posted June 18, 2020 at
12:30 am by Rey E.
Requejo
The
Supreme Court has upheld the authority of the Energy Regulatory Commission to
implement price controls for the Wholesale Electricity Spot Market, the
country’s trading floor for electricity.
In
a 15-page decision, the SC denied the petition filed by Power Sector Assets and
Liabilities Management Corporation (PSALM), a government-owned and controlled
corporation, seeking the reversal of the Court of Appeals (CA) decision issued
on August 28, 2009.
The
CA ruling sustained the validity of ERC orders issued on January 30, 2008 and
October 20, 2008 granting Meralco’s plea for the adjustment of WESM settlement
prices.
The
ERC, in the said assailed order, set the WESM settlement prices for its
September and October 2006 supply months at the commission-approved time-of-use
(TOU) rates.
This
prompted PSALM to file a petition before the SC seeking to reverse the ERC
orders, arguing that the ERC committed an “illegal, arbitrary and ultra vires
act” when it imposed price controls for the subject billing months in the WESM.
According
to PSALM, such action of ERC was contrary to the requirements of Republic Act
9136 or the Electric Power Industry Reform Act (EPIRA).
PSALM
stressed that such act would cause unnecessary distortions in the market, which
would adversely affect both the consumers and the market participants.
In
upholding the ERC’s order, the SC ruled that the objecting in applying TOU
rates was not merely for the protection of consumers but also to set the WESM
settlement prices at reasonable levels, “since there was a clear evidence of
unusually high WESM prices during the subject periods.”
“Here,
the unusually high and unreasonable market prices for the subject billing
periods which necessitated the ERC to step in and exercise its police power as
mandated by the EPIRA, cannot be overemphasized,” the SC stressed.
The
SC shared the position of PEMC, saying the impact of the adjustment in the WESM
prices estimated to be an additional imposition of P6 per kwh would have
resulted to an increase in generation charge of its consumers of about 90
centavos and P2.05 per kwh for the subject period.
“In
the basis of the foregoing, the Court absolutely agrees with the CA that
although the ERC adopted the findings of its IU and terminated the
investigation against PSALM for alleged anti-competitive behavior and abuse of
market power, the same did not necessarily preclude the existence of irregular
behavior or circumstances which would have contributed to the high prices in
the WESM during the subject periods,” the SC said.
“The
ERC validly exercised its regulatory power pursuant to the police power of the
State when it imposed the commission-approved TOU rates as a form of price
adjustment or price control,” the tribunal added.
The
controversy arose from an investigation report issued by the Enforcement and
Compliance Office (ECO) of Philippine Electricity Market Corporation (PEMC), a
non-profit organization which serves as the market operator and governing body
of WESM.
ECO
investigated the increase in the load weighted average price in the WESM in the
monthly operations and the bidding behavior of PSALM’s trading teams increase.
As
a result of the inquiry, the ECO issued its investigating report finding that
PSALM behaved anti-competitively and abused its market power.
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