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POWER RATE HIKE | DOE tells high court PSALM violated electricity spot market rules file photo of Malaya thermal power plant.
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MANILA, Philippines - (UPDATE 3, Feb 12, 10:17 a.m.) The Department of Energy (DOE) on Tuesday said the Power Sector Assets and Liabilities Management Corporation (PSALM) had violated rules, effectively preventing competition among players in the country's electricity spot market.

During the third installment of the oral arguments on the power rate hike at the Supreme Court, DOE Secretary Carlos Jericho Petilla admited to Chief Justice Ma. Lourdes Sereno that PSALM had violated the Wholesale Electricity Spot Market anti-competitiveness behavior rule for not allowing the Malaya thermal power plant to run when electricity supply was acute in November last year.

Sereno asked if the DOE had ordered PSALM to run Malaya as a "must-run" plant when supply was down.

To this Petilla said his office had instructed PSALM to run Malaya when needed and it was up to the National Grid Corporation of the Philippines (NGCP) to call the shots when this would be. NGCP is the sole operator of the country's power grid, therefore, it knows the supply and demand of electricity at all times.

This was the time when the Malampaya gas field had shut down almost at the same time when other power plants also temporarily closed for maintenance, causing power supply shortage and the spike in the cost of electricity, as claimed by the Manila Electric Company (Meralco).

However PSALM did not dispatch Malaya, saying the cost of running the plant was high. During its presentation before the Supreme Court, counsel for the government-run firm said the Malaya thermal power plant has several technical limitations such as  a long start-up time--about 16 hours--to synchronization. As such, Malaya cannot shut down during bid intervals and if it shuts down, the facility will have to forego 16 bid intervals.

It is expensive, officials said, as P3.75 million would have to be spent per cold start for Unit 1 and P1.63 million per cold start for Unit 2. This means the government would have to spend P5.4 million in total start-up cost for both units.

With the prevailing market conditions, running the Malaya plant would result in a P1.3-billion loss per month.

When it was run as a must-run unit, Malaya ran for 267 days or 44 times in 2010; 28 days or 8 times in 2011; 151 days or 32 rimes in 2012; and 56 days or 8 times in 2013.

Sereno then asked Petilla what is the Energy department's main concern in the whole scheme of things, and the secretary replied that his agency is mandated to make sure that there was adequate power supply and that price was only secondary. 

Sereno also asked the DOE chief if PSALM could defy the order of the department not to run Malaya because of the expense it would incur, thereby ignoring the statute of its governing body of supplying the public with stable supply at reasonable cost. 

Petilla replied that PSALM had been penalized in the past due to similar defiance. 

In an interview following the oral arguments, Petilla told reporters that PSALM's action may be considered anti-competitive but it has to be verified first by an investigation of the Energy Regulatory Commission (ERC).

"Anti-competitive behavior is under [the jurisdication of the] ERC, what we [DOE] are concerned with are WESM rules. I'll leave it up to them. But now we'll just supply them with data," Petilla said.

"It depends on what the findings are. I will wait for further investigation rather than conclude at this point," he added.