SC voids ERC’s 2013 order regulating WESM prices

Supreme Court

To ensure a competitive market environment among power generation companies (gencos) and safeguard the interest of consumers, the Supreme Court has declared null and void the order issued by the Energy Regulatory Commission (ERC) that regulated the prices in the Wholesale Electricity Spot Market (WESM) for the supply months of November and December 2013.

In a 32-page en banc decision, the Court noted that ERC issued the order even if it had yet to complete its findings on the possible abuse of market power which could have negatively impacted on the prices of electricity in the market.

The ERC was investigating the alleged collusion among gencos to manipulate prices of electricity in the spot market during the shutdown of the Malampaya gas facility in 2013.

It said the March 3, 2014 order was primarily intended to address the abnormal spike and unreasonable prices of electricity imposed by gencos during the said period.

“The March 3, 2014 order acknowledged that it was based on an unfinished investigation, and yet it included a fallo (decision) voiding the Luzon WESM prices and imposing regulated prices instead,” the SC said.

The Court noted that the ERC also did not notify the affected parties about its investigation, in violation of their right to due process.

It noted that most of the parties manifested before the Court that they filed petitions to intervene in the ERC, and motions for reconsideration of the March 3, 2014 order.

“Thus, the March 3, 2014 ERC order is nullified considering the circumstances of its issuance,” the SC declared.

The ERC had maintained that its order was consistent with its mandate under the Electric Power Industry Reform Act of 2001 (EPIRA), to protect public interest as it is affected by the rates of electric utilities and ensure transparent and reasonable prices of electricity by not allowing excessive and unreasonable prices of electricity during the period of Malampaya shutdown.

Among the gencos covered by the SC decision were First Gas Power Corporation, South Premiere Power Corporation, San Miguel Energy Corporation, Masinloc Power Partners Co., Ltd., Quezon Power (Phils.) Ltd. Co., Therma Luzon, Inc., Sem-Calaca Power Corporation, FGP Corporation and National Grid Corporation of the Philippines, 1590 Energy Corporation, AP Renewables, Inc., Bac-Man Energy Development Corporation/Bac-Man Geothermal, Inc., First gen Hydro Power Corporation, GNPower Mariveles Coal Plant Ltd. Co., Panasia Energy Holdings, Inc., Power Sector Assets and Liabilities Management Corporation, SN Aboitiz Power, Strategic Power Development Corporation, Bulacan Power Generation and Vivant Sta. Clara Northern Renewables Generation Corporation.

In the same decision, the Court affirmed ERC’s order approving  Manila Electric Co.’s  request for a staggered collection of automatic rate adjustments arising from generation costs for November 2013.

The Court held that the ERC’s decision to allow the staggered recovery of the adjustment charges, while denying the request of Meralco for carrying costs, was intended “to protect the interest of the consumers.”

In a letter dated December 5, 2013, Meralco told respondent ERC that the total cost of generation to be passed on to its almost 5 million captive customers amounted to P22.64 billion, equivalent to a generation charge for December 2013 billing of P9.1070 per kwh—an increase of P3.44 per kwh from the P5.67 per kwh billed in the previous month.

The power firm attributed the abrupt increase in the generation cost to the supposed maintenance shutdown of the Malampaya facility that brings natural gas to three major power plants—Ilijan, San Lorenzo and Sta. Rita—which supply an aggregate capacity of 2700 MW electricity to its franchise area.

It said Malampaya’s shutdown coincided with the scheduled maintenance of two other plants, Pagbilao 2 and Sual 1, which also collectively contribute over 950 MW to its requirements.

Meralco said because of the events, it was forced to buy expensive power from the Wholesale Electricity Spot Market (WESM).

On December 9, 2013, respondent ERC approved Meralco’s request for a staggered collection, but did not approve the power firm’s request to recover carrying costs.

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