Lawmaker seeks ERC clarification on power market-share limitation

By Lenie Lectura – October 17, 2017

from Manila Bulletin

A lawmaker will discuss with the Energy Regulatory Commission (ERC) ways on how to reconcile discrepancy between installed and dependable power-generating capacity.

In his keynote speech, Sen. Sherwin T. Gatchalian on Tuesday said the metric used to determine the market-share limitation should be reviewed.

The law specifies installed generating capacity as the measure in computing market shares.

However, Gatchalian said, this is not reflective of the true market power of a company since the installed capacity is different from the power generated and the actual power injected to the grid.

“We have to [undertake a review]. It has to be an ERC recommendation. We will have a dialogue with ERC to look at it. We will talk to them on how to remedy this,” Gatchalian said.

The share of coal in the country’s total installed capacity is approximately 35 percent, but its share in actual generation is 48 percent. For natural gas, its installed capacity is only 16 percent, but its actual generation is 22 percent.

As a consequence, Gatchalian said, the use of installed generating capacity underestimates the true market share of a company, especially if its plants have comparatively higher capacity factors.

According to the senator, almost 60 percent of the installed energy capacity is controlled by only three firms.  These are First Gen of the Lopez Group at 19.63 percent, San Miguel Corp. at 18.73 percent and AboitizPower at 17.48 percent.

“There exists no formal monitoring of associated party contracting between generation companies and distribution utilities,” Gatchalian said.

Market-share limitations prohibit generation companies from owning more than 30 percent of the installed capacity of a grid and more than 25 percent of the installed capacity of the national grid.

A cross-ownership provision prevents generation companies and distribution utilities from extracting control or influence over the transmission concessionaire and vice versa. Also, distribution utilities are precluded from contracting more than 50 percent of their demand related parties.

“Market share is not exactly bad for the industry. What is bad is it creates environment for collusion and regulatory capture,” Gatchalian said.

Epira, he said, lays down a catch-all provision prescribing market power abuse and anti-competitive behavior. This is further elucidated by the enactment  of Republic Act  10667 or the Philippine Competition Act which specifies kinds of anti-competitive agreements and situations of abuse of dominant position.

“Yet, a perusal of the existing electricity industry shows the presence of dominant players and high retail rates,” Gatchlian said.