Market Domination and Counting Installed Generating Capacities
David Celestra Tan, MSK
8 January 2016
A wise USA regulator said “we know we want to deregulate, we just forgot why we are doing it!”. This characterizes the way the Philippines had been implementing its power deregulation law of 2001 or RA 9136 a.k.a Epira Law.
It is a new year and the ERC will again have the fun time of counting the installed generating capacities in the country to assure ourselves that no one is dominating the power generation sector (brave but delusional words!) in compliance with the Epira Laws prohibition under its Section 45 for any generating company to own, operate, control 25% of the national grid or 30% of the regional grids of Luzon, Visayas, and Mindanao. (wonderful aspiration!). Then it will proudly announce to the public that no one is dominating the power generating sector, and we all commoners, sufficiently assured, dip into our harried pockets to pay our overpriced electricity bills.
1. Controlling the Capacity
The Arroyo ERC had been doing this annual routine by taking an inventory of the installed generating capacities in the country, computing the legal limits of 25% and 30%, determining who controls them, and establishing compliance by each power generator.
Note that we used the word “control” instead of “own, operate, and control” as defined by Section 45 of the Epira Law. This is because the Arroyo DOE and Arroyo JCPC inserted under Rule 11 of the Implementing Rules and Regulations it passed in 2003 to enable the Epira Law of 2001, by essentially saying “for purposes of determining market concentration of generating capacities, the capacity shall be credited to the company “controlling” the capacity. Haha. Whatever happened to “own and operate”?
And do you know the meaning of “controlling” in their devious world? It means the party marketing the capacity. Under the warped concept of Rule 11, it means even if Meralco PowerGen owns 100% of the generating plant it doesn’t count as part of its market domination as long as there is another party doing the marketing of the power output. Craftily worded and innocuous rule. Nifty circumvention!
2. Harmful market domination and Hopeful signs at ERC
We have been forgetting that the reason we are bothering to determine installed generating capacity is to determine the concentration of generating capacity to assure there is no harmful market domination.
The hopeful sign is that the new Pnoy ERC, not yet compromised by the pampering and foreign travelling sponsored by the vested interests, is reported to be wising up and will measure not only installed generating capacity but also market domination. In the latter they will apply the triple tests of “owning, operating, controlling”. Hence any power generation player, whether owner, part owner, operator, or “controller”, will be credited for the capacity for purposes of determine market concentration and domination. Now, that’s what we are talking about!
3. Double Counting of Capacity
Recently the professional spin doctors at the vested interests, and exclusively reported in one broadsheet, raised the alarm and introduced the new idea of “double counting” of the installed generating capacity. Good try.
An inventory of the installed generating capacity is one thing. A determination of market domination and concentration is another which is for the purpose assuring there is sufficient market competition, the holy grail of power cost reduction as aspired to by the Epira Law.
We agree that in determining the installed generating capacity of the country there should not be a “double counting”, lest it will not be accurate. But for purposes of determining market domination and concentration, any and all of the three (own, operate, or control) must be considered.
Even in the case of multi-owner plants, each of the owners should be credited with the whole capacity, because each partner has influence on the whole capacity and not just his proportionate share. Maybe the ERC can have a rule on passive minority investments not exceeding 10%.
We would like to caution however that in counting the installed generating capacity of the country, the ERC must use the net dependable capacity of each plant and not its gross installed generating capacity. The former is the true measure of what power supply can be available to the public.
4. A Meralco subsidiary effectively controlling 45% of national generating capacity?
Related to ERC’s exercise of determining market concentration, it might want to investigate and check the contracts of Meralco and its power generators which are reported to contain a provision that the capacity will be dispatched by a Meralco subsidiary. That would be “controlling” and if it is true, then there is a party that controls 6,000mw or 45% of the national installed generating capacity.
Let us hope the new Pnoy ERC will go back to the spirit of the Epira Law to assure true competition and guard against harmful market domination. Let us not forget why we are doing the annual exercise
And how was your new year!
Matuwid na Singil sa Kuryente Consumer Alliance Inc.
