The Mindanao Power Summit: It’s the power cartel, stupid!

By TUCP Partylist
April 12, 2012

QUEZON CITY  –  “It is time for the Mindanao power summit to call a spade a spade – the cause of the power crisis – present and near future – is a power cartel. They are made up of six families: Aboitiz, Lopez, Pangilinan, Ang and Cojuangco, Alcantara, and Sy,” said Trade Union Congress Party (TUCP) Rep. Raymond Democrito C. Mendoza. “These families have definitively carved up specific areas of the country so that all three island grids are now in thrall of an electricity monopsony,” explained Mendoza.

“The real question that should be posed in the Mindanao power summit is: Why has government compromised national energy policy and national energy security to the greed of the few? Ten years after the Electric Power Industry Reform Act (EPIRA) was supposed to bring in private players with deep pockets to invest in needed capacity, there is now a looming undercapacity. With most of National Power Corporation (NPC) assets in private hands, competition was expected to drive down rates but instead there are threats of brownouts and the endless upward spiralling of electricity rates. But instead the oligarchs and their friends would have us believe that it is the fault of Mindanao for trying to hold on to its policy regime of cheap hydropower,” explained Mendoza.

“Now we would have their agents and apologists in high places further add to the disinformation by blaming what is happening to Mindanao on the Mindanaoans being “spoiled” and by convincing all that Mindanaoans should now bite the bullet,” said Mendoza, referring to the Department of Energy (DOE)/National Electrification Administration (NEA)-sponsored power supply contracts between the Aboitiz-Therma Marine power barges selling electricity at P14 per kilowatt hour (kWh) to eight (8) electric cooperatives.

“Unfortunately, contrary to the truly best intentions of Mindanao Development Authority (MinDA) Secretary Luwalhati Antonino, the DOE would have the Mindanao power summit transformed into a footmark in history to sweep the inconvenient truth under the rug. By coming up with the grand plan of forcing electric cooperatives to buy expensive diesel power from the Aboitiz-owned Therma Marine power barges, the DOE would want the summit to legitimize the de facto power of oligarchs to control our access to power and its resultant costs,” said Mendoza.

“High-ranking officials are saying let us stop trying to hold people to account for the brownouts. Somehow they miss the point that you cannot provide a technical answer – power barge-provided electricity – to a political question – the cartelization of the power industry. We must definitely demand accountability for those bringing up our power rates so that we are now the highest in Asia while not investing in additional capacity to prevent power shortages,” said Mendoza.

TUCP points out that these families frequently control the industry through the vertical integration of the power production and electricity distribution functions. Power is generated by the Aboitiz group and sold to the Aboitiz-held Davao Light and Power and Visayas Electric Corporation. In like manner, Pangilinan-owned plants sell power to the Pangilinan-owned MERALCO to distribute. “So within the areas carved out by each oligarch, there is no competition at all and instead we have “sweetheart deals” which drive rates up between the generator and the distributor,” said Mendoza.

“TUCP predicts that the power crisis will extend to Visayas and Mindanao because it is not in the interest of the power cartel to build additional capacity. They will wait fully knowing that growing demand will bring about a shortage in supply. Then they will step in pretending to be a white knight with expensive stop-gap measures based on coal or bunker fuel,” explained Mendoza.

“The Board of Investments (BOI) has now moved to remove tax holidays from those endeavouring to put in new fossil fuel baseload plants. We believe that this move was lobbied for by the power cartel. It means that the mobilization costs for new players will be so prohibitive that it will discourage them from coming in. Also, the six families are signalling that if new players want to come in, they must partner only with one of the cartel,” said Mendoza. “They are tinkering around with our tax laws and customs codes to rob our consumers and workers,” he said.

TUCP explained that the removal of tax holidays will bring up the cost of existing coal plants by an additional P280 million annually which will be borne by workers and consumers as part of the pass-through charges of the generating plants. Because there will be no real competition in the generating sector, the bias will be to rely on building additional coal plants which will further bring the costs of tariffs up. TUCP and the Philippine Chamber of Commerce and Industries (PCCI) have jointly warned that the Philippines now charges the fourth highest power rates in the world which may drive investors away.

“The President – if the DOE Secretary does not have the will to do it – can immediately order the Energy Regulatory Commission (ERC) to reform the rate-making formula known as performance-based ratemaking so as to moderate the overly generous rates of return we allow the cartel,” explained Mendoza. TUCP pointed out that some generating corporations are making over 50% return on rate base and siphoning their respective earnings to stock dispersal, dividends, bonuses, foreign expansion or diversification instead of investing in additional capacity. TUCP also lamented that the rate of return is based not on the investment cost of the plant but on the replacement cost which may be twice or thrice that of the original cost of plant.