High power cost probed
Tuesday, October 10, 2006
Gov’t energy privatization plans at risk
By Abigail L. HoInquirer
Posted date: October 06, 2006
THE OPERATOR of the new Philippine wholesale electricity spot market yesterday said it was investigating a government agency for possible price manipulation that resulted in sudden spikes in the electric bills of factories and households in Luzon.
Philippine Electricity Market Corp. (PEMC) said its probe was focused on Power Sector Assets Liabilities and Management Corp. (PSALM), the government agency in charge of selling the state’s power plants and the national electricity grid.
“There is suspicion of manipulation in prices,” PEMC president Lasse Holopainen said at a news conference.
Analysts said the probe could further frustrate energy privatization plans.
“Some investors will be turned off by this, I’m sure,” said Astro del Castillo, managing director of local investment firm First Grade Holdings. “They will be thinking twice about investing in the Philippines.”
PEMC said the average price of power in the spot market’s third month of operation (Aug. 26-Sept. 25) surged to P4.853 per kilowatt-hour (kWh). This was almost 75 percent higher than the P2.788 per kWh in the market’s first month of operation.
PSALM denied the allegation, which centered on the soaring prices since the spot market opened in late June.
“There have been no concerted and deliberate efforts to manipulate electricity prices on the part of PSALM’s four trading teams,” PSALM president Nieves Osorio said in a statement.
Analysts said the probe was likely to further hamper the government’s attempts to raise up to $5 billion and cut its debt by selling dozens of plants belonging to state-owned National Power Corp. (Napocor) and leasing the electricity grid. Napocor’s debts are equivalent to about a third of the Philippines’ gross domestic product.
At the news conference, Holopainen said the PEMC market surveillance committee noted unusual price fluctuations in the spot market and found no reason for the spikes.
At the start of the most recent trading month, the weekly average price in the spot market was at P3.62 per kWh. This jumped to P4.51 the following week, surging to as high as P6.80 per kWh for the week ending Sept. 25.
Focus of probe
Holopainen said PSALM became the focus of the probe because it controlled 50 percent of the total power capacity traded in the market. PSALM trades on behalf of power plants with a total capacity of 6,000 megawatts. Napocor supplies about 20 percent of the power traded.
He said it would take PEMC 45 days to complete its probe, which started on Tuesday when a notice was served on PSALM.
“Whenever there are significant changes in price, whether upward or downward, PEMC will closely monitor the operations of the power spot market, conduct investigations if needed, and penalize responsible parties,” he said.
Osorio said PSALM welcomed the investigation but added that “bid prices are influenced by several factors, among them, the cost of producing electricity which varies from plant to plant.”
Holopainen said the wholesale electricity spot market traded 10.5 million megawatt hours from June 26 to Sept. 25, representing almost all of the consumption in Luzon.
Participants in the market include 30 power plants and 13 distributors, including Manila Electric Co. (Meralco).
PEMC said it was also considering suspending the wholesale market to preempt high prices in November and December, when three power plants on Luzon will be out of action.
The three natural gas plants, with 2,700 megawatts of capacity, will be closed for maintenance of a pipeline from Nov. 18 to Dec. 12.
4th attempt
Earlier this week, PSALM said three groups had lined up to bid for a 25-year contract to run the P138-billion power grid -- the fourth attempt to auction off the network since 2003.
The agency was intended to sell 70 percent of the total rated capacity of 31 Napocor plants by the end of 2004 but so far has sold only six plants or 3 percent of the targeted capacity.
The 24-hour computer-based wholesale market was seen as the key to the sale of the Napocor plants because it was meant to free up the supply of electricity on Luzon, and partly allay investor concerns about the sector’s profitability.
Even without the allegations against PSALM, the government’s attempts to sell its power assets had met with little success due to lingering concerns over corruption and official meddling in tariffs, as well as political and security uncertainties. With reports from Reuters
posted by philpower @ 7:57 AM,
