WESM is no solution
Saturday, June 24, 2006
THE Wholesale Electricity Spot Market (WESM) would not guarantee lower and more reasonable electricity bills for consumers, contrary to the rosy picture painted yet again by Gloria Arroyo, who announced that the WESM would begin full commercial operation on June 23.
WESM, which was formulated by government and private power companies, can only bring down power costs if monopoly and cross-ownership in the electric industry are prohibited. But under Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA) of 2001, cross-ownership between generation and transmission sectors and between distribution and transmission sectors are allowed. Furthermore, EPIRA would also lift the limit on cross-ownership between generation and transmission companies by 2007.
In a truly competitive environment, power distributors can theoretically extend pressure on generators to bring down their rates with the end-users reaping the benefits. But if distributors are allowed to own generation and transmission assets, a spot market becomes meaningless.
Manila Electric Company (Meralco), for instance, wants to further establish itself in the generation sector in the light of WESM as it eyes the 660-megawatt geothermal plant of the National Power Corporation in the Tiwi-Makban area southeast of Manila, and the 112-megawatt hydropower plant package in northern Pantabangan-Masiway area.
Furthermore, WESM does not include electricity prices covered by bilateral agreements between generators and distributors, which imply that the onerous contracts of independent power producers (IPPs) with the National Power Corporation (Napocor) and power distributors like the Meralco will not be affected.
These sweetheart deals include the notorious take-or-pay provision in the form of purchased power adjustment (PPA) and paid for by the consumers even if the IPPs did not produce nor deliver the electricity. The PPA is one of the reasons why electricity rates in the country are exorbitant.
WESM is similar to the deregulation of the downstream oil industry. Deregulation, like the spot market, was supposed to bring down or at least make oil pump prices more competitive. But deregulation failed because companies like Petron Corporation, Pilipinas Shell, and Chevron Philippines do not only retail petroleum products through their network of pump stations but also hold monopoly control over the extraction, transport, storage, and refining of oil.
Cheaper electricity rates are possible only if government would abandon its pro-corporation, pro-privatization and pro-deregulation power program. This means that EPIRA as the framework of power sector reforms must be abandoned and replaced with a program for nationalization. In the immediate, government must cancel all IPP contracts and fast track the refund of Meralco to its consumers. – Ibon Foundation
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posted by philpower @ 11:00 AM,
