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Bill prevents power distributors from owning gensets

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AN OPPOSITION leader in the House of Representatives on Wednesday urged Congress to pass a bill that she filed banning power distribution utilities from also owning or holding shares in generation facilities.

Assistant Minority Leader and ACT Teachers Rep. France Castro  said House Bill 8079 will prohibit distribution utilities, such as the Manila Electric Co. (Meralco), from also engaging in power generation as it creates a conflict-of-interest situation.

Castro, a member of the Makabayan bloc in the House, said allowing distribution utilities to also engage in generation would remove protection against undue increases in power rates.

Once enacted, Castro said HB   8079 would prevent the mega deal of Meralco with San Miguel Corp and Aboitiz that would turn Meralco as a co-owner of generation companies on top of its principal mandate as a power distributor.

“If House Bill 8079—Prohibiting ownership by electricity distribution utilities in electricity generation companies and retail electricity suppliers had been enacted, the super merger created by MVP/Meralco-RSA/SMC-Aboitiz would not have happened,” Castro said.

The $3.3 billion mega deal under a joint venture agreement (JVA) targets control of liquefied natural gas (LNG) facilities in Batangas province by the three companies, including Meralco.

Castro said HB 8079, or the proposed “Electricity Consumer Protection Against Cross-Ownership Act,” would prevent distribution utilities from also owning generation plants or having ownership stakes in these.

She said cross-ownership would allow distribution utilities to dictate electricity rates to recoup investments in power generation.

“Given that the generation cost of electricity is passed on by the distribution utility to the consumers, the higher the generation price, the higher the rates the consumers will pay,” said Castro in the bill’s explanatory note.

“If the distribution utility also owns the generation company, it will be to its financial interest to pay a higher generation cost,” Castro said.

“In other words, cross-ownership brings about a conflict of interest that the distribution utility will resolve to fatten its pockets rather than lower electricity rates to consumers,” Castro said.

She added that the bill’s enactment will address the fact that the Philippines has among the highest electricity rates in Asia, which is driving away foreign investors.

“Despite 20 years of the Electric Power Industry Reform Act or EPIRA, the country has not moved from its top spot in the world’s most expensive electricity list,” said Castro in the bill.

Among the flaws found in EPIRA, she added, was its provision allowing cross ownership of utilities of generation plants, too.

“The industry uses a seemingly indifferent term for it – cross-ownership,” Castro said.

“But far from being indifferent, recent developments reveal that cross-ownership is generously biased in favor of the distribution utility and poverty-inducing to the consumers,” Castro added.

On paper, competition and competitive mechanisms should give consumers the power to choose their power suppliers that offer the least cost.

“However, this is not what is happening in the real world,” said Castro.

“In the name of the EPIRA, the regulator has abetted conflicted distribution utilities to own retail electricity suppliers or be one themselves, or both,” Castro’s bill said.

“It is not difficult to guess which generation companies these retail electricity suppliers prefer,” it added.

“It has also been the convenient excuse that competitive selection process or CSP prevents the conflicted distribution utility from unduly awarding power supply agreements (PSAs) to the generation companies it owns or has business ties with,” the bill said.

“Again, this is not the reality. Like most public biddings, the CSP can be rigged. Never underestimate a monopoly’s power to abuse,” Castro said.

Castro authored HB8079 along with fellow Makabayan Bloc members, Representatives Arlene Brosas of Gabriela Women’s Party and Raoul Manuel of Kabataan. The bill is pending at the House committee on energy.


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