ERC says anti-competitive behavior hard to probe

The Energy Regulatory Commission (ERC) has admitted weakness in investigating anti-competitive behavior, especially for company participants that are trading their generated capacities in the Wholesale Electricity Spot Market (WESM).

Given this difficulty in its market policing power, ERC Chairperson Monalisa C. Dimalanta indicated they will be engaging the assistance of the Philippine Competition Commission (PCC) in crafting regulatory tools and protocols that could be employed in flagging anti-competitive behavior, especially in the spot market.

Dimalanta acknowledged that despite the more than 20 years of deregulation and restructuring of the power sector and a number of “market gaming” allegations thrown against industry players, “there’s not much investigation being done, that’s what we want to explore with PCC.”

“We have to accept that we cannot do this on our own, we really need the help of another agency for us to come up with proper parameters and proper enforcement mechanisms,” she admitted.

Since the WESM was set up in 2006, there were already several accusations of collusion hurled against power generation companies,  especially when their plants would simultaneously conk out with consequent effect of rate hikes, and yet not a single case had been fully investigated by the ERC.

Even in the “2013 perfect storm”, which refers to the “worst case scenario” of forced outages of generating facilities that triggered a rate hike of roughly P5.00 per kilowatt hour (kWh), a comprehensive probe on that case has not been fully concluded until now.

In 2021, a decision of the Supreme Court had reverted to the ERC the jurisdiction of hearings and investigation of cases of anti-competitive behavior or collusion raps against power generation companies.

The high court ruling primarily stipulated that the ERC has the power to probe over unscrupulous trading acts in the WESM, despite earlier questions raised by some parties that the jurisdiction of such cases shall have been tossed to the PCC.

The SC decision was based on a case filed by some industry players which questioned the authority of the ERC on the investigation of anti-competitive behavior in the market, with these parties-in-interest claiming that when the PCC was established, the ERC already lost its jurisdiction to hear such cases.

However, that high court ruled that the ERC “retains its jurisdiction” on the investigation and resolution of cases delving with practices or ways of doing business that have been unfairly reducing competition in the power market.

To note, the 2013 and 2016 allegations of collusion or anti-competitive market behavior lodged against trading participants in the WESM – and collectively placed under the investigation unit (IU) of the ERC – are still pending for resolution until now.

With the summer months blazing again, industry stakeholders are keenly watching anew trading behaviors in the electricity spot market – and it comes off as a continuing puzzle why it has been taking way too long for the ERC to act on or resolve the previous market collusion imputations.

Such allegations of anti-competitive practices in the spot market could wobble the industry, chiefly during peak demand periods, because unexplained unavailability of capacities or forced outages of power plants could result in unwarranted price spikes.

The very first complaint of collusion in the spot market which implicated state-run Power Sector Assets and Liabilities Management Corporation (PSALM) in 2006 was dismissed, with the ERC stating  that “the culpability of the parties were not sufficiently established.

Taking cue from that then, the entire industry is eagle eyed as to how the regulatory body will decide on the two pending IU cases – especially the 2013 case because that triggered massive spikes in spot prices.

The ERC previously stated that it encountered hurdles in the validation and analysis of voluminous data relative to the WESM transactions during the questioned period, which then coincided with the November-December 2013 shutdown of the Malampaya gas production facility.