Consumers Domain
Abuse of the Market
"I beg to dream and differ from the hollow lies,
This is the dawning of the rest of our lives..."
- from "Holiday" by Green Day
This column yields today's space to a position paper submitted by Ilonggo consumers to the Energy Regulatory Commission (ERC) in a hearing held in Cebu City last Thursday (January 19). This is in relation to the petition of PECO and PPC to increase their Generation Rates and amend their Power Purchase Agreement or their PPA.
Headed by the Freedom from Debt Coalition (FDC), members of the Responsible Ilonggos for Sustainable Energy (RISE!) and the Professionals for Social Responsibility (PRO-SR), the document featured below was signed by consumers from different sectors, the academe, business community, NGOs, people's organizations and communities.
Kudos to Atty. Romeo Gerochi (FDC Chair) and Atty. Edeljulio Romero for ably representing the cause of the consumers in the hearing!
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A Position Paper Against PECO & PPC's Abuse of the Market
We, consumers of Panay Electric Company (PECO), recognizing that the existing power set up in the city of Iloilo has been abused by PECO and Panay Power Corp (PPC) hereby submits this position paper to the Energy Regulatory Commission (ERC) for consideration in the same companies' joint petition for the amendment of their Power Purchase Agreement (PPA).
Monopoly of Market Power
PECO is the exclusive electric distribution utility in Iloilo City and has the monopoly of market power over its consumers. PPC on the other hand is the sole supplier of PECO's power requirements since 1999 when their supply agreement was put in motion. It is important to note that in 1997 when their supply agreement was signed up to 2003 when there were changes in the ownership structure of both, PECO owned 30% of PPC and similarly PPC owned 30% of PECO.
We strongly believe that this inherent monopoly that characterized the power set up in the City of Iloilo has been abused by PECO and PPC. That PECO and PPC exploited their monopoly of the market is shown by the fact that for several years they have violated their commitment to the consumers to provide reliable and competitively-priced electricity contrary to their PPA as approved by the ERB (now the ERC).
PPA: Anti-Competitive Agreement
The PPA between PECO and the PPC clearly is an anti-competitive agreement that bred inefficiencies that run against public interest. Subjecting such agreement to the standards of the R.A. 9136 or the Electric Power Industry Reform Act (EPIRA) that was enacted in June 2001 it will surely fail on the provisions for free and fair competition and the encouragement and protection of contestable markets.
Further through the "take or pay" provisions of the same PPA, PECO guaranteed to purchase from PPC excessive quantities of electricity beyond the actual needs of consumers. In terms of actual power utilized, it is unconscionable that unutilized electricity accounts for 48.3% in 2004. This is another evidence of gross inefficiency that is harmful to the consumers who are paying for the unutilized electricity that is almost half of what were actually used.
Inefficient Energy Mix
In addition, the existing set up does not utilize a satisfactory energy mix that could ensure reliability and affordability of electric power in Iloilo City.
As a result of the same PPA and without regard to and proper consultations with its affected consumers, PECO effectively disconnected from the Cebu-Negros-Panay (CNP) grid thus isolating its franchise area from the Visayas Grid (NPC). This deprived Iloilo City power consumers of affordable baseload supply, ancillary reserve and other services that could have provided with reliable and competitively priced electricity.
There is available cheaper, indigenous and renewable geothermal energy in the CNP grid that is appropriate for the baseload need of Iloilo City. The 100 MW capacity Negros-Panay submarine cable is underutilized because the baseload demand of Panay Island, minus Iloilo City, is only about 40 MW.
We would like to underscore that it is also due to this PPA that led to the current predicament of the Ilonggo consumer. PPC's threat of a blackout as a consequence of its financial obligations to its fuel supplier is deplorable. With only one source of power, the current problem would have been mitigated if NPC power were available to PECO.
With these assertions, we professionals, members of the academe, the business sector, community leaders and members of different NGOs / POs, workers and social movements in Iloilo who are all power consumers of PECO call for the following:
- Make PECO and PPC accountable for the violation of their PPA as approved then by the ERB (now the ERC). Since 1999, they have been charging higher than NPC rates contrary to their commitment. While they are on the process of amending their contract, we believe that it is proper that just reparation should be afforded the consumers of Iloilo City for PECO and PPC's abuse of the market.
- That consumers should not be made to bear the brunt of the inefficiency of PECO and PPC. That the rate increase petition incorporated in their petition to amend their PPA should be disapproved and the previous unbundling decision of the honorable Commission be sustained.
We also ask the honorable Commission to direct PPC to immediately pay it obligations to its fuel supplier and cease from issuing blackout warnings that are threatening Iloilo residents and dampen the City's investment climate. We oppose any form of bail out of PPC by the NPC as it is another form of passing the burden to the public.
- The honorable Commission should not approve the amendment in the PPA as proposed by PECO and PPC. The amendment that they seek is in fact strengthening the anti-consumer provisions of their existing PPA. We oppose the exclusivity and the priority given to PPC generated power. We oppose any take or pay provision and the escalation clauses. We believe that any increase or adjustment in rates shall be petitioned with the ERC so that consumers may be properly informed and will have a chance to contest the same.
Any amendment in the PPA between PECO and PPC should conform to the open access provisions of the EPIRA. We strongly demand that public interest and the welfare of the consumers be given due regard in any amendment to the PPA.
- That the reconnection of PECO to the Panay Grid is fast-tracked as decided by the ERC in its Order dated December 14, 2005. That NPC power be utilized for baseload and PPC only to augment and for peaking load. That PECO shall source its power giving priority to whichever charges more competitive rates.
- That the ERC and other related government instrumentalities support our call to utilize renewable sources of energy in increasing the power capacity in Panay. We also call for the uprating of the Negros-Panay transmission lines.
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