Consumer Group Opposes Joint Venture Controlling Imported LNG Supply for Power Generation

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The Power for People Coalition Challenges Joint Venture in the Energy Sector

The Power for People Coalition (P4P), an energy watchdog group, has announced its intention to challenge the joint venture between San Miguel Corp., Manila Electric Co. (Meralco), and Aboitiz Power Corp. This joint venture aims to control the supply of imported liquefied natural gas (LNG) used for power generation in the Philippines. The P4P believes that this move will drive up electricity costs for consumers.

Speaking in Filipino, P4P convener Gerry Arances stated that the coalition is currently studying the possibility of opposing the agreement once it is lodged with the Energy Regulatory Commission (ERC). Additionally, Arances mentioned that the group is likely to file a complaint before the Philippine Competition Commission (PCC). The goal of these actions is to defend electric consumers’ rights to clean and affordable energy.

Arances emphasized that questioning the joint venture is a crucial step in protecting consumers from an endless cycle of power rate hikes. The LNG facility in Batangas, operated by the joint venture, will handle imported LNG, which is a more expensive fuel for power generation. Arances highlighted that the completion of the merger and acquisition of the LNG power plants will result in increased electricity rates, severely impacting consumers. He pointed out that imported LNG is costlier due to pass-on charges, including freight costs at dollar rates in world markets. As a result, power rates are expected to rise compared to the use of coal.

The P4P also expressed concerns about the timing of the joint venture agreement. This agreement coincided with Meralco awarding 2.4 gigawatts worth of new power supply agreements to two plants owned by its partners in the LNG venture. Through this deal, Meralco will acquire a 40 percent stake in the Ilijan LNG power plant and Excellent Energy Resources LNG power plant, effectively making the distribution utility the owner of these power plants.

Arances criticized Meralco’s actions, stating that in January, the company allocated 80 percent of its new power requirements to these two San Miguel Corp. gas plants. He argued that the terms of these agreements are disadvantageous to consumers. Arances further revealed that Meralco had intended to buy these plants all along, directly benefiting from the expensive costs of fuel passed on to consumers. He described this as “robbery in broad daylight.”

In addition to the concerns raised by the P4P, it is important to note that LNG is prone to price increases due to its vulnerability to global market forces. The P4P referred to the experience in the United States as evidence of this trend. Imported LNG, according to their data, is costlier than coal due to pass-on charges and freight costs in world markets. These factors contribute to the anticipated rise in power rates.

The P4P’s challenge to the joint venture and their efforts to protect consumers’ rights reflect their commitment to ensuring fair and affordable energy for all. By questioning the agreement and raising awareness about the potential consequences, they aim to safeguard the interests of electric consumers in the Philippines. As the situation unfolds, it remains to be seen how the Energy Regulatory Commission and the Philippine Competition Commission will respond to the P4P’s actions and concerns.

Source: The Manila Times

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