an initial wrong turn but is now in the right course.  In this issue, Philreca should put higher priority for the best interest of their members and not for the sake of the association as a political party.  Pasensya na mga pare ko, an uncooperative stance seems out of character for a sector that is founded on cooperation.

The EC’s should welcome this opportunity for a deep review of their problems and to participate in coming up with long term solutions. After all when was the last time this was actually done either by a DOE Secretary or Administrator of NEA or even by a Presidential Asst for Rural Electrification? We will have to go back to the time of the venerable General Pedro Dumol, the father of the electric cooperative system.

Let us hope that the parties (Secretary Cusi and Philreca) will find a mutually acceptable time and venue for a constructive dialogue. That starts with giving each other a chance and the benefit of the doubt.

The problems of electric coops are deep-seated and will actually require honest acceptance. How do we insulate it from politicalization? how do we develop competent and honest managers? How do we elect qualified directors? How do we stop corruption? how do we improve our regulatory environment and compliance? How do we collect from the LGU’s who treat their monthly electric bills as a discretionary fund?

It is also a good time to revisit the EC’s role in national development. How do we reconcile the need for cost efficiency as a utility and the high cost of missionary services?  Should they be required to operate efficiently and cost competitively as public service providers? How about separate rules and rates for their missionary responsibilities?

This website had written about the role of the various government institutions in the weakening and failures of the electric coops. And to be honest, we can right the EC’s if we right the way the government institutions deal with them.  When government officials talk about privatizing electric coops, they are actually abdicating their obligations as government officials to perform their own roles for the well being of Electric Coops. It is akin to the AFP proposing to privatize the PNP force because they cannot do their job as law enforcers.

While we are on the subject of dialogue, let us include all the Electric Cooperatives groupings that have sprouted to address their common goals. Let it be a solution of national consensus. Let us hope NEA Administrator Edgar Masongsong weighs in on this momentous occasion and be an agent of unity and dialogue.

We wish Secretary Cusi, Philreca and its leadership, and all the other electric cooperatives and their associations well in this opportune undertaking. Your members are counting on you.

 

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph

 

 

Viewpoint: An Open letter to the DOE Secretary on what to do about the grand theft of consumers’ money in the amount of more than 5.0 billion pesos every year that is being carried out by 15 electric cooperatives in Mindanao

David A. Tauli, President, Mindanao Coalition
19 October 2018

SIR:

This is to suggest to the Department of Energy that they should carry out legal actions against the ERC commissioners and against officials in the DOE in the past administration, in particular in the PSALM-NPC and the National Electrification Administration, who were involved in the corruption of the power supply contracting processes that were carried out by fifteen (15) electric cooperatives in Mindanao, which resulted in the legalized theft (if there is such a thing) of the money of power consumers by their electric cooperatives amounting to more than five billion (5,000,000,000) pesos every year for the 25 years during which the anomalous power supply contracts are still in effect. Which makes for a whooping 125 billion pesos that will be transferred from the pockets of power consumers to the pockets of the capitalist owners of coal generating plants to whom the electric cooperatives are giving the money that they have extorted from their own member-consumer-owners.

This afternoon, Thursday, October 18, 2018, a public forum was held, with department secretaries or their representatives in attendance, at the PIE-MO headquarters in the Mindanao International Container Terminal in Tagoloan, Misamis Oriental. In the morning, workshops were held among the participants, during which we were instructed to include in our positive recommendations to be submitted to the various cabinet secretaries of President Rodrigo R. Duterte any valid complaints that we may have about corruption or incompetence in the departments we were assigned to take up. I was tasked to make the presentation for the recommendations and complaints that our group formulated to be submitted to the Department of Energy.

The last recommendation of the DOE group was to stop corruption at the DOE and the Energy Regulatory Commission. In my oral presentation I explained briefly about the corruption that we wanted to bring to the attention of President Duterte. I mentioned that fifteen (15) electric cooperatives in Mindanao have been systematically stealing the money of their consumers, and that this theft, while involving only around 1,000 pesos per year per consumers, was resulting in the amount of more than five billion (5,000,000,000) pesos being contributed every year by the electric cooperatives to the profits (not revenues, but PROFITS, which is the amount pocketed by the capitalist owners of the coal plant after they have paid off all their obligations during the year) of the FDC Misamis Power Corporation, the owners of the 405-MW coal power plant in Villanueva, Misamis Oriental, which was contracted by the electric cooperatives to supply the power requirements of their consumers for twenty-five (25) years.

I also said that such theft of humongous amounts of money of consumers would not have been accomplished without the cooperation of past officials of the DOE and the commissioners of the Energy Regulatory Commission (some of whom are still with the ERC) at the time when the scams were committed by the electric cooperatives. And I added that the grand theft would not continue to be carried out by the electric cooperatives unless the present set of DOE officials and the new set of ERC commissioners were themselves corrupt or incompetent.

In my presentation, I did not go into the details about how the theft of consumers’ money was planned and implemented by DOE officials and ERC commissioners because I have already sent to the DOE and ERC the details about these scams (SCAMS, plural, committed not only once but twice by most of the electric cooperatives that were involved in the scams, but both times with the same FDC Misamis Power Corp as their partner in committing the scams). Letters concerning the scams were sent at least twice to government officials, the first time in 2016, and the second time last month, September 2018.

In his response to my charges of corruption in the DOE and the ERC, the representative of DOE Secretary Alfonso Cusi, in the person of Undersecretary Wimpy Fuentebella, said that the complaints about corruption in power contracting by the electric cooperatives were forwarded to President Rodrigo R. Duterte. According to USEC Fuentebella, the President issued a directive to the Energy Regulatory Commission to carry out investigations into the power supply contracts that were subjects of the complaints, and to carry out measures to reduce the rates that were being paid by consumers under these power supply contract.

My response to this information from USEC Fuenteballa was to point out the directive of PRRD to the Energy Regulatory Commission is USELESS because the people being directed to investigate the anomalous power supply contracts include commissioners who approved the patently illegal contracts. Unless they are suspended, these commissioners (Atty. Magpale-Asirit and Alfredo Non) will likely obstruct whatever investigation will be proposed, and make the investigations into another moro-moro. Apart from which, the contracts (26 in number) are patently illegal because the electric cooperatives contracted for the power supply without carrying out competitive selection process (CSP), which is required of them to do by the EPIRA. As a consequence of not doing CSP, the electric cooperatives imposed onerous rates on their consumers because they contracted for baseload power supply from the proposed coal plant of the FDC Misamis Power Corporation to be located at Villanueva, Misamis Oriental, at a price of 5.40 pesos per kilowatt-hour, at a time when the San Miguel Consolidated Power Corporation was offering the same baseload power supply from their proposed coal plant in Malita, Davao del Sur, at a price of 4.20 pesos per kWh, and the GNPOWER corporation was offering the same baseload power supply from their proposed coal plant in Kauswagan, Lanao del Norte, at a price of 4.00 pesos per kWh. If the electric cooperatives carried out CSP, they would have contracted with GNP at a price of 4.00 pesos per kWh. They violated the EPIRA requirements and “negotiated” directly with FDC Misamis to buy their baseload coal power supply at a price of 5.40 pesos per kWh for 25 years.

The only investigation to be carried out is to summon the electric cooperative officials concerned and ask them to answer under oath: Did you enter into power supply contract with the FDC Misamis Power Corporation for power supply from the Mt. Apo geothermal power plant (or from the 405-MW Villanueva coal plant) without carrying out legitimate competitive selection process?

And the only question to be asked of the ERC commissioners under oath is: Did you approve the rate for power supply contracts between the electric cooperatives and the FDC Misamis Power Corporation in which the electric cooperatives did not carry out legitimate CSP and did not conduct public bidding for their power supply?

USEC Fuentebella and other apologists for the DOE and the ERC are saying that the CSP requirement do not apply to the electric cooperatives who contracted from FDC because it was only recently that the DOE and the ERC issued rules governing the CSP that should be carried out by the distribution utility companies. These people are feigning ignorance of the fact that the CSP has been required by all DU’s to do since the enactment of the EPIRA in 2001, and that since 2001 all DU’s have been complying with the CSP requirements in carrying out power supply contracting, except only the electric cooperatives who contracted for power supply from the FDC Misamis coal plant and from the Mt. Apo geothermal power plant whose power supply contracting was sold by the PSALM-NPC to the FDC Misamis Power Corporation (illegally, it should be said, because the PSALM-NPC also violated EPIRA requirements in the IPPA process for the Mt. Apo geothermal power plant). There are twenty-six (26) of these anomalous power supply contracts that were approved by the ERC, in violation of their mandate under the EPIRA to ensure that all distribution utility companies should carry out public bidding for their purchases of materials, equipment and services.

So it is pointless on the part of President Duterte to direct the ERC to review these anomalous power supply contracts and have them revised if verified to have been contracted in violation of the EPIRA. What the President should do is to direct the DOE or the Ombudsman to verify if the power supply contracts have been contracted by the electric cooperatives in violation of the provisions of the EPIRA, and upon verification that the power supply contracts were contracted in violation of the EPIRA, file criminal charges against the ERC commissioners for having approved illegal power supply contracts (26 of them!) in violation of their mandate to ensure that consumers are protected against illegal acts of participants in the electric power industry.

The Mindanao Coalition of Power Consumers is now campaigning among consumer groups and NGO’s in the territories of the thieving electric cooperatives to file legal charges at the RTC against the officials of the electric cooperatives for crimes committed against the EPIRA. So we believe that we can take care of having the anomalous power supply contracts (26 of them) declared as “null and void ab initio” by the RTC’s. Such a finding by the RTC’s will result in stopping the theft of billions of pesos of consumers’ money every year, and in the refund of the billions of pesos that already have been stolen by the officers of the electric cooperatives and turned over to their masters at the FDC Misamis Power Corporation. But we are hoping that officials of the government, or even LGU officials, could take care of the prosecution of the national government officials who were involved in the scams.

During the public forum, my friend Ben Contreras informed the audience that he will try to have the complaints reach President Duterte so that the President could run after the culprits. Good work, Ben. But what the President should do is to get rid of all the government officials to whom the corrupt activities have been reported, and who have not done anything to run after the crooks who are stealing the money of power consumers, and replace them with new officials who are honest and competent and will not hesitate to go after crooks in high places in the national government.

But I digress. The main purpose of this letter is to advise the DOE to verify all our allegations about corruption in the DOE and in the ERC during the past administration (some of whom are still holding the same office, though most have been separated from government service), and upon verification of the facts to have the perpetrators prosecuted. The facts concerning corruption in high places in government will not go away, Honorable Secretary; every act of commission and omission that have been done by the electric cooperatives and by the ERC commissioners and by the officials of the PSALM-NPC and the NEA are all matters of public record. And the theft of consumers money amounting to more than five billion pesos (PhP 5,000,000,000.00) every year is actually happening every month when the miscreant electric cooperatives bill their consumers.

This is written to remind you, Sir, that these complaints have been with your office for two years now, and you have not done anything about them, and to advise you to disregard whatever USEC Fuentebella has been telling you about these high crimes. Just go ahead and do what a Department Secretary should do to protect power consumers in Mindanao.

 

Truly yours,

David A. Tauli
President, Mindanao Coalition of Power Consumers
davetauli@gmail.com

Disclaimer: The views expressed in this article are those of the author and are published in the MSK website as a forum of national debate in the public interest on the issue of power, its contracting, government stewardship and regulation, and high cost to consumers. The author’s views do not necessarily reflect the views and approval of the owners of the MSK website.  MSK welcomes Counterpoints on the views expressed.

Viewpoint: An Open letterto the DOE Secretary on what to do about the grand theft of consumers’ money in the amount of more than 5.0 billion pesos every year that is being carried out by 15 electric cooperatives in Mindanao

David A. Tauli, President, Mindanao Coalition
19 October 2018

SIR:

This is to suggest to the Department of Energy that they should carry out legal actions against the ERC commissioners and against officials in the DOE in the past administration, in particular in the PSALM-NPC and the National Electrification Administration, who were involved in the corruption of the power supply contracting processes that were carried out by fifteen (15) electric cooperatives in Mindanao, which resulted in the legalized theft (if there is such a thing) of the money of power consumers by their electric cooperatives amounting to more than five billion (5,000,000,000) pesos every year for the 25 years during which the anomalous power supply contracts are still in effect. Which makes for a whooping 125 billion pesos that will be transferred from the pockets of power consumers to the pockets of the capitalist owners of coal generating plants to whom the electric cooperatives are giving the money that they have extorted from their own member-consumer-owners.

This afternoon, Thursday, October 18, 2018, a public forum was held, with department secretaries or their representatives in attendance, at the PIE-MO headquarters in the Mindanao International Container Terminal in Tagoloan, Misamis Oriental. In the morning, workshops were held among the participants, during which we were instructed to include in our positive recommendations to be submitted to the various cabinet secretaries of President Rodrigo R. Duterte any valid complaints that we may have about corruption or incompetence in the departments we were assigned to take up. I was tasked to make the presentation for the recommendations and complaints that our group formulated to be submitted to the Department of Energy.

The last recommendation of the DOE group was to stop corruption at the DOE and the Energy Regulatory Commission. In my oral presentation I explained briefly about the corruption that we wanted to bring to the attention of President Duterte. I mentioned that fifteen (15) electric cooperatives in Mindanao have been systematically stealing the money of their consumers, and that this theft, while involving only around 1,000 pesos per year per consumers, was resulting in the amount of more than five billion (5,000,000,000) pesos being contributed every year by the electric cooperatives to the profits (not revenues, but PROFITS, which is the amount pocketed by the capitalist owners of the coal plant after they have paid off all their obligations during the year) of the FDC Misamis Power Corporation, the owners of the 405-MW coal power plant in Villanueva, Misamis Oriental, which was contracted by the electric cooperatives to supply the power requirements of their consumers for twenty-five (25) years.

I also said that such theft of humongous amounts of money of consumers would not have been accomplished without the cooperation of past officials of the DOE and the commissioners of the Energy Regulatory Commission (some of whom are still with the ERC) at the time when the scams were committed by the electric cooperatives. And I added that the grand theft would not continue to be carried out by the electric cooperatives unless the present set of DOE officials and the new set of ERC commissioners were themselves corrupt or incompetent.

In my presentation, I did not go into the details about how the theft of consumers’ money was planned and implemented by DOE officials and ERC commissioners because I have already sent to the DOE and ERC the details about these scams (SCAMS, plural, committed not only once but twice by most of the electric cooperatives that were involved in the scams, but both times with the same FDC Misamis Power Corp as their partner in committing the scams). Letters concerning the scams were sent at least twice to government officials, the first time in 2016, and the second time last month, September 2018.

In his response to my charges of corruption in the DOE and the ERC, the representative of DOE Secretary Alfonso Cusi, in the person of Undersecretary Wimpy Fuentebella, said that the complaints about corruption in power contracting by the electric cooperatives were forwarded to President Rodrigo R. Duterte. According to USEC Fuentebella, the President issued a directive to the Energy Regulatory Commission to carry out investigations into the power supply contracts that were subjects of the complaints, and to carry out measures to reduce the rates that were being paid by consumers under these power supply contract.

My response to this information from USEC Fuenteballa was to point out the directive of PRRD to the Energy Regulatory Commission is USELESS because the people being directed to investigate the anomalous power supply contracts include commissioners who approved the patently illegal contracts. Unless they are suspended, these commissioners (Atty. Magpale-Asirit and Alfredo Non) will likely obstruct whatever investigation will be proposed, and make the investigations into another moro-moro. Apart from which, the contracts (26 in number) are patently illegal because the electric cooperatives contracted for the power supply without carrying out competitive selection process (CSP), which is required of them to do by the EPIRA. As a consequence of not doing CSP, the electric cooperatives imposed onerous rates on their consumers because they contracted for baseload power supply from the proposed coal plant of the FDC Misamis Power Corporation to be located at Villanueva, Misamis Oriental, at a price of 5.40 pesos per kilowatt-hour, at a time when the San Miguel Consolidated Power Corporation was offering the same baseload power supply from their proposed coal plant in Malita, Davao del Sur, at a price of 4.20 pesos per kWh, and the GNPOWER corporation was offering the same baseload power supply from their proposed coal plant in Kauswagan, Lanao del Norte, at a price of 4.00 pesos per kWh. If the electric cooperatives carried out CSP, they would have contracted with GNP at a price of 4.00 pesos per kWh. They violated the EPIRA requirements and “negotiated” directly with FDC Misamis to buy their baseload coal power supply at a price of 5.40 pesos per kWh for 25 years.

The only investigation to be carried out is to summon the electric cooperative officials concerned and ask them to answer under oath: Did you enter into power supply contract with the FDC Misamis Power Corporation for power supply from the Mt. Apo geothermal power plant (or from the 405-MW Villanueva coal plant) without carrying out legitimate competitive selection process?

And the only question to be asked of the ERC commissioners under oath is: Did you approve the rate for power supply contracts between the electric cooperatives and the FDC Misamis Power Corporation in which the electric cooperatives did not carry out legitimate CSP and did not conduct public bidding for their power supply?

USEC Fuentebella and other apologists for the DOE and the ERC are saying that the CSP requirement do not apply to the electric cooperatives who contracted from FDC because it was only recently that the DOE and the ERC issued rules governing the CSP that should be carried out by the distribution utility companies. These people are feigning ignorance of the fact that the CSP has been required by all DU’s to do since the enactment of the EPIRA in 2001, and that since 2001 all DU’s have been complying with the CSP requirements in carrying out power supply contracting, except only the electric cooperatives who contracted for power supply from the FDC Misamis coal plant and from the Mt. Apo geothermal power plant whose power supply contracting was sold by the PSALM-NPC to the FDC Misamis Power Corporation (illegally, it should be said, because the PSALM-NPC also violated EPIRA requirements in the IPPA process for the Mt. Apo geothermal power plant). There are twenty-six (26) of these anomalous power supply contracts that were approved by the ERC, in violation of their mandate under the EPIRA to ensure that all distribution utility companies should carry out public bidding for their purchases of materials, equipment and services.

So it is pointless on the part of President Duterte to direct the ERC to review these anomalous power supply contracts and have them revised if verified to have been contracted in violation of the EPIRA. What the President should do is to direct the DOE or the Ombudsman to verify if the power supply contracts have been contracted by the electric cooperatives in violation of the provisions of the EPIRA, and upon verification that the power supply contracts were contracted in violation of the EPIRA, file criminal charges against the ERC commissioners for having approved illegal power supply contracts (26 of them!) in violation of their mandate to ensure that consumers are protected against illegal acts of participants in the electric power industry.

The Mindanao Coalition of Power Consumers is now campaigning among consumer groups and NGO’s in the territories of the thieving electric cooperatives to file legal charges at the RTC against the officials of the electric cooperatives for crimes committed against the EPIRA. So we believe that we can take care of having the anomalous power supply contracts (26 of them) declared as “null and void ab initio” by the RTC’s. Such a finding by the RTC’s will result in stopping the theft of billions of pesos of consumers’ money every year, and in the refund of the billions of pesos that already have been stolen by the officers of the electric cooperatives and turned over to their masters at the FDC Misamis Power Corporation. But we are hoping that officials of the government, or even LGU officials, could take care of the prosecution of the national government officials who were involved in the scams.

During the public forum, my friend Ben Contreras informed the audience that he will try to have the complaints reach President Duterte so that the President could run after the culprits. Good work, Ben. But what the President should do is to get rid of all the government officials to whom the corrupt activities have been reported, and who have not done anything to run after the crooks who are stealing the money of power consumers, and replace them with new officials who are honest and competent and will not hesitate to go after crooks in high places in the national government.

But I digress. The main purpose of this letter is to advise the DOE to verify all our allegations about corruption in the DOE and in the ERC during the past administration (some of whom are still holding the same office, though most have been separated from government service), and upon verification of the facts to have the perpetrators prosecuted. The facts concerning corruption in high places in government will not go away, Honorable Secretary; every act of commission and omission that have been done by the electric cooperatives and by the ERC commissioners and by the officials of the PSALM-NPC and the NEA are all matters of public record. And the theft of consumers money amounting to more than five billion pesos (PhP 5,000,000,000.00) every year is actually happening every month when the miscreant electric cooperatives bill their consumers.

This is written to remind you, Sir, that these complaints have been with your office for two years now, and you have not done anything about them, and to advise you to disregard whatever USEC Fuentebella has been telling you about these high crimes. Just go ahead and do what a Department Secretary should do to protect power consumers in Mindanao.

 

Truly yours,

David A. Tauli
President, Mindanao Coalition of Power Consumers
davetauli@gmail.com

Disclaimer: The views expressed in this article are those of the author and are published in the MSK website as a forum of national debate in the public interest on the issue of power, its contracting, government stewardship and regulation, and high cost to consumers. The author’s views do not necessarily reflect the views and approval of the owners of the MSK website.  MSK welcomes Counterpoints on the views expressed.