Congress to probe power market

The Joint Congressional Power Commission (Powercom) is set to investigate allegations of price manipulation in the wholesale electricity spot market, which is being blamed for the sudden increases in power rates in Luzon.

Sen. Miriam Defensor-Santiago, who chairs the Powercom, said the inquiry would focus on the Power Sector Assets and Liabilities Management Corp. (PSALM) as the owner of the National Power Corp. (Napocor)’s power plants and is the de facto administrator of all Napocor power plants.

According to Santiago, there is cause for concern over escalating prices in the spot market since the first trading month of June.

"In the first trading month which was June, biddings resulted in an average price of P2.72 per kilowatt hour. In the second month it rose again and now in the third month, it is P4.853 per kwh. This is unreasonably high," Santiago said.

She expressed alarm that the PSALM and Napocor might be losing billions in the spot market.

During the Powercom hearing last August, Santiago raised the issue that Napocor might be losing money since it generates power at P5 per kwh but sold it in the spot market at only P2.72 per kwh in June.

"If the average price of generation is used as indicator of the real market price then we can conclude that Napocor’s generation cost is really high," Santiago said during that meeting.

She pointed out that the allegations of price manipulation in the market are well-founded.

"PSALM has market power and may have been tempted to manipulate spot prices. But, and this is a big but, there are also other market players who might be engaged in so-called gaming because they know that Napocor and PSALM might have been losing billions in the spot market," Santiago said.

She explained that there are several factors that influence the movement of prices in the spot market, most notably the cost of producing electricity, which varies from one plant to another.

In the scheduled Powercom inquiry on Thursday, Santiago said she intends to focus on the trading decisions of PSALM last month.

"We in the government must act very fast because investor confidence in privatization as well as public trust in the spot market as a device for bringing down power prices are both hemorrhaging," she said.

She rejected a temporary suspension of the spot market as called for by some sectors saying it was premature.

"Under the rules of court, PSALM and DOE (Department of Energy) are entitled to the presumption that official duty has been regularly performed. It is for the Powercom hearing to determine whether there is evidence to overthrow this presumption," she said.

PSALM is one of the state-run firms spun off from the long-planned privatization of debt-saddled Napocor.

The others are National Transmission Co. and Generation Co. Transco’s task is to privatize Napocor’s transmission facilities while the latter handles the power generation facilities.