PNoy: MERALCO AT FAULT

PRESIDENT Benigno Aquino III on Tuesday said the P8 per kilowatt-hour increase sought by the Manila Electric Co. (Meralco) was too high, and could have been reduced if the company planned ahead for the shutdown of the Malampaya natural gas plant. “Our impression is there are people who really made a very significant profit from this situation,” the President said, stopping short of confirming allegations that power producers colluded to produce a spike in electricity prices. Meralco spokesman Joe Zaldarriaga declined to comment on the President’s remark, since the company was not specifically mentioned. “We’ve already had two meetings on the Meralco increases. The Malampaya shutdown is not an unusual event. It happens every two to three years. It is a foreseeable event,” Aquino said in an interview during the sidelines of the groundbreaking ceremony of the San Gabriel Power Plant in Barangay Sta. Rita in Batangas. “We don’t think the price increase that is being charged is commensurate to what should have been the case.” “You (Meralco) know that your power producers will not be able to produce, then you have to find a substitute. So you could have prepared for it; you should have prepared for it,” the President said. While Aquino said he was eagerly awaiting the resolution of the petition against the rate hikes before the Supreme Court, he said the Energy Regulatory Commission is empowered to “disgorge excessive and unjustifiable profits.”

ALSO: Aquino vows action vs. power profiteers

Saying that electric consumers should not be made to pay for the “wrong decisions” of power producers and distributors, President Benigno Aquino 3rd on Tuesday vowed to take action against unjustified power rate increases. The President said concerned agencies continue their investigation into reports that power companies committed a grave mistake when they purchased electricity at higher rates from the Wholesale Electricity Spot Market (WESM). The Manila Electric Co. (Meralco) had claimed that it was forced to buy more expensive power because of the simultaneous shutdown of the Malampaya gas plant and other power plants last year. As a result, the Energy Regulatory Commission (ERC) approved the utility firm’s petition to increase power rates by P4.15 per kilowatt-hour. However, the Supreme Court stopped the implementation of the rate hike.
The High Court set oral arguments on the power rate hike on January 21.

ALSO: Aquino inaugurates new power plant

The government is looking to tap more efficient energy resources to boost the country’s energy supply, President Benigno S. Aquino III said here yesterday as he led a time capsule-laying ceremony for a power plant fired by natural gas. During the ceremony, the President assured that there will be no rotating power brownouts in Luzon because of the stable power supply. Federico Lopez, Lopez Group of Companies, Oscar Lopez, Barangay Sta. Rita, Batangas City, San Gabriel Power Plant Project, Manila Bulletin
The first phase of the San Gabriel plant costing P650 million with 414-megawatt (MW) capacity is expected to be finished by the third quarter of this year. Construction of the second phase will be completed by March, 2016, while phase three will be completed by 2018, together with the construction of the Liquified Natural Gas receiving and regasification facility. By 2019, San Gabriel will deliver a full capacity of 1,242 MW. In his speech at the San Gabriel power plant capsule-laying ceremony in Barangay Sta. Rita, President Aquino said the plant “is expected not merely to meet the demand but to surpass it.” The President said the government will seek a “safe surplus of generating capacity” after the recent calamity in the Visayas forced it to review its energy development plan.


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Meralco at fault—PNoy

Blames firm’s unpreparedness, wrong decision


Aquino with Ambassador to Japan Manuel Lopez, a director of Meralco.

MANILA, JANUARY 14, 2014 (MANILA STANDARD) By Joyce Pangco Panares - PRESIDENT Benigno Aquino III on Tuesday said the P8 per kilowatt-hour increase sought by the Manila Electric Co. (Meralco) was too high, and could have been reduced if the company planned ahead for the shutdown of the Malampaya natural gas plant.

“Our impression is there are people who really made a very significant profit from this situation,” the President said, stopping short of confirming allegations that power producers colluded to produce a spike in electricity prices.

Meralco spokesman Joe Zaldarriaga declined to comment on the President’s remark, since the company was not specifically mentioned.

“We’ve already had two meetings on the Meralco increases. The Malampaya shutdown is not an unusual event. It happens every two to three years. It is a foreseeable event,” Aquino said in an interview during the sidelines of the groundbreaking ceremony of the San Gabriel Power Plant in Barangay Sta. Rita in Batangas.

“We don’t think the price increase that is being charged is commensurate to what should have been the case.”

“You (Meralco) know that your power producers will not be able to produce, then you have to find a substitute. So you could have prepared for it; you should have prepared for it,” the President said.

While Aquino said he was eagerly awaiting the resolution of the petition against the rate hikes before the Supreme Court, he said the Energy Regulatory Commission is empowered to “disgorge excessive and unjustifiable profits.”

“As a first step, the Department of Energy is investigating exactly what transpired and why the situation happened. It (the Malampaya shutdown) was a foreseeable event and they could have prepared for it. It appears people did not prepare for it, so we have to identify who is at fault,” he said.

He said it was incumbent upon the government to find out what actually transpired, given the huge impact that power rates would have on the majority of Filipinos, and to find out “what correct actions should be undertaken to address that situation.”

“If it was a commercial decision that was wrong, the government never promised that they will be shielded from their wrong decisions. If it was wrong—and emphasis on if since the investigation is ongoing – consumers must not bear the brunt of the wrong commercial decisions,” the President said.

With the shutdown of the Malampaya gas plant and other power plants, Meralco said it was forced to buy from the Wholesale Electricity Spot Market at peak prices.

Aquino said the government will be proposing to Congress amendments to the Electric Power Industry Reform Act, which deregulated the power sector.

“There are specific amendments—it’s part of the study. I think we are looking at the powers of the ERC. But, again, I am not ready to comment on the specific amendments that we will be proposing to Congress,” he said.

The President, however, was lukewarm to a proposal to revoke Meralco’s franchise, which he described as being good only as headline copy.

Aquino also assured the public that there will be no rotational brownouts since there is enough supply in Luzon.

He also expressed optimism that the power issue will not scare off investors, citing the Batangas San Gabriel project with a total capacity of about 1,242 megawatts that is set to be completed by 2019.

The first phase with a 100-megawatt power capacity is expected to be finished by the third quarter of the year.

“Our plan to guarantee sufficient energy for our country may just be a single item in the catalog of things to be done in the grand and collective task of nation-building, but they are symbols of our

countrys impending success. Projects such as this, after all, do not merely help bring power into our homes and workplaces; they empower the Filipino people as well,” Aquino said.

At the same event, the president of First Gen Corp., which owns the 414-megawatt natural gas plant being inaugurated, said he wlecomed the ongoing investigation into allegations of collusion and market abuse.

Federico Lopez, First Gen president told reporters that an investigation should be conducted to discover why prices went up during the 30-day Malampaya shutdown.

“A proper investigation should be [conducted] so that people can discover exactly what happened and [learn] how [to] you prevent it from happening again,” Lopez said.

He said the industry was “very transparent” and there was a lot of data available.

The Malampaya natural gas facility in northwest Palawan fuels First Gen’s 1,500 megawatts Sta. Rita and San Lorenzo natural gas power plants in Batangas.

Lopez said it was important for consumers to have confidence in a system that was privatized and deregulated.

“If they are not sure about … safeguards in place to protect from this kind of spike, then that’s not good,” Lopez said.

He said the President’s remarks also highlighted one of the safeguards – the ERC’s ability to disgorge unjustified profits.

In the Senate, Aquino’s ally, Senator Antonio Trilanes IV, filed a bill granting the President emergency powers to deal with Meralco’s warning about rotating blackouts.

He said the emergency powers would enable the President to better handle the looming energy crisis.

In the House, Speaker Feliciano Belmonte Jr. said lawmakers would give priority to a review of the Electric Power Industry Reform Act of 2001 (Epira), which deregulated the power industry.

He said it was about time for Congress to review the 13-year-old law to prevent cross-ownership of the three sectors – generation, transmission and distribution, and to prevent market abuse.

The review would also plug loopholes in the law, he said.

“It could become a priority as we learn more about the power problem,” Belmonte said.

Oriental Mindoro Rep. Reynaldo, Umali chairman of the House committee on energy, also said proposed measures seeking to amend or repeal the Epira law will be the priority of his committee when session resumes session on Jan. 20.

He added, however, that measures to repeal the law authored by militant lawmakers were not likely to prosper.

“Off hand, I don’t see a need to repeal the Epira. Nevertheless, we will take up all bills related to the issue. We owe this to the authors but whether to approve or not is another matter,” Umali said.

Eastern Samar Rep. Ben Evardone, meanwhile, filed a bill prohibiting cross-ownership of generation and distribution companies to prevent collusion among industry players.

Evardone said that distribution companies, their subsidiaries, officials, stockholders and their relatives should be banned from holding interest in generation companies, and vice versa.

Marikina Rep. Miro Quimbo, chairman of the ways and means committee, said his panel would also review a proposal to remove the 12 percent value added tax on power generation and distribution charges. With Alena Mae Flores, Maricel V. Cruz and Macon Ramos-Araneta

FROM MANILA TIMES

Aquino vows action vs. power profiteers January 14, 2014 9:51 pm
by Catherine S. Valente And Jefferson Antiporda Reporters


President Benigno Aquino 3rd led the ceremonial laying of time capsule of the San Gabriel Power Plant in Batangay City on Tuesday. With him are Federico Lopez, First Gen Corp. chairman and CEO, Oscar Lopez of the Lopez Group of Companies, Energy Secretary Jerico Petilla, Batangas Gov. Vilma Santos Recto, Richard Tantoco and Francis Giles. MALACAÑANG PHOTO

Saying that electric consumers should not be made to pay for the “wrong decisions” of power producers and distributors, President Benigno Aquino 3rd on Tuesday vowed to take action against unjustified power rate increases.

The President said concerned agencies continue their investigation into reports that power companies committed a grave mistake when they purchased electricity at higher rates from the Wholesale Electricity Spot Market (WESM).

The Manila Electric Co. (Meralco) had claimed that it was forced to buy more expensive power because of the simultaneous shutdown of the Malampaya gas plant and other power plants last year. As a result, the Energy Regulatory Commission (ERC) approved the utility firm’s petition to increase power rates by P4.15 per kilowatt-hour. However, the Supreme Court stopped the implementation of the rate hike.

The High Court set oral arguments on the power rate hike on January 21.

Aquino said it is likely that several people profited from the power crisis.

“Our impression is there are people who really made a very significant profit from this situation. So I have tasked the DOE [Department of Energy] again as the lead agency to investigate,” Aquino said during the groundbreaking of First Gen Corp.’s San Gabriel Power Plant Project in Batangas on Tuesday.

He noted that the DOE is investigating if power producers conspired to shut down so that prices would go up at the electricity spot market.

“My position personally is, if it was a commercial decision that was wrong, government never promised that they will be shielded from their wrong decisions,” the President said.

He said the ERC can order power companies to return any unjustified profits.

“I think it is incumbent upon us that this situation that greatly affects the welfare of so many of our countrymen, we should know what actually transpired, and what correct actions should be undertaken to address that situation,” he added. “If there are unjustifiable profits, the ERC can order the disgorgement of these profits.”

The President also dismissed Meralco’s warning that rotating brownouts will occur if it will not be allowed to increase its electricity rates.

Aquino said the scenario of rotational brownouts is unlikely because there is ample power to meet demands in Luzon.

“Well, naninigurado tayong hindi magkakaroon nitong rotating brownouts dahil, technically, meron tayo talagang enough of a supply, if not, even a surplus currently at least for Luzon [We would like assure that there will be no rotating brownouts because technically, we have enough of a supply, if not even a surplus currently at least for Luzon],”he said.

He added that there will be “less brownouts” in Mindanao during the summer months because of an “innovation” to be implemented by the DOE “to address that perpetual cycle in Mindanao.”

More power

In his speech, Aquino said that the new energy project will ensure sufficient supply of power and attract investors.

The $600-million project has three phases. The first unit to be built by First Gen will produce 414 mega-watts for the Luzon grid.

“This plant also bodes well for our country’s continued growth. Our economy hinges on having adequate power. After all, it is growing at a rapid pace—and we want to sustain this. Businesses are continually seeing the Philippines as an ideal investment destination,” he said.

“And we must continue doing our utmost to be able to tell investors: If you decide to set up shop in the Philippines, an adequate energy supply for your factories and facilities will be as low as possible on your list of things to worry about,” he added.

By 2016, the President said power demand in the Luzon grid is expected to rise to 11,000 megawatts from today’s 10,294 megawatts.

First Gen has 15 power plants that are contracted for sale under long-term power purchase agreements or other energy sales agreements.

First Gen already has the 1,000 megawatt Santa Rita gas-fired power plant and the 500-MW San Lorenzo plant in Batangas. In addition to the first unit launched on Tuesday, First Gen will be building two more power generation units to be completed several few years from now.

Emergency powers

The President also shot down proposals to grant him emergency powers to address the rising cost of electricity.
Aquino said the current situation does not call for any emergency powers, which was pushed by Rep. Ben Evardone of Eastern Samar.

Evardone earlier proposed that the President be given extra powers for a year to address the “catastrophic problems” of energy and mass transportation.

However, Aquino emphasized that the 1987 Constitution already allows the Executive branch to use such powers in times of crisis.

“We have emergency powers already in the Constitution that authorizes us to take over certain industries. So I don’t think we are in the situation that we have to employ Section 17 of Article XII,” he told reporters.

He was referring to Section 17 of Article XII which states that “In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately-owned public utility or business affected with public interest.”

But despite the President’s statement, Sen. Antonio Trillanes 4th filed a measure that seeks to grant the chief executive special authority to prevent a power crisis.

Trillanes, in filing Senate bill 2051, insisted that the President needs emergency powers in light of the threat of rotating blackouts in areas being serviced by Meralco.

Under the measure, Aquino will have the power to enter into negotiated contracts for the construction, repair, rehabilitation, improvement and/or maintenance of power plants, projects and facilities whenever necessary for the national welfare and in the public interest.

The proposed emergency authority introduced by Trillanes is almost similar to the powers given by Congress to then President Fidel Ramos in 1993, when the country was gripped by a power crisis.

However, Trillanes’ proposal prohibits the government from granting sovereign guarantees for the payment of obligations incurred by the Independent Power Producers (IPPs).

The bill also authorizes the President to compel IPPs to sell power to distribution utilities like Meralco as well as power distribution cooperatives and to fix the rate of return of the IPPs on their rate base to a reasonable rate not to exceed twelve percent per annum.

SB 2051 also empowers the president to use all available funds, including the Malampaya Fund, to finance the maintenance, rehabilitation, and replacement of energy infrastructure in preparation for and/or in response to natural and man-made calamities, and to finance subsidy for energy consumption by end users in case of market failure.

At the House of Representatives, Rep. Romero Quimbo sought the scrapping of the value-added tax (VAT) in electricity and replace it with a fixed tax scheme to unburden consumers.

Quimbo, he chairman of the Committee on Ways and Means, said that it is about time for the government to revisit the imposition of VAT on power to alleviate electricity rates.

“We need to study that further—if we need to bring back the fixed franchise tax or any tax that we can collect [from power producers] in order to lessen the burden of the consuming public,” he said.

The lawmaker explained that in the three stages of power production, generation and distribution phases are slapped 12-percent VAT, which makes a consumer pay 24-percent VAT. If the tax will be eliminated, the power charges can be reduced by 85 centavos or up to P1 per kilowatt-hour.

Quimbo said his committee is studying how to scrap VAT on electricity without compromising the government’s revenues.

“We need to know the impact of this move. Many people think that when power costs are low, more investors will invest, more jobs will be generated, and maybe this can be the solution of a holistic economic development that is really job-generation centered,” he added.

Also on Tuesday, Evardone filed House Bill 3676 prohibiting cross-ownership of power generation and distribution companies to prevent collusion among energy market players.

Evardone said that distribution companies, their subsidiaries, officials, stockholders and their relatives should be banned from holding interest in generation companies, and vice versa.

“In the present set-up, only a few corporations dominate both the generation and distribution sectors. This fuels the recent allegations of collusion among players in the generation sector and/or with those in the distribution chain,” he said. With report from Llanesca Panti

FROM MANILA BULLETIN


NEW POWER PLANT IN BATANGAS — President Benigno S. Aquino III (third from right) leads the ceremonial laying of the time capsule of the San Gabriel Power Plant Project in Barangay Sta. Rita, Batangas City, on Jan. 14, 2014. Assisting the President are Oscar Lopez, Chairman Emeritus, Lopez Group of Companies; Federico Lopez, Chairman and CEO, First Gen. Corp.; Batangas Governor Vilma Santos; and Secretary of Energy Jericho Petilla. (Malacañang Photo Bureau)

Aquino inaugurates new power plant by Genalyn Kabiling January 15, 2014
 

Batangas City – The government is looking to tap more efficient energy resources to boost the country’s energy supply, President Benigno S. Aquino III said here yesterday as he led a time capsule-laying ceremony for a power plant fired by natural gas.

During the ceremony, the President assured that there will be no rotating power brownouts in Luzon because of the stable power supply.

Federico Lopez, Lopez Group of Companies, Oscar Lopez, Barangay Sta. Rita, Batangas City, San Gabriel Power Plant Project, Manila Bulletin

The first phase of the San Gabriel plant costing P650 million with 414-megawatt (MW) capacity is expected to be finished by the third quarter of this year. Construction of the second phase will be completed by March, 2016, while phase three will be completed by 2018, together with the construction of the Liquified Natural Gas receiving and regasification facility. By 2019, San Gabriel will deliver a full capacity of 1,242 MW.

In his speech at the San Gabriel power plant capsule-laying ceremony in Barangay Sta. Rita, President Aquino said the plant “is expected not merely to meet the demand but to surpass it.”

The President said the government will seek a “safe surplus of generating capacity” after the recent calamity in the Visayas forced it to review its energy development plan.

“The goal is not simply to meet demand, but to surpass it. We intend to have a safe surplus of generating capacity. The effect of typhoon Yolanda on our generation capacity in Visayas should serve as a lesson,” the President said in his speech.

The President said the typhoon damaged major geothermal power plants in Leyte, causing a “ripple effect” that hampered recovery efforts.

With the worsening effects of climate change, he said, “greater measures” should be taken to adapt, particularly in reinforcing the country’s power supply.

“The situation also calls on us to reassess the sources of our power and their effects on the environment. In the coming years, we will make a concerted effort to use more efficient forms of energy generation, and natural gas will play a starring role in this,” he said.

Aquino said natural gas plants emit only half as much carbon compared to coal-powered power plants. “This means cleaner energy. It means that despite our status as a less-industrialized nation, we are doing our part to not exacerbate the risks posed by climate change,” he added.

Rising Demand

By 2016, Aquino said, Luzon grid’s energy demand will rise to around 11,000 megawatts from the present demand of 10,294 megawatts.

But, he said, in the next three years, various companies are expected to build new plants in Luzon that will generate a total of 2,412 megawatts.

The President welcomed the construction of the 414-megawatt San Gabriel natural gas-fired power plant, saying the facility would also help meet the increasing energy requirements in Luzon.

The $600-million power plant, which will utilize Malampaya gas, is expected to go on commercial operation in 2016.

The plant, to be built by First Gen Corporation in partnership with Siemens AG, is the first of three plants of San Gabriel power complex in Sta. Rita, Batangas City. The entire project of three plants will have a capacity of 1,350 MW.

The President expressed gratitude to First Gen Corporation for its investment in clean energy, saying its investments have reached P28.48 billion. “This is on top of the amount they have already invested in other plants in the country,” he said.

Aquino praised Energy Secretary Jericho Petilla and other energy officials for the restoration of power in Yolanda-hit communities at the soonest possible time. He said many Filipinos would still be suffering the power shortage had it not been for their “remarkable work.”

Adequate Energy Supply

Aquino acknowledged that natural gas demand is growing. From 2013 to 2030, the share of natural gas in the country’s total energy supply will go from 8 percent to 14 percent. “This is a major step in fulfilling our obligation as a country towards our goal, as one human race, to limit climate risk,” he said.

With many businesses considering the Philippines as an investment destination, Aquino said that if they set up shop here, they are assured an adequate energy supply for their factories and facilities.

Federico R. Lopez, chairman and chief executive officer of First Gas Power Corp. (FirstGen), said the San Gabriel power plant is “a major milestone in the country’s progress because in the next 10 years, without this new and high-tech plant, the country will suffer massive brownouts.” (With report by Vicky Aclan Florendo)


Chief News Editor: Sol Jose Vanzi

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