AboitizPower to dialogue with PEMC to resolve P235-million penalty issue

by Lenie Lectura – January 28, 2016

from Business Mirror

ABOITIZ Power Corp. is willing to continue negotiations with Philippine Electricity Market Corp. (PEMC) to resolve their dispute following a Court of Appeals (CA) decision that junked the market operator’s appeal to impose a P235-million fine against an AboitizPower subsidiary.

“We are pleased with the CA decision and will dialogue more with PEMC to reach a satisfactory settlement,” AboitizPower President Antonio Moraza said when sought for comment.

On Thursday, AboitizPower said in a disclosure to the stock exchange that it received the CA decision dated December 14, 2015, denying PEMC’s petition for review assailing the April 1, 2015, decision of Branch 157 of the Regional Trial Court (RTC) in Pasig City.

The RTC Branch 157 in Pasig City issued a writ of preliminary injunction preventing PEMC from collecting from Therma Mobile Inc. the amount of P234.9 million in financial penalties. The CA’s upheld the local court’s decision.

The CA also prevented PEMC from charging interest on the financial penalties. Likewise, the appellate court prevented PEMC from transmitting its investigation report to the Energy Regulatory Commission (ERC), until the dispute is finally resolved through the dispute resolution process of the Wholesale Electricity Spot Market Rules and Dispute Resolution Market Manual.

In the same order, the court made a prima facie determination of the existence of an arbitration agreement between TMO and PEMC, and ordered the parties to continue with the dispute resolution process embodied in the WESM Rules and WESM DRMM.

Aboitiz said negotiation meetings conducted by the parties have already commenced.

When sought for comment, PEMC said it “will endeavor to release a statement tomorrow (Friday) after our board meeting.”

Early last year, PEMC said TMO withheld capacity during the November and December 2013 supply period and imposed financial penalties.

TMO argued that it did not withhold any capacity, as it was physically impossible for TMO to transmit more than 100megawatts (MW) to the Manila Electric Company.

Although TMO’s rated capacity is 234 MW, it could only safely, reliably and consistently deliver 100MW during the period under investigation because of the thermal limitations of its transmission lines and the technical and mechanical constraints of its generating units, the company said.

Aside from TMO, PEMC also imposed penalties against the Power Sector Assets and Liabilities Management Corp. (PSALM) and Panasia Energy, Inc. for the same reasons.

In its report, PEMC said PSALM’s violation covers the 140MW Casecnan hydro plant and 650MW Malaya thermal power plant. PEMC imposed a total of P89-million penalty against the state firm.

Panasia Energy, which operates the 620-MW Limay power plant in Bataan, was also fined by PEMC for violating the must-offer rule. Panasia is owned by Millennium Energy Inc.

Under the must-offer rule, generation companies registered in the WESM must declare and offer the maximum generating capacities of their power facilities in the spot market.

Aside from PSALM, TMO and PANASIA, there were other power producers that violated the WESM rule but penalties were not meted out against them.

These are AP Renewables, Inc. (APRI); CIP II Power Corp.; Trans-Asia Power Generation Corp. (TAPGC); Udenna Management and Resources Corp.; Strategic Power Development Corp.; and SEM-Calaca Power Corp.

PEMC, according to its President Melinda Ocampo, only investigates breaches of the WESM rules. Any act of anti-competitive behavior is under the jurisdiction of the ERC.

“When it comes to PEMC our concern is only breaches in WESM rules. When it comes to anti-competitive rules, this is for ERC to find out. It’s beyond [our] jurisdiction,” Ocampo said.

The Supreme Court earlier ordered the ERC to investigate anti-competitive behavior and abuse of market power allegedly committed by some WESM participants. As such, PEMC conducted the investigations under the “must-run” and “must-offer” rules of the WESM.