Concerns Raised Over LNG Deal and Potential Impact on Power Costs

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An Environmental Group Raises Concerns Over a Mega Energy Deal in the Philippines

An environmental group in the Philippines, the Power for People Coalition (P4P), has expressed fears about the recent partnership between the country’s biggest energy companies. The collaboration aims to jointly operate the largest liquefied natural gas (LNG) facility in the country. However, P4P has raised concerns about potential high power costs resulting from this deal.

P4P convenor Gerry Arances stated that the partnership between San Miguel Corp. (SMC), Manila Electric Co., and Aboitiz Power Corp. raises red flags. He further explained that the deal could lead to cross-ownership in the power industry and possible collusion among power generation companies. Arances emphasized the need for action by both the Energy Regulatory Commission and the Philippine Competition Commission to protect the interests of consumers.

The three major players in the country’s energy industry recently sealed a significant partnership worth P184 billion to launch an LNG facility in Batangas. This landmark deal has been hailed as a major step towards a cleaner energy future. Under the partnership, Manila Electric Co. (Meralco) would acquire a 40 percent stake in the Ilijan LNG power plant, originally owned by SMC and Excellent Energy Resources LNG power plant. This acquisition would exceed the shares owned by both Aboitiz and SMC.

However, the partnership raises concerns as it effectively makes Meralco, a company with a franchise for power distribution, a producer of electricity. This violates the Electric Power Industry Reform Act (EPIRA), which prohibits power distribution companies from engaging in power generation.

P4P highlighted that the partnership comes shortly after Meralco awarded 2.4 gigawatts of new power supply agreements (PSAs) to power companies using imported LNG handled at SMC’s Batangas facilities. Arances criticized the terms of these agreements, stating that consumers are getting the short end of the stick. He further revealed that Meralco’s intention to purchase these plants means that the company would directly benefit from the expensive costs of fuel passed on to consumers. Arances described this situation as “robbery in broad daylight.”

In addition to the LNG facility partnership, SMC, Aboitiz, and Meralco are also seeking to acquire the adjacent liquefied natural gas import and regasification terminal owned by the Atlantic Gulf and Pacific Company of Manila. This move further consolidates their control over the LNG market in the Philippines.

It is essential to address the concerns raised by P4P and ensure that the interests of consumers are protected. The energy regulatory and competition authorities must thoroughly evaluate the potential implications of this partnership and take appropriate action to prevent any negative impact on power costs.

Implications for the Energy Industry and Consumers

The partnership between SMC, Aboitiz, and Meralco raises questions about the concentration of power in the hands of a few major players in the energy industry. Cross-ownership and collusion among power generation companies can lead to anti-competitive practices and higher power costs for consumers.

Furthermore, the violation of the EPIRA by allowing a power distribution company like Meralco to become a producer of electricity undermines the principles of fair competition and market efficiency. This could potentially limit the entry of new players into the power generation sector and hinder the development of a more diverse and competitive energy market.

Consumers are particularly vulnerable to the impact of high power costs. Electricity bills form a significant portion of household expenses, and any increase in prices can have a detrimental effect on the overall cost of living. It is crucial for regulatory bodies to intervene and ensure that consumers are not burdened with excessive costs resulting from this partnership.

The Need for Regulatory Intervention

To address the concerns raised by P4P and safeguard the interests of consumers, the Energy Regulatory Commission and the Philippine Competition Commission must take swift action. They should thoroughly investigate the potential anti-competitive practices and market concentration resulting from this partnership.

Regulatory intervention may involve imposing conditions on the partnership to prevent abuse of market power and ensure fair competition. It could also include measures to promote transparency in pricing and cost recovery to prevent consumers from bearing the brunt of any increased expenses.

Additionally, the regulatory bodies should assess the compliance of Meralco with the EPIRA and take appropriate measures to ensure that the company operates within the legal framework. This will help maintain a level playing field in the energy industry and prevent any undue advantage for specific players.

In conclusion, the concerns raised by the Power for People Coalition regarding the partnership between SMC, Aboitiz, and Meralco in the Philippines’ energy industry are valid and require immediate attention. Regulatory bodies must act swiftly to assess the potential implications of this partnership on power costs and market competition. By doing so, they can protect the interests of consumers and ensure a fair and competitive energy market in the country.

Source: The Manila Times

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