GMA ALSO TO BLAME FOR HIGH POWER RATES, SAYS PARTY-LIST GROUP
MANILA, MAY 5, 2008 (STAR) By Jess Diaz - President Arroyo is equally to blame for the high power rates in the country, which are the second highest in East Asia after those of Japan, Rep. Teodoro Casiño of the party-list group Bayan Muna said yesterday.Casiño said the Arroyo administration failed to fully carry out the mandate of the Electric Power Industry Reform Act (Epira) of 2001, which should have brought down the cost of power.
He said the administration failed to privatize 70 percent of state-owned power plants as mandated by Epira.
Casiño added that the privatization of these plants would have brought about free competition among private power producers.
“As it is, the National Power Corp. (Napocor) still controls the market and can dictate and even manipulate prices, as it did in the latter part of 2006,” Casiño stressed.
He said Mrs. Arroyo also failed to renegotiate the “onerous” contracts Napocor entered into with independent power producers during the Ramos administration.
“She’s now training her guns on Meralco to divert attention from her own responsibility and accountability for the fact that power rates have remained high during her seven-year watch,” he said.
Casiño, a member of the House energy committee, conceded that “Meralco is part of the problem, but the bigger problems are the onerous IPP contracts that have caused these spiraling power costs.”
He said these contracts bind the government to pay for the contracted generation capacity of IPPs, whether such capacity is actually produced and used or not.
“It is the consumers that end up paying for the huge costs of these contracts, including the cost of corruption. And President Arroyo knows that,” he stressed.
Casiño also said he is puzzled by Mrs. Arroyo’s appeal for big business to join forces with the government in bringing down power rates, saying it is a call for conspiracy against the biggest power distribution company in the country.
The President made the appeal in a speech before the Federation of Philippine Industries and the Federation of Filipino-Chinese Chambers of Commerce and Industry.
She has asked the Department of Energy to petition the Energy Regulatory Commission (ERC) to bring down power rates.
At the same time, she told Napocor to reduce the cost of power it sells to the Manila Electric Co. and for Meralco not to purchase power in the Wholesale Electricity Spot Market (WESM) at peak hours when prices are high.
It is in the spot market that Napocor was found by market operator Philippine Electricity Market Corp. (PEMC) to have manipulated prices in September-October 2006, raising prices by P4-per-kilowatt-hour from P2.88 to P6.88.
Federico Lopez, president of First Generation, a sister company of Meralco, supported PEMC’s findings, saying their analysis showed that Napocor shut down some plants to create an artificial shortage and drive prices up.
“That is what the bankrupt Enron did in California some years ago, and they made tons of money,” he said.
Two weeks ago, Meralco announced adjustments in its electricity charges this month of .5188 centavos per kWh in generation, 30 centavos in distribution, .0759 centavos in transmission, and .0770 in system loss.
Senate Minority Leader Aquilino Pimentel, on the other hand, sought an explanation from Meralco for the planned increases.
He acknowledged that Meralco’s latest rate adjustments might be justified in the wake of rising crude prices but said, “there is also Section 23 of Epira, which obligates electric distribution companies to supply electricity at the least cost to customers.”
“It may be true that Meralco is buying power from Napocor and the spot market at higher prices than the power it is buying from IPPs like Sta. Rita and San Lorenzo power plants. The problem however is that if it buys power from these plants, it may be cross-subsidizing them as Meralco partially owns them. That will violate Epira,” he said.
Scrap VAT
A consumers group, on the other hand, called on President Arroyo to scrap the value added tax (VAT) on electricity in her effort to lower power rates in the country.
The People Opposed to Warrantless Electricity Rates (POWER) said Mrs. Arroyo should show her sincerity by removing the VAT on electricity altogether to significantly reduce its cost.
The group said VAT was not included in electricity bills of consumers before 2006.
POWER spokesman Ramon Ramirez said a family consuming 200 kilowatt-hours of electricity per month could easily cut their electric bills by around 10 percent if the government removes the VAT on electricity.
The group pointed out that the projected reduction, if VAT on electricity is removed, translates to at least P200 in savings for consumers, whose bill could reach more than P2,000 when VAT is included.
“This reduction is significant and will provide consumers with more purchasing power for other needs such as rice and food,” Ramirez stressed.
“The removal of the VAT on power will be the fastest and most direct form of relief from higher electricity rates that the administration can do. We wonder why the government has not seen this before?” he added.
According to POWER, there are pending bills before the House of Representatives and the Senate calling for the abolition of the VAT on electricity and petroleum products.
But there have been no significant movements on these proposed measures because the administration has opposed the removal of the VAT on electricity and petroleum products, the group said.
The militant Bagong Alyansang Makabayan (Bayan) also criticized the government for ignoring the anomalies in the (Napocor, Power Sector Assets and Liabilities Management (PSALM), and the WESM.
Bayan secretary-general Renato Reyes Jr. said the tendency of the government is to put the blame on the Manila Electric Co. (Meralco) for the increasing power rates rather than look into alleged irregularities in Napocor, PSALM, and WESM, which also drive up power rates.
“The government wants to pin the blame on Meralco but conveniently disregards the anomalies and questionable practices of Napocor, PSALM, and WESM,” Reyes claimed. “This double standard puts serious doubts on the government’s purported campaign to lower power rates.”
According to Bayan, Napocor has bought coal “at exorbitant prices” through questionable “emergency purchases” that drove generation rates up.
The group added Napocor is also being accused of abusing its market power at the WESM by artificially bringing up generation rates of Napocor-controlled plants.
Bayan said that this “practice” resulted in P9 billion-worth of “questionable generation charges” from August to November 2006.
Bayan said the PSALM has written the ERC, asking the amount to be passed on to consumers despite government findings of price manipulation.
The cases are now pending before the Ombudsman and ERC, Bayan said.
“The government shouldn’t just focus on Meralco… The bigger problem here is the whole power sector structure, and the policies of deregulation and privatization brought about by the Epira,” Reyes pointed out.
Earlier, President Arroyo ordered Napocor to cut by half its charges to Meralco, apparently to pressure the latter into lowering electricity rates.
She also directed the Department of Trade and Industry to file four petitions with the ERC, which are all aimed at pulling down Meralco rates.
The four petitions included enjoining Meralco from buying electricity from the WESM during peak hours; ensure preferential treatment for households and power-intensive industries in the distribution of TransCo (National Transmission Corp.) charges; to prohibit Meralco from charging its system loss as a separate item; and to require Meralco to charge the same rates as the Visayan Electric Co. (VECO), Cebu Electric Co. (CEBECO) or Davao Light.
Sen. Joker Arroyo warned the government against cutting the rates charged by Napocor to Meralco.
Arroyo said that such a move by the government might just again leave the state-owned power firm in deep financial trouble.
Senator Arroyo claimed he finds the President’s order to Napocor “disturbing.” – With Katherine Adraneda
Reported by: Sol Jose Vanzi
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