Republic of the Philippines


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ERC Denies Motions for Consideration Filed by GENCOs on its 03 MARCH 2014 Order on Regulated Price

The ERC, in an Order dated 15 October 2014, in  Case No. 2014-021 MC (docketed 30 October 2014) entitled “In the Matter of the Prices in the Wholesale  Electricity Spot Market (WESM) for the supply months of November and December 2013 and the exercise   by  the  Commission of  the   Regulatory   Powers to Intervene and Direct the Imposition of Regulated Prices Therein Without Prejudice to the Ongoing Investigation on the Allegation of Anti- competitive Behavior and Possible Abuse of Market Power Committed by Some Participants” (downloadable at, DENIED the Motions for Reconsideration filed by (collectively called “movants”): 1)  AP Renewables, Inc. (APRI); 2)   SN  Aboitiz Power-Magat, Inc.  (SNAP-Magat) and SN Aboitiz Power-Benguet, Inc. (SNAP-Benguet) (collectively, the SNAP Group); 3)   Therma  Mobile, Inc.  (TMO); 4) Therma  Luzon, Inc. (TLI); 5) San  Miguel  Energy  Corporation  (SMEC); 6) South Premiere Power  Corporation (SPPC); 7)  Strategic Power Development Corporation (SPDC) and  SMC Powergen, Inc. (SPI); 8) Petron Corporation; 9)  Masinloc Power  Partners Co., Ltd. (MPPCL); 10) 1590 Energy  Corporation (1590 EC); 11) Panasia  Energy, Inc. (PANASIA; 12)   Sem-Calaca  Power Corporation (SCPC); 13) Cabanatuan Electric  Corporation  (CELCOR): 14)  Northwind  Power  Development Corporation  (NORTHWIND) on the ERC’s 3 March 2014 Order  which  voided  the  Luzon WESM prices for the November and December 2013 supply months and imposed  a regulated  price  to be calculated  based  on the load  weighted average of the ex-post nodal energy prices and meter quantity of the same day same  trading  interval that  have not  been  administered  covering  the period December 26, 2012 to September 25, 2013, subject to the payment to the oil-based  plants  of additional compensation  to cover their full Fuel and Variable O&M Costs, if warranted, following the manner and procedure for computing additional compensation under the Administered Price Determination Methodology.

The movants raised several points against the Order including the: 1) lack of jurisdiction by the ERC to void the WESM    prices   for    the    supply   months   of November and  December 2013 and to impose regulated prices; 2)  invalid exercise by the ERC  of     police    power;   3)  premature imposition of a penalty; 4) impairment of the  right to procedural due process; 5) violation  to   equal protection of the law (ex. 1 = the Commission's ruling to allow oil-based      plants     to      recover    additional compensation and not for non-oil plants) & ex. 2 = the Commission's imposition of the  regulated prices on all participants in the market  during  the   November  and   December 2013  supply months without distinction as  to who  among them  may  be liable or not  liable for anti-competitive  behavior); & 6) the violation of the   constitutional  proscription  against impairment of contracts.
The objective of the ERC in issuing the challenged 03 March 2014 Order was primarily to restore the competitive conditions in the market by rationalizing prices in the market in order to safeguard the interest of the consuming public pursuant to its legal mandate under the EPIRA. By  voiding  the WESM  prices  during  the November  and December  2013  supply  months and imposing regulated rates in their stead, which were shown to have abnormally   spiked   up  due  to  acts   indicative   of   lack   of  competitive conditions  in the market  during the said supply  months,  the ERC was able to accomplish  its purpose and in complying with its legal mandate to   ensure   competition   in  the   market.   Moreover,   by   so   doing,   the ERC   was  able  to  fulfilI  its  legal  mandate  to  protect  consumer interests as they were prevented from being charged and unfairly burdened with paying unreasonably  high electricity prices.
Consistent with its mandate under the EPIRA,  to protect the public interest as it is affected by the rates of electric utilities and ensure transparent and reasonable prices of electricity, the ERC  did not  allow excessive,  exorbitant,  unreasonable or very high prices of electricity in the light of what transpired during  the  period  of the  Malampaya  shutdown,  as confirmed and verified based on the IU's February 2014 Preliminary Report and all data gathered  by the  ERC then.  Moreover, the regulated rate was certainly not an amount that was extrapolated out of thin air but rather on actual cost which were the subject of an in-depth evaluation by the ERC when it passed upon the rates prayed for in the power supply agreements.
As elaborated in the 3 March 2014 Order, there has been tightness of supply in the market, leading to the spike in electricity prices.  The IU February 2014 Preliminary Report confirmed the MAG findings as stated in its Market Situationer on the Malampaya  Gas  Facility  Maintenance  Report covering 26 October to 25 December 2013 (MAG Report). According to the MAG, a "tight demand and supply situation" existed even before the shutdown of the  SPEX   Malampaya   Onshore   Natural  Gas Plant.
These  factual  circumstances  constrained  the  ERC  to  take action  and  intervene   in  the  market.  Had  the  ERC   not interceded  to rationalize  the prices in the market,  the consequences  and effects  of  the  unduly  high  electricity  prices  during  the  November  and December 2013 supply months would have been more equally onerous on the consumers who ultimately shoulder the brunt of irrationally skyrocketing electricity  rates.  It is worth mentioning that at the end of the day, it is the consumers  who  pay  for the  prices  generation  companies  charge  for the supply of electricity, thus aptly rendering their business as one imbued and affected  with   public  interest.  As  such,   it  is  but  appropriate   that  the ERC  intervene  in the  market to protect them from  paying unreasonably  high prices in order prevent the egregious  transfer of wealth from the consumers to the generation companies.


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