PRESS RELEASE

January 5, 2011
Reference: Rep. Salvador “Kiting” Cabaluna III
1st Consumers Alliance for Rural Energy (1-CARE) Party List
(0917) 5050542
1-CARE party list seeks suspension of WESM for Visayas;
legality of commercial operations questioned
The skyrocketing of spot market rates for electricity to as high as P32 per kilo
watt hour (kwh) in the Visayas during the first few days of trading is proof tha
t the region is not ready for the scheme mandated by the power industry reform l
aw, Rep. Salvador “Kiting” Cabaluna III of the 1-CARE party list said.
And before its continued operations could cause in “irreparable damage” to ordinary
consumers, Cabaluna asked the Philippine Electricity Market Corp. (PEMC) to susp
end the commercial operations of the wholesale electricity spot market (WESM) fo
r six months to allow stakeholders, notably electric cooperatives, enough time t
o secure bilateral contracts for their power supply.
“Time and again, our sector has cautioned the government the situation in the Visa
yas is not ripe for the operation of WESM, and this opposition is not without fa
ctual basis,” Cabaluna said in a letter to PEMC president Melinda C. Ocampo dated
Jan. 3, 2011.
Cabaluna said that “even the Department of Energy (DoE) had postponed its implemen
tation several times because conditions then, as they are now, are bound to resu
lt in failure.”
The WESM began operations in the Visayas region on Dec. 26, and as feared, the s
pot rates had gone as high as P32 per kwh during peak demand, Cabaluna said.
At the same time, Cabaluna questioned the legality of the WESM implementation, w
hich he said began operating without the sanction of the Energy Regulatory Commi
ssion (ERC).
Cabaluna said that two years ago, the ERC had ordered the PEMC to submit a packa
ge of mitigating measures to protect the market from volatile price fluctuations
. On Dec. 10, 2010, the ERC issued a second order on the subject, but the PEMC h
as failed to comply with it, he added.
“Without such ERC authority, distribution utilities would be violating the law if
they pass on to consumers the cost of electricity drawn from the spot market,” Cab
aluna wrote.
Cabaluna explained that the rural energy sector that he represents is not agains
t the implementation of WESM. However, he insisted that “structural defects” must fi
rst be addressed before it goes into operation.
He said a basic “structural defect” in the WESM operations is the tight energy suppl
y situation in the Visayas. Three new coal-fired power plants --- two in Cebu an
d one in Iloilo --- are set to go into full operations on March 26 this year yet
, he added.
Cabaluna said the situation is bound to “go haywire” because many electric cooperati
ves have not yet secured bilateral supply contracts to ensure that they get the
bulk of their requirements at a fixed price.
“We have repeatedly argued that we need extra time as most ECs had expiring bilate
ral contracts with the National Power Corp. on Dec. 31, 2010,” he said.
Because of this, the ECs were not able to complete their negotiations for new bi
lateral contracts when the WESM was put into operation, he added.
The implementation of WESM on Dec. 26 placed the ECs in a vulnerable situation b
ecause they are now forced to draw a big portion of their supply needs from the
spot market, he said.
Cabaluna said that in the end, the impact of the spiked rates would fall upon th
e shoulders of ordinary consumers, as the distribution utilities and transmissio
n firm would simply pass on the cost to their customers. (30)