PEMC can talk, but not negotiate, with AboitizPower subsidiary

by Lenie Lectura – February 1, 2016

from Business Mirror

THE Philippine Electricity Market Corp. (PEMC) on Monday said discussions with the subsidiary of power producer Aboitiz Power Corp. is possible, but a negotiation could not take place because it is not in accordance with the rules provided by the Wholesale Electricity Spot Market (WESM).

This was the reaction of the WESM operator, following the December 2015 order of the Court of Appeals (CA), which junked PEMC’s appeal to impose a P235-million fine against Therma Mobile Inc (TMO).

PEMC President Melinda L. Ocampo said in a statement that the WESM operator “is always open” to discuss any issue with the participants as long as it is consistent with its mandate under the WESM rules.

“We are committed in upholding the integrity of the WESM investigation process and we will remain true to our objective of creating a level-playing field among the WESM players,” she added.

Ocampo said the WESM investigation process of breaches of WESM Dispute Resolution Market Manuals (DRMM) is not covered by mediation and arbitration. “The WESM rules is clear that the investigation process is not a commercial transaction and, therefore, not covered by the term ‘dispute’ that should undergo mediation and arbitration if a participant disagrees with the results,” she said, adding that pursuant to the Electricity Power Industry Reform Act, the proper course of action of a participant is to escalate the finding to the Energy Regulatory Commission (ERC) via an original action.

“I will not give direct comments. It may just affect our current relationship and talks,” AboitizPower President Antonio Moraza said in a text message when sought for comment.

Last week 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 in Pasig City.

In particular, the CA did not allow PEMC to impose a penalty against Therma Mobile. The court also prevented PEMC from charging interest on the financial penalties.

Moreover, the appellate court prevented PEMC from transmitting its investigation report to the ERC, until the dispute is finally resolved through the dispute resolution process of the WESM rules and DRMM.”

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

“We are pleased with the decision and will dialogue more with PEMC to reach a satisfactory settlement,” Moraza said last week.

Early last year PEMC said Therma Mobile 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 100 megawatts (MW) to the Manila Electric Co.

Although Therma Mobile’s rated capacity is 234 MW, it could only safely, reliably and consistently deliver 100 MW 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 Therma Mobile, 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 140-MW Casecnan hydro plant and 650-MW 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, Therma Mobile 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.