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THE PHILIPPINE

COMPETITION ACT
Implications on the Electric Power Industry
Philippine Competition Act
Signed 21 July 2015
Philippine Competition Commission
Anti-competitive agreements and abuse of dominant position
Regulates M&A
Stiff administrative sanctions
Injunctive relief
Private action
EPIRA
Signed 8 June 2001

Competition mandate of ERC; includes unfair trade practices


Sec. 43(r) function
Sec. 45
- Cross-ownership restrictions
DU-Transmission
Gen-Transmission
Supply-Transmission
- Limits on ownership of generation capacity
30% by grid; 25% nationwide
- Limits on BC of DU with affiliate : 50% of demand
EPIRA
Anti-competitive Behavior and UTP (Sec. 8, IRR)

- Price-fixing
- Fixing output
- Market division
- Tying
- Physical or economic withholding
- Discriminatory provision of distribution and
transmission services
- Misrepresentation or false advertising
- Cross-subsidization
EPIRA
Competition Rules and Complaint Procedures
23 August 2006
Rule 4: Anti-competitive agreements (Sec. 14)
Rule 5: Misuse of market power (Sec. 15)
Rule 6: Acquisitions, mergers and consolidatins (Sec. 16)
Rule 8: Clearances (Sec. 37(a), Binding Ruling)
Rule 9: Authorization (Sec. 28, Forbearance)
Bid Collusion
2006
3rd month of WESM, price spiked 75% despite
increasing supply gap
3 generation plants offered same bids during peak hours
(P10,000/MWh) traded by diff teams under PSALM
Bid structures were different before the spike
NPC and PSALM agreed on revenue requirement of
trading teams
ECO concluded that similar bids were not coincidental
Price Manipulation
2013
Electricity price reached P9.107/kWh, 66% higher than
previous year

Malampaya shutdown (11 Nov 10 Dec 2013)


15 power plants went on outage at different times
Lowest recorded outage: 1,182 MW (22 Nov 2013)
Highest recorded outage: 3,505 MW (6 Dec 2013)
650-MW Malaya Thermal Power Plant was not operated
to ease power supply condition
Price Manipulation
2013
Bayan Muna et al. alleges:
ERC committed grave abuse of discretion, in that:
(i) it violates Petitioners constitutional right to due process of
law;
(ii) it failed to protect the public from anti-competitive practices
and market abuse
Sec. 6 (generation is not a PU) and 49 (deregulation of
generation rates) are unconstitutional

Sec. 78 EPIRA
- Injunction and restraining order against ERC can only be issued by SC.
PCA and EPIRA
Concurrence

Definition of Control
Sec 45, EPIRA; Rule 4(r), IRR
Control shall mean the power to direct or cause the
direction of the management policies of a person by
contract, agency or otherwise.

Sec. 4(f), PCA


Control refers to the ability to substantially influence or
direct the actions or decisions of an entity, whether by
contract, agency or otherwise.
PCA and EPIRA
Difference

Sec. 45, EPIRA

Affiliate means any person which, alone or together


with any other person, direct or indirectly, through one or
more intermediaries, controls, is controlled by, or is under
common control with another person.

Ownership restrictions on generation capacity (Sec. 45, EPIRA)


Limitations on bilateral contracting (Sec. 45, EPIRA)
Price agreement between affiliates is not price-fixing (Rule 4,
Competition Rules)
PCA and EPIRA
Difference

Sec. 14, PCA


An entity that controls, is controlled by, or is under common control
with another entity or entities, have common eonomic interests, and are
not otherwise able to decide or act independently of each other, shall
not be considered competitors for purposes of this Section.

Price agreement between competitors - per se prohibited, between non-


competitors - rule of reason

Sec. 4 (a), PCA


Acquisition refers to the purchase of securities or assets, through
contract or other means, for the purpose of obtaining control
PCA and EPIRA
Difference

Rule 3, Competition Rules


Agreement includes an agreement that is (in whole or part)
written or oral.

Sec. 4 (b), PCA


Agreement refers to any type or form of contract,
arrangement, understanding, collective recommendation, or
concerted action, whether formal or informal, explicit or
itacit, written or oral
PCA and EPIRA
Relationship between PCC and ERC

Sec. 43 (u), EPIRA

The ERC shall have the original and exclusive jurisdiction


over all cases contesting rates, fees, fines and penalties
imposed by the ERC
Sec. 32, PCA

The Commission shall have original and primary


jurisdiction in the enforcement and regulation of all
competition-related issues.
PCA and EPIRA
Relationship between PCC and ERC

If issue involves both competition and non-competition, PCC


consults sector regulator
PCC and sector regulator to issue rules and regulations to
promote competition
PCC has sole and exclusive authority to initiate and conduct a
fact-finding or preliminary inquiry into any competition-
related matter
Unless deputized, ERC is barred from conducting fact-finding,
inquiry or investigation
- PCCs PI must be completed in 90 days
Bid Collusion
2006

ERCs Investigation Unit concluded:

Absent any other evidence that would, even if indirectly, prove


what transpired during the meeting or what other discussions
took place between PSALM and its trading teams, particularly,
that there was such an agreement or understanding, express or
implied, on the trading teams offers into the WESM, , the IU
would only be speculating if it would say that because the three
trading teams simultaneously offered similar offers , PSALM
already unduly influenced the submission of such offers and
abused its market power. (emphasis mine)
Price Manipulation
2013
PCCs original and primary juridiction
90-day limit on PI
Sec. 47, PCA
Except for the Court of Appeals and the Supreme Court, no other
court shall issue any temporary restraining order, preliminary injunction
or preliminary injunction against the CommissionProvided however,
That this prohibition shall not apply when the matter is of extreme
urgeny involving a constitutional issue, such that the non-issuance of a
temporary restaining order will result in grave injustice and irreparable
injury to the public