MEMORANDUM

TO: FROM: DATE: RE:

Senator Gregorio B. Honasan II Chair, Joint Congressional Power Commission Elvin Ivan Uy 29 April 2010 Genuine and Sustainable Reforms in the Electric Power Industry

Introduction: The 2010 Power Crisis Nearly two decades after the power crisis in the latter years of the Aquino administration, the country is again experiencing recurrent electric power outages (Rubrico, 2010). Installed capacities have not been able to cope with demand with the onset of the hot summer weather1, a marked reduction in hydropower generation due to lower water levels in dams as a result of El Nio, and operational problems in several power generators2. Mindanao was placed under a state of calamity last month, and P10 billion in emergency funds were made available to address the power shortage in the region (Paares, 2010). Adding to the nations woes, Meralco the countrys largest power distributor hiked its rates this month by an average3 of P1.27 per kilowatt-hour (KWh) given higher generation and distribution costs (Santos, 2010). Households consuming 100 KWh a month will pay an additional P120, while those using 300 KWh a month will be charged P360 more (Ho, 2010). Our power rates are now the third most expensive in Asia (Cabreza, 2010). This memorandum aims to refocus the discussion on the central issue: the overall efficacy of Republic Act No. 9136 (RA 9136), the Electric Power Industry Reform Act of 2001 (EPIRA). We review the progress of its implementation, assess whether EPIRA has achieved its stated goals, and prescribe necessary action by the Joint Congressional Power Commission4 (JCPC) to rectify the current power crisis and avert future ones. Nine Years After: A Review Of EPIRA RA 9136 is designed to bring down electricity rates and to improve the delivery of power supply to end-users by encouraging greater competition and efficiency in the electricity industry. The essence of these reforms is giving stakeholders a CHOICE5. (DOE, n.d.) EPIRA mandated a restructuring of the power sector (see Figure 1), and the privatization of the National Power Corporation (NPC) as one of the prerequisites6 to the implementation of open access and retail competition. Previously vertically integrated, the power industry was unbundled into four sectors: generation, transmission, distribution, and supply. Generation and supply sectors were deregulated, with the Power Sector Assets and Liabilities Management Corporation (PSALM) taking the lead in the privatization of NPCs generation assets, including its contracts with Independent Power Producers7 (IPP). The Wholesale Electricity Spot Market (WESM), operated by the Philippine Electricity Market Corporation8 (PEMC), was launched in 2006 to spur competition in these sectors (WESM Overview, n.d.).

Transmission and distribution sectors continued to be natural monopolies9 and are regulated by the Energy Regulatory Commission (ERC). The government-owned National Transmission Corporation (TRANSCO) was created in March 2003 to assume NPCs transmission operations (Mira and Singson, 2007) and was subsequently sold to the privately held National Grid Corporation of the Philippines (NGCP) in 2008 (Bordamonte and Miraflor, 2008). Anatomy of High Electricity Prices Electricity cost in the country is inherently high due to several factors. First, the country lacks sufficient domestic fuel reserves. Generation companies, as a result, have to import their fuel requirements. Second, the countrys archipelagic topography necessitates substantially higher investments in transmission infrastructure compared to other countries. These facilities must link generation and distribution utilities across thousands of geographically dispersed islands, and they must also be able to withstand tropical storms and earthquakes. Third, the countrys electricity demand curve is relatively peaky in comparison to other countries. The lack of a strong industrial base in the country means that there is very little baseload demand on a 24-hour basis that might help defray the cost of installing facilities to cover peak demand. Lastly, majority of inputs are sourced overseas due to a lack of domestic sources of critical equipment. Since both fuel and equipment are purchased at international prices, the industry, and ultimately the consumers, are continuously subjected to significant foreign exchange risk. (Woodhouse, 2005) Privatization, Rent Seeking, and the Power Oligarchy Central to EPIRAs aim of a free and competitive electricity market was the dismantling of monopolies in the power sector. Privatization was viewed as the means to improve efficiency and transfer, from the government to the private sector, the burden and rewards of sustained investments particularly in generation and transmission facilities. As of December 2009, 81 percent of the generation capacity of NPC in Luzon and Visayas has been privatized (see Table 1), fulfilling one of the five preconditions for open access and retail competition. A Lopez- or Aboitiz-controlled company won the bid in ten out of the twenty plants sold. The rest went to other private corporations and one electric cooperative. Both the Lopez and Aboitiz families have taken advantage of RA 9136, amassing and consolidating their stakes in the generation and distribution sectors. While Sec. 45 of the Act disallows generation companies and distribution utilities from owning interests in the transmission monopoly and vice-versa, it does not impose similar restrictions for generation, distribution, and supply ownership. The Lopez-owned First Generation Power Corporation (First Gen) and its affiliates collectively comprise the countrys leading private generation firm, with a 19.8 percent share of the Luzon grid, 53 percent of Visayas, and 5.6 percent of Mindanao, totaling 15 percent of the national grid. The Lopez clan likewise controls10 Meralco, the countrys largest distribution utility that serves 4.6 million customers in 29 cities and 82 municipalities including Metro Manila (Meralco, 2009). The Aboitiz Power Corporation (APC) and its affiliates own 12.3 percent, 6.53 percent, and 35 percent of the Luzon, Visayas, and Mindano grids, respectively, equivalent to 14 percent of the national installed capacity. Aboitiz also has controlling interests in Visayan Electric Company (VECO) and Davao Light and Power Company, the second and third largest distribution utilities in the country, apart from other smaller entities. (Briola, 2009)

Sec. 45 of EPIRA on cross-ownership and market power abuse specifies that no company or related group can control more than 30 percent of the installed generating capacity of a grid and/or 25 percent of the national installed generating capacity. Both First Gen and APC have essentially breached the 30 percent limit, for the Visayas and Mindanao grids, respectively. However, the ERCs updated rules11 on generation capacity and market share limits coupled with the ownership structure of some of these companies prevent any corrective action, allowing both firms to acquire more horizontal market power. Gaming in the WESM, Delays in Implementation of Open Access and Retail Competition Sec. 30 of RA 9136 mandates that the WESM must be established within one year from the effectivity of the Act. The WESM was however only launched in June 2006 and only for the Luzon grid, owing to delays in the privatization of NPC assets and the lack of technical and market requirements from Visayas and Mindanao (Diokno-Pascual and Fortaleza, 2009). Trial operations for Visayas began in March 2009, and no specific date has been pegged for its commercial launch due to a lack of available supply (14th Status Report, 2009). The WESM aims to: (1) provide incentives for the cost-efficient dispatch of power through an economic merit order, (2) create reliable price signals to assist participants in weighing investment options, and (3) provide and maintain a fair and level playing field for suppliers and buyers of electricity (About WESM, n.d.). In sum, the spot market serves as a trading place between electricity buyers and sellers through auctions that match bids for demand and supply (WESM Overview, 2007). Figure 2 describes the WESM along with its mechanism for the determination of dispatch schedules and market clearing price (MCP). The latter is set based on the last power plant that is scheduled to meet the demand, which has a price higher than the earlier plants that matched preceding bids. All suppliers are paid uniformly based on the MCP. This mechanism is prone to gaming, both in theory12 and in practice13. Lopez-owned IPPs, for example, routinely bid zero to ensure dispatch knowing from experience that other plants will eventually be scheduled for dispatch with a satisfactory and non-zero MCP (Diokno-Pascual and Fortaleza, 2009). Competitive biddings through the WESM have not generated their intended benefits. Power rates of electricity sourced through the spot market were consistently higher compared to other sources (see Table 2). Only less than a fifth of the power supplied in Luzon has also been sourced via the spot market, with most distribution utilities getting electricity directly from generators through bilateral contracts (see Table 3). These results are not surprising. Sec. 45c of EPIRA barred distribution utilities from sourcing more than 90 percent of their demand through bilateral contracts, effectively setting 10 percent as the minimum share of the spot market. Meanwhile, Sec. 45b permits distribution utilities to source up to 50 percent of their requirements from their affiliates. Both provisions have enabled firms with vertical market power the Lopez and Aboitiz to favor their respective IPPs. In its Annual Market Assessment Report (2007), PEMC acknowledged that Meralcos large share on the buy side of the market both the spot and bilateral contracts raises the specter of a potential monopsony power. Open access and retail competition, as defined in Sec. 3114 of RA 9136, was scheduled for implementation last month, following the fulfillment of the precondition to privatize 70 percent of NPC generation assets in Luzon and Visayas. The program is available to

consumers in Luzon with a 1MW monthly average peak demand for the past 12 months preceding its implementation (Gatdula, 2010). An Ineffectual Energy Regulatory Commission Under Sec. 41 and 43 of RA 9136, the ERC is tasked to ensure the adequate promotion of consumer interests and promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the restructured electricity industry as an independent quasi-judicial body. Its most crucial functions include the authority to approve rate hikes across the industry, and act on complaints regarding anti-competitive behavior. Two market power abuse cases highlight the weakness of the Commission in carrying out its industry watchdog role. In 2007, the Enforcement and Compliance Office (ECO) of PEMC complained that PSALMs trading teams engaged in price manipulation by simultaneously raising the MCP for three plants. The ERC dismissed the complaint citing no evidence of anti-competitive behavior. Diokno-Pascual of Freedom from Debt Coalition (FDC), who studied the case, concluded that ERCs investigation centered on collusion between PSALM and NPC, instead of the evidences provided by ECO. (Pabico, 2007) Another ECO case accused Meralco and its IPPs of gaming the spot market. Meralco bought more from WESM during off-peak compared to peak hours from January 2007 to March 2008, when its IPPs were price setters next to two other NPC generation plants (see Table 4). The Commission again found no evidence of abuse. (Diokno-Pascual and Fortaleza, 2009) Reforming EPIRA And The Power Industry: Policy Prescriptions Drawing from the lessons of the first nine years of EPIRA, we propose three vital amendments to RA 9136 and one for open access in economic zones (or ecozones): 1. Strengthen safeguards against significant cross-ownership and market power abuse RA 9511, the Act that granted the transmission franchise to the NGCP further watered down the already weak provisions on cross-ownership of EPIRA. From a total ban on crossownership between transmission and other sectors, RA 9511 allows cross-ownership up to 1 percent of the outstanding shares of the other company. Beyond this limit, cross-ownership is not allowed among relatives and spouses within the fourth degree of consanguinity. Simply, there could be cross-ownership between transmission, generation and distribution. Amendments to RA 9136 must include stronger safeguard provisions, specifically: a) Total ban on cross-ownership in transmission, generation, distribution and supply b) Restriction on firms, including their affiliates, with vertical market power from further acquisition of NPC generation assets c) Clearer guidelines on the regional generation capacity share limits to curb horizontal market power d) A lower limit on the amount of supply that may be sourced through bilateral contracts by a distribution utility from its affiliate generation firm 2. Revisit the WESM and evaluate its practicability Most criticisms of the WESM center around the MCP and how this mechanism ensures prices go up rather than down. Bidding rules may be revised from uniform to pay-as-bid pricing, as was done in the United Kingdom, but such a change have been proven to be ineffective15 (Apt et al., 2004). Some state regulators in the U.S. responded to this inherent flaw by developing administered markets16, where prices are mandated by the regulators

rather than determined through real competition. Such regulatory regimes and price reductions are bound to be unsustainable17. (Apt et al., 2006) A truly free and competitive market requires that enough companies, which do not have horizontal market power, invest more in their generation infrastructure. More players with less generation capacity per firm are needed to curb the pivotal supplier problem associated with entrenched oligarchs. (Apt et al., 2006) However, the required investments are prohibitive, and the smaller generation firms are likely unable to assume them. If the WESM cannot be made competitive, one possible solution is to limit the amount of electricity sourced from the spot market, and instead enforce better regulation of bilateral contracts between generation and distribution firms. The ERC must ensure that contracts between firms place generation as close to average cost as possible by allowing the length of the agreement to span the life of a generation plant18. (Apt et al., 2004) Considering the high concentration of market power in the distribution sector, the Commission must guard against market power abuse particular by vertically integrated conglomerates. 3. Overhaul the ERC The ERC has thus far failed to carry out its two main functions. Reforming the Commission entails instituting stringent anti-regulatory capture policies. These include removing from the ERC the power to grant provisional authority to firms for cost recovery applications. The ERC should always decide price hikes directly. Appointments of the commissioners must also be strictly based on competence and integrity. (A Dozen Ways, 2008) 4. Support the PEZA Open Access Policy in All Ecozones Mandates of the Philippine Economic Zone Authority (PEZA) include regulating electric power utilities to fix just, reasonable and competitive rates, charges and fees (RA 7916, 1995). PEZA implements an Open Access policy in all four of its public ecozones. As a result, average power cost in these ecozones is nearly half of the private ecozones (see Figure 3). The only barrier to extending this program to the latter is the legal case19 by the Philippine Independent Power Producers Association (PIPPA) and the ERC (Velasco, 2010). By issuing a clear policy preference towards open access in ecozones, the JCPC can pave the way towards a business environment that is more conducive to inflow of foreign investments. Beyond EPIRA: Securing A Sustainable Energy Future Reforming the electric power industry is as much a technical as it is an adaptive challenge. The former requires relevant and well-formulated policies while the latter necessitates bold and strong leadership from the JCPC, the DOE, the ERC, and other stakeholders. Republic Act No. 9513, the Renewable Energy Act of 2008, is designed to address gaps found in EPIRA from a technology standpoint. RA 9513 set the regulatory framework to encourage broad market participation20 in the continued development of the renewable or clean energy sector, which currently contributes the least to our electricity production (see Figure 4). The JCPC must lead in accelerating the implementation of RA 9513, which should ultimately provide a countervailing force against the existing power oligarchs. Nine years after its enactment, the EPIRA has clearly failed the Filipino people. The country cannot afford more of the same for another decade. The JCPC must initiate the necessary actions toward genuine reforms today.

________________________________________ 1 Meralco estimates that electricity demand increases by an average of 100 megawatts (MW) for every degree (Celsius) increase in temperature (Santos, 2010). 2 The 647-MW Sual 2 unit of the Sual coal-fired power plant had been down since April 5, while the 350 MW Pagbilao I unit of the 735-MW Pagbilao coal-fired power facility in Quezon would remain on maintenance shutdown until April 20 Modules 40 and 20 of the 1,000-MW Sta. Rita natural gas-fired power plant had scheduled major outages until April 19 and 25, respectively The 300-MW Malaya 1 unit of [Kepcos] 650-MW Malaya thermal power plant was not running Thursday as it had no fuel. (Dauigoy et. al, 2010) 3 Households consuming up to 200 KWh a month pay only 85.47 centavos/KWh up to P1.2298/KWh for more than 200 KWh, P1.5836/KWh for more than 300 KWh, and P2.1998/KWh for more than 400 KWh. (Santos, 2010) 4 Given that the 14th Congress is currently in recess and the national elections on May 10, it is more realistic to expect action once the JCPC is reconvened in the 15th Congress. 5 CHOICE is an acronym representing the objectives of EPIRA: Consumer empowerment achieved by giving consumers the power to choose their source of electricity from among a host of generators and suppliers of electricity Higher efficiency adequate and reliable power supply at lower rates Open access open access to transmission and distribution network/facilities so that the benefits of competition in the generation/supply sector could trickle down to the consumers Industry accountability higher levels of environmental, health and safety standards Competition in generation and supply prices will be market-driven and competitive. There will be long-term contracts and a spot market where the trading of electricity between buyers and sellers will be undertaken. Electricity tariff unbundling customers will be able to know how much they would be paying for generation, transmission, distribution and other charges. 6 Sec. 31 of EPIRA requires the following before open access and retail competition can be implemented: (a) establishment of the wholesale electricity spot market; (b) approval of unbundled transmission and distribution wheeling charges; (c) initial implementation of the cross subsidy removal scheme; (d) privatization of at least seventy (70%) percent of the total capacity of generating assets of NPC in Luzon and Visayas; and (e) transfer of the management and control of at least seventy percent (70%) of the total energy output of power plants under contract with NPC to the IPP Administrators. (RA 9136, 2001) 7 [NPC] entered into 48 IPP contracts since 1991... More than half of these were made during the Ramos presidency. IPPs are paid a fixed fee per month, whether there was actual use of their generation capacity or not. (Rimban and Samonte-Pesayco, 2002) 8 PEMC, a non-stock and non-profit corporation established by the DOE and representatives of the various power sectors, serves as both the governance arm and the market operator (MO) of the WESM (WESM Overview, 2007). 9 Natural monopolies are industries where the costs are lower with only a single player due to economy of scale. Transmission through a nationwide grid is carried out most economically through a single firm (Bordamonte and Miraflor, 2008), while distribution utilities (i.e. private companies, electric cooperatives, or LGU-controlled utility) are granted monopoly of their respective coverage areas for the same reason (Fortaleza, 2009). 10 Lopez only owns 6.6% of Meralco but is allied with the group of Manuel V. Pangilinan that has a 41.1% stake; the alliance was forged to avert a takeover of the San Miguel group, which holds a 27% stake, in 2008 (Pangilinan, 2010). 11 Installed generating capacities have increased from: (a) 10,664MW in 2009 to 11,189MW in Luzon; (b) 1,645MW to 1,715MW in Visayas; (c) 1,730MW to 1,809MW in Mindanao; and (d) 14,039MW to 14,713MW for the national grid (ERC, 2010).

12

Sarosh Talukdar and his students created a simulation with 10 firms, each having 10% of total system capacity. These firms are not as smart as human traders and learn slowly. Yet, even when capacity is twice the amount of electricity needed, the suppliers manage to raise the price to monopoly levels. (Apt et. al, 2004) 13 The hourly spot market auctions implemented in the U.S. fostered tacit collusion among participating generators. The potential for implicit collusion through repeated interaction in hourly electricity auctions is widely recognized If a generator had enough capacity so that withholding its generation would cause a blackout, it could dictate the price. This pivotal supplier problem can take the form of a single firm who could exercise pivotal power, or a group of firms colluding explicitly or implicitly. (Apt et. al, 2006) 14 All electricity end-users with a monthly average peak demand of at least 1MW for the preceding 12 months will be deemed part of the contestable market. The threshold level for the contestable market shall be reduced to 750KW after 2 years. Every year thereafter, the ERC shall evaluate the performance of the market and shall gradually reduce threshold level until it reaches the household demand level. (EPIRA, 2001) 15 In practice, everyone knows the capacity of each plant, its heat rate, and the approximate price of fuel. Thus, all generators can estimate the MC [marginal cost] of every available generation plant. If they assume that everyone will bid their plants at MC, it is straightforward to estimate the market clearing price for any level of demand. In a pay-as-bid auction, a generator would estimate that the MC of the plant required to produce the required level of electricity and bid their low priced generators just under this price Thus, there is little difference between setting up the market as paying the market clearing price to everyone versus paying each generator what they bid. (Apt et al., 2004) 16 One example is PJM Interconnection. They operate the WESM for several Eastern and mid-Atlantic states, and require cost-based bidding on any generator dispatched out of merit order while its market enforcement units have the authority to hand down fines to generators at any hint of impropriety (Apt et al., 2006). 17 Such setup is akin to cost-plus regulation and where nearly all sectors of the industry will be regulated, which was what EPIRA set out to restructure. 18 Apt et al. (2004) posits that for contracts that encompass the entire life of the plant, a competitive market would force the winning bids down to expected average cost. 19 More information on the history of the PEZA Open Access policy and the legal challenge against it can be found in Roxas (2008). 20 Specifically, market participation is enabled through the feed-in tariff (FIT) system mandated by Sec. 7 of RA 9513. FIT mechanisms have been implemented in 42 countries, states and regions globally, and are largely responsible for encouraging uptake in renewable electricity capacity and generation, while driving down costs through technology advancement and economies of scale, and developing domestic industries (Energy [R]Evolution, 2008).

Appendices The Joint Congressional Power Commission (Congressional Committees, 2009) Senate Panel Chair: Honasan II, Gregorio B. Members: Lacson, Panfilo M. Zubiri, Juan Miguel F. Gordon, Richard J. Roxas II, Manuel A. Arroyo, Joker P. Pimentel Jr., Aquilino Q. House Panel Co-Chair: Macapagal-Arroyo, Juan Miguel Members: Fuentebella, Arnulfo P. Valdez, Edgar L. Locsin Jr., Teodoro L. Albano III, Rodolfo T. Dumarpa, Faysah RPM Guingona III, Teofisto L.

Figure 1: The Restructured Power Industry (Tan, 2010)

Table 1: List and Status of NPC Generation Assets for Privatization (PSALM, 2010)
Fuel Type Coal Plant Name Calaca Masinloc Navotas I & II Diesel / Bunker Panay I Panay III Bohol Iligan I & II Mak-Ban Geothermal Tiwi Bac-Man Palinpinon Tongonan Magat Angat Masiway Pantabangan Ambuklao Binga Barit Hydro Cawayan Amlan Agusan Loboc Talomo Bataan Thermal Manila Thermal Decommissi oned Plants Sucat Thermal Cebu II Diesel Location Batangas, Luzon Zambales, Luzon Metro Manila, Luzon Iloilo, Visayas Bohol, Visayas Iligan City, Mindanao Laguna & Batangas, Luzon Albay, Luzon Sorsogon, Luzon Negros Oriental, Visayas Leyte, Visayas Isabela, Luzon Bulacan, Luzon Nueva Ecija, Luzon Benguet, Luzon Camarines Sur, Luzon Sorsogon, Luzon Negros Oriental, Visayas Bukidnon, Mindanao Bohol, Visayas Davao City, Mindanao Bataan, Luzon Manila, Luzon Muntinlupa City, Luzon Cebu, Visayas Capacity (MW) 600 600 210 & 100 36.5 110 22 114 458.53 289 150 192.5 112.5 360 246 12 100 75 100 1.8 0.4 0.8 1.6 1.2 3.5 225 200 850 54 Taifu Metal Exchange Corp. 22 January 2009 Green Core Geothermal Inc.* SN Aboitiz Power** First Generation Hydro Corp.* SN Aboitiz Power** Peoples Energy Services Inc. Sorsogon II Electric Cooperative, Inc. ICS Renewables, Inc. First Generation Holdings Corp.* Santa Clara International Corp. Hydro Electric Development Corp.** Rubenori, Inc. Gagasan Steel Inc. 2 September 2009 14 December 2006 6 September 2006 28 November 2007 25 June 2004 30 September 2004 10 December 2008 4 June 2004 10 November 2004 25 March 2004 16 April 2009 25 April 2008 AP Renewables Inc.** 30 July 2008 Winning Bidder DMCI Holding Inc. Masinloc Power Partners Co. Ltd. Bid Date 8 July 2009 26 July 2007

SPC Power Corporation

12 November 2008

Fuel Type

Plant Name Aplaya Diesel

Location

Capacity (MW) 108

Winning Bidder TEC Industries, Inc.

Bid Date 25 May 2009

Misamis Oriental, Mindanao General Santos South Cotabato, Diesel Mindanao Total Capacity of Luzon-Visayas grids Total Privatized Capacity

22.3 3,778.23 3,072.23 *Lopez-owned/controlled **Aboitiz-owned/controlled

NPC and IPP Privatization Status (Tan, 2010) Privatization of NPC Assets as of End 2009 85.25% bidded out 76.07% turned over Transfer of NPC-IPP contracts to IPP Administrators 37.32% bidded out 29.60% turned over Note: Official figures from PSALM and ERC (shown above) are slightly different. Figure 2: The WESM and Its Dispatch Mechanism (Tan, 2010 and WESM Overview, 2007)

10

How the WESM Operates (Diokno-Pascual and Fortaleza, 2009) Step 1: Buyers and sellers submit hourly bids to the Market Operator (MO), PEMC. There are 24 one-hour trading periods in a day and bids take place 24 hours in advance. Step 2: MO matches bids from buyers and sellers, and then schedules the dispatch. Demand and supply of electricity are stacked into merit order based on bid price, with the lowest bid plant being dispatched first. Buyers pay a uniform market clearing price (MCP), which is the last bid price that met the demand. Step 3: MO submits the dispatch to NGCP, the System Operator (SO), for implementation. Electricity from the matched generators will be transmitted to the distribution utilities through NGCPs transmission facilities. Step 4: Buyers and suppliers settle payments through the WESM. The final price (LMP) is based on the MCP plus market adjustments and congestion cost. Table 2: Comparison of Power Rates (Diokno-Pascual and Fortaleza, 2009) Period NPC (P/KWh) IPPs (P/KWh) WESM (P/KWh) Jan Sept 2007 5.4396 4.1743 6.2260 Oct 2007 Mar 2008 4.3170 4.1036 6.6546 Jan 2007 Mar 2008 4.9296 4.1773 6.2048 Table 3: WESM Share of Energy Supplied in Luzon (14th Status Report, 2009) Billing Metered Spot Quantity, Percent Bilateral Percent Month Quantity, MWh MWh Share Quantity, MWh Share Nov 2008 3,447,266.38 535,759.02 16 2,911,507.37 84 Dec 2008 3,151,245.74 545,175.13 17 2,606,070.61 83 Jan 2009 2,906,720.56 604,622.65 21 2,302,097.92 79

11

Billing Month Feb 2009 March 2009 April 2009

Metered Quantity, MWh 3,358,810.66 3,222,969.29 3,503,547.55

Spot Quantity, MWh 766,465.14 537,701.69 414,910.72

Percent Share 23 17 12

Bilateral Quantity, MWh 2,592,345.53 2,685,267.60 3,088,636.83

Percent Share 77 83 88

Table 4: Alleged Spot Market Gaming by Meralco (Diokno-Pascual and Fortaleza, 2009) Peak Off-peak Period NPC IPP WESM NPC IPP WESM Jan Sept 2007 41.49% 43.82% 14.70% 9.34% 64.13% 26.53% Oct 2007 Mar 2008 53.21% 42.14% 4.65% 23.39% 62.33% 14.28% Jan 2007 Mar 2008 44.01% 44.32% 11.67% 14.43% 64.36% 21.21% Figure 3: The PEZA Open Access Program and Results (Roxas, 2008)

12

Comparative Distribution Rates

Figure 4: Sources of Electricity Production for Select Countries (Green Electricity, 2009)

References Rubrico, J. U. (2010, April 10). Philippines power at crisis point. Asia Times. Retrieved April 21, 2010, from: http://www.atimes.com/atimes/Southeast_Asia/LD10Ae01.html Dauigoy, E.K., Ho, A. L. and Sotelo, Y. (2010, April 9). Rotating brownouts worsen in Metro. Philippine Daily Inquirer. Retrieved April 21, 2010, from: http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20100409-263171/Rotatingbrownouts-worsen-in-Metro

13

Paares, J. P. (2010, March 11). Mindanao placed under state of calamity amid power crisis. Manila Standard Today. Retrieved April 21, 2010, from: http://www.manilastandardtoday.com/insideNews.htm?f=2010/march/11/news3.isx&d=20 10/march/11 Ho, A. L. (2010, April 9). Power down, rates up. Philippine Daily Inquirer. Retrieved April 20, 2010, from: http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20100409263166/Power-down-rates-up Remo, A. R. (2010, March 8). Power supply still unstable, says NGCP. Philippine Daily Inquirer. Retrieved April 21, 2010, from: http://newsinfo.inquirer.net/inquirerheadlines/regions/view/20100308-257444/Powersupply-still-unstable-says-NGCP Santos, J. F. (2010, April 15). Meralco customers complain as bills soar due to higher power rates, consumption. BusinessWorld. Retrieved April 20, 2010, from: http://www.gmanews.tv/story/188497/meralco-customers-complain-as-bills-soar-due-tohigher-power-rates-consumption Cabreza, V. (2010, April 4). RP power 3rd most costly in Asia. Philippine Daily Inquirer. Retrieved April 21, 2010, from: http://newsinfo.inquirer.net/breakingnews/regions/view/20100404-262343/RP-power-3rdmost-costly-in-Asia Frequently Asked Questions: EPIRA (RA 9136). Department of Energy. (n.d.). Retrieved April 18, 2010, from: http://www.doe.gov.ph/FAQ%27S/epira.htm Tan, R.A. (2010). Regulating Towards A Brighter Future [Powerpoint Presentation]. Energy Regulatory Commission. Retrieved April 28, 2010, from: http://www.erc.or.th/ERCWeb/Upload/Document/10.3012.30%203Rauf%20A.%20Tan(Philippines).pdf Briola, J. (2009, November). From state monopoly to de factor electricity oligarchy. People Against Immoral Debt (PAID!): Official Publication of the Freedom from Debt Coalition Vol. 13 No. 1, pp 7-27. WESM Overview, Asian Energy Advisors. (2007). Retrieved April 18, 2010, from: http://asianenergyadvisors.pbworks.com/f/WESM-Overview.pdf Republic Act No. 9136, Electric Power Industry Reform Act of 2001. (2001, June 8). Retrieved April 18, 2001, from: http://www.doe.gov.ph/EP/RA9136.pdf Mira, R. and Singson, J. (2007, Februrary). Occasional Paper No. 5: The Challenge of Restructuring the Power Sector and Privatization of NPC Assets. Congressional Planning and Budget Department, House of Representatives. Retrieved April 18, 2010, from: http://www.congress.gov.ph/download/cpbd/Occasional_Paper_05_EPIRA.pdf Bordamonte, J. and Miraflor, J. M. (2008, September 29). TRANSCO: The Filipinos Last Line of Defense Against Privatization. People Against Immoral Debt (PAID!): Official Publication of the Freedom from Debt Coalition Vol. 13 No. 1, pp 28-32.

14

Fortaleza, W. (2009, November). The Undistributed Powers: Power Plays in Distribution Utilities. People Against Immoral Debt (PAID!): Official Publication of the Freedom from Debt Coalition Vol. 13 No. 1, pp 33-42. Rimban, L. and Samonte-Pesayco, S. (2002, August 5-8). Trail of Power Mess Leads to Ramos. Philippine Center for Investigative Journalism. Retrieved April 21, 2010, from: http://www.pcij.org/stories/2002/ramos.html Restructuring & Privatization of the Philippine Electric Power Sector. Power Sector Assets and Liabilities Management Corporation (PSALM). (2010, January 31). Retrieved April 21, 2010, from: http://www.psalm.gov.ph/documents/prospectus/2010/JANUARY%202010%20INDUST RY%20PROSPECTUS_Final%20(2).pdf Corporate Profile, Meralco. (2009, June 4). Retrieved April 19, 2010, from: http://www.meralco.com.ph/Corporate/about/aboutus.htm Pangilinan group hikes Meralco stake. BusinessWorld. (2010, March 30). Retrieved April 22, 2010, from: http://www.bworld.com.ph/main/content.php?id=8321 ERC adjusts 2010 generation capacities and sets market share limits, Energy Regulatory Commission. (2010, March 29). Retrieved April 23, 2010, from: http://www.erc.gov.ph/new/10-3-29%20adjusts%202010gen%20capacities.html Diokno-Pascual, M. and Fortaleza, W. (2009, November). Why WESM Wont Work. People Against Immoral Debt (PAID!): Official Publication of the Freedom from Debt Coalition Vol. 13 No. 1, pp 43-54. 14th EPIRA Implementation Status Report, Department of Energy. (2009, April). Retrieved April 18, 2010, from: http://www.doe.gov.ph/EP/14th%20EPIRA%20Status%20Report.pdf Woodhouse, E. J. (2005, September). The IPP Experience in the Philippines. Working Paper No. 37, Program on Energy and Sustainable Development, Stanford University. Retrieved April 22, 2010, from: http://iis-db.stanford.edu/pubs/20816/PhilippinesIPP.pdf About WESM, Wholesale Electricity Spot Market. (n.d.) Retrieved April 21, 2010, from: http://www.wesm.ph/page.php?p=189 Apt, J., Blumsack, S. and Lave, L. B. (2004, October). Rethinking Electricity Deregulation. Elsevier The Electricity Journal Vol. 17 No. 8, pp 11-26. Apt, J., Blumsack, S. and Lave, L. B. (2006, August). Lessons from the Failure of U.S. Electricity Restructuring. Carnegie Mellon Electricity Industry Center Working Paper CEIC-05-09. Retrieved April 20, 2010, from: http://repository.cmu.edu/cgi/viewcontent.cgi?article=1236&context=tepper Annual Market Assessment Report (AMAR) 2006-2007, Wholesale Electricity Spot Market. (2007, June). Retrieved April 21, 2010, from:

15

http://www.wesm.ph/templates/default/market.monitoring.and.assessment.view.record.ph p?title=63f85d8740258df3e16602bb84caf905&id=9&filename=WESM-AMAR-2007.pdf Gatdula, D. L. (2010, February 14). ERC okays rules on power supply options. The Philippine Star. Retrieved April 22, 2010, from: http://www.philstar.com/Article.aspx?articleId=549399&publicationSubCategoryId=66 Pabico, A. P. (2007, November 16). A commission of power. Philippine Center for Investigative Journalism. Retrieved April 22, 2010, from: http://pcij.org/stories/acommission-of-power/ Republic Act No. 9511, An Act Granting the NGCP a National Franchise to Engage in the Electricity Transmission Business. (2008, July 28). Retrieved April 23, 2010, from: http://www.senate.gov.ph/republic_acts/ra%209511.pdf A Dozen Ways to Reduce Electricity Rates Towards Sustainable and Pro-Consumer Electric Power Industry. Freedom from Debt Coalition. (2008, June 17). People Against Immoral Debt (PAID!): Official Publication of the Freedom from Debt Coalition Vol. 13 No. 1, pp 58-59. Roxas, F. Y. (2008, March). Competition, Lower Prices in Electricity [Powerpoint Presentation]. Asian Institute of Management Policy Center. Retrieved April 22, 2010, from: http://www.policy.aim.edu/downloads/EPS/Lec_Competition_Lower_Prices_in_Electricit y.pdf Republic Act No. 7916, Special Economic Zone Act of 1995. (1995). Retrieved April 28, 2010, from: http://www.humanrights.gov.ph/docs/RA7916.pdf Republic Act No. 9513, Renewable Energy Act of 2008. (2008, July 28). Retrieved April 28, 2010, from: http://www.doe.gov.ph/popup/RA%209513.pdf Velasco, M. M. (2010, January 16). Only court ruling can untangle legal knot in ecozone power regulation. Manila Bulletin. Retrieved April 21, 2010, from: http://www.mb.com.ph/node/238766/only-court-ruling-can-untangle-legal-knot-ecozonepower-regulation Green Electricity Making A Difference. PriceWaterhouseCoopers and World Wildlife Fund. (2009, May). Retrieved April 28, 2010, from: http://www.naturemade.ch/Dokumente/Kommunikation/pwc_green_electricity_making_a _difference%5B1%5D.pdf Energy [R]Evolution, A Sustainable Philippine Energy Outlook. Greenpeace International, European Renewable Energy Council. (2008, August). Retrieved April 23, 2010, from: http://www.greenpeace.org/raw/content/seasia/en/press/reports/energy-r-evolution-asustain.pdf Congressional Ad hoc/Oversight Committees, Senate of the Philippines. (2009, September). Retrieved April 20, 2010, from: http://www.senate.gov.ph/committee/oversight_mem.pdf

16