MERALCO: Emerging Power Monopoly


This is to support and echo Socio-Economic Planning Sec. Romulo Neri’s warning of an emerging monopoly in power generation, which immediately drew sharp criticism from MERALCO. After the adoption of a watered-down cross-ownership limit in the present Electric Power Industry Reform Act (EPIRA), MERALCO mounted a relentless campaign to attain dominance in the generation sector by leveraging its market power in the electricity distribution. Having full and virtually unchallenged dominance of electricity distribution (70% of the entire Luzon market; 64% nationwide), it has used this market power to scare away any future investor/player (it can squeeze any player without a firm supply contract by denying it access to the market, much like squeezing oxygen out of the atmosphere).

At the same time, with the captive customers not having any say at all on MERALCO’s power procurement programs, it has awarded the juiciest deals to its sister company, the Lopez-owned generation companies (in a real sense, MERALCO owners, where the Lopezes are actually a minority, are subordinate to the Lopezes in the First Generation companies, which are dominated by them). Proof of this devious generation plot: known allies and friends of the Lopez generation interests first cried dire warnings of a looming power crisis, made sure no credible new player could come in by closing the lid on its dominant captive market (thus scuttling Napocor privatization), then turned around and filed an application for a new 550 megawatts (MW) natural gas plant (in addition to its present 1,500 MW natural gas) supposedly to address the looming power shortage or crisis. Having virtually unlimited powers over its captive market, First Gen is the only group with a high level of confidence in its future in the generation market. After all, it can quite literally write its own market ticket with MERALCO. Again reference is made to the ERC petition of MERALCO and the First Generation companies to extend by amendment their power supply agreements, with a number of cost items like the capacity fees under challenge by consumers.

Clearly, as shown by our experience with EPIRA over the last five years, there is a need to revisit, raise and reinforce the cross-ownership limits on all generation capacity, including those existing prior to EPIRA. Dilution of generation ownership will become a disincentive to market power abuse by distribution monopolies.

On a related matter, events today have validated our earlier concern over the true intentions behind MERALCO’s offer to President Arroyo in March this year to open up its one-megawatt market to competition in generation. At that time, we questioned MERALCO’s tender to Pres. Arroyo, challenging them to bring their generosity to the ERC, which has jurisdiction over power rates and market play. Concededly a potential advantage to MERALCO customers, the appropriate petition has not been filed by MERALCO at ERC up to this late date.

Posted by Bulatlat

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