Return spot market operation to PEMC if WESM-Iemop deal is voided–solon

By Lenie Lectura -February 24, 2020
from Business Mirror

THE operation of the electricity spot market should be returned to the Philippine Electricity Market Corp. (PEMC), at least for now, if the contract with Independent Electricity Market Operator of the Philippines Inc. (Iemop) to run the Wholesale Electricity Spot Market (WESM) is declared null and void.

“Let’s just go back to PEMC. I don’t see a problem returning to PEMC because it is not about who is running the market. It is the legality of the juridical entity that’s running the market,” Puwersa ng Bayaning Atleta (PBA) Party-list Rep. Jericho Nograles told reporters on Friday. “My issue here is plain and simple. Is Iemop legally covered to run the WESM? The answer is no.”

He cited three major qualifications to run the WESM under Section 6A of the IRR of Republic Act (RA) 9136 or the Electric Power Industry Reform Act (Epira).

“Very simple. Three basic characteristics needed. No. 1, financial capability.  Seven thousand pesos is not financial capability,” he said, referring to Iemop’s paid-up capital.

“No. 2, technical capability. You can’t even buy a cell phone with P7,000 that can take [good] pictures, right? So [right off you see there’s no] technical capability.

“And third, minimum two years market operator of a similar or larger electricity spot market. No [such record]. You can see it, it’s very simple,” said Nograles.

Lawmakers want the Department of Energy (DOE) to declare null and void the contract between the PEMC and Iemop. PEMC is the former operator of WESM.

Nograles said not even the Philippine Stock Exchange is totally qualified to run the WESM. “PSE is a stock market. They have experience and they have capability but as a market of equities and not as electricity spot market. So, [even the] PSE [lacks capability],” he said.

Nograles said he has discussed with Energy Secretary Alfonso Cusi about revisiting the IRR as one way to move forward in resolving the qualifications of an independent electricity market operator. He cited the third requirement, which requires two years of experience as a market operator.

“You can either go two ways. No. 1, somebody will partner with a foreign electricity spot market operator. So, that can be the Singapore spot market operator, any of the four US stock market operators.

No. 2, which I told Secretary Cusi, why don’t we revisit the IRR? If you don’t want to give it to foreigners, because wala naman talaga mag qualify sa Philippines, then maybe we should revisit the IRR, together with Congress, and make it as equitable, as competitive, and as independent as possible then that would be a good alternative and to legitimize it,” said Nograles.

Basta ang position ko, which I told Secretary Cusi personally, is the manner of giving the contract to Iemop where, at the very least, there are legal questions there.  The way I see it, it can be returned to PEMC and then Congress is willing to work together with him and his department to fix whatever possible manner of resolution—which may or may not include the full privatization of PEMC,” the congressman elaborated, in a mix of English and Filipino.

Ombudsman

Nograles also raised the possibility of the committee on energy forwarding its report to the Office of the Ombudsman, detailing possible violations of Section 3G of Republic Act 3019.

He was referring to Iemop President and Chief Executive Officer Richard Nethercott, who is married to an assistant secretary of the DOE, and another Iemop official who is married to the president of the National Transmission Corp.  The second Iemop official, who is one of the incorporators, has since resigned.

Nethercott, who was appointed at the start of the year, earlier told a public hearing that there is no conflict of interest, as a legal opinion from Iemop was sought on the matter.

“When the committee agrees to forward it to the Ombudsman then that is the time when we can forward it to the Ombudsman as a committee. If the committee is not inclined to forward it to the Ombudsman, there is nothing stopping any individual taxpayer from forwarding it to the Ombudsman for the Ombudsman to motu propio investigate it.

He insisted the issue “is violation of law” while acknowledging that “personality issues” are intruding in the debate. “But I don’t care about personality issues, although I believe that that is a violation…or possible violation.”

His cause, he stressed, “is to protect the bigger picture, which is the consumers, the electric consumers of the Republic of the Philippines. Because if our market operator is operating on a contract that is void ab initio and collecting from the electricity users without a valid ERC (Energy Regulatory Commission) approval, then who’s next?”

Nograles added: “Who will stop generators and distribution utilities and others from doing the same thing?” if there is a “precedent” where the ERC, the Philippine Competition Commission and the Governance Commission for GOCCs “are being disrespected.”