Press Release
October 7, 2006


Sen. Miriam Defensor Santiago, chair of the bicameral Joint Congressional Power Commission or Powercom, said the oversight commission will meet next week, October 12, Thursday afternoon, to investigate charges of alleged price manipulation that allegedly caused sudden spikes in Luzon power bills.

Santiago also raised the alarm that the Power Sector Assets Liabilities and Management Corp. (PSALM), and National Power Corp. (NPC) might be losing billions of pesos in the spot market.

We in government must act very fast because investor confidence in privatization, as well as public trust in the spot market as a device for bringing down power prices, are both hemorrhaging, the senator said.

Santiago said that there is cause for concern over escalating prices in the Philippine wholesale electricity spot market, known as WESM.

In the first trading month which was June, biddings resulted in an average price of P2.72 per kiloWatt hour (kWh), in the second month it rose again, and now in the third month it is P4.853 per kWh. This is unreasonably high, Santiago said.

Santiago said the Powercom probe will focus on PSALM which owns the NPC power plants and is the de facto administrator of all NPC power plants.

PSALM is the dominant market player, because it controls at least 50 percent of Luzon generation capacity, the senator said.

At a Powercom hearing last August, Santiago had already raised the issue that NPC might be losing a lot of money, since it generates power at P5 per kWh, but sold it in the spot market at only P2.72 per kWh in the first month.

At that meeting two months ago, Santiago had already noted for the record that: If the average price of generation is used as indicator of the real market price, then we can conclude that NPCs generation cost is really high.

Santiago said the fears raised over possible price manipulation in the market are well-founded.

PSALM has market power, and may have been tempted to manipulate spot prices. But and this is a big but there are also other market players who might be engaged in so-called gaming, because they know that NPC / PSALM might have been losing billions in the spot market, Santiago said.

The senator said that there are several factors which influence spot prices, notably the cost of producing electricity, which varies from one electric plant to another.

Santiago said the focus of the Powercom probe will be PSALMs trading decisions in the last month.

We need to act very fast, because this allegation of price manipulation in the spot market tends to erode investor confidence in the privatization of the power sector, she said.

The senator said it is premature to order the temporary suspension of WESM as called for by certain business leaders.

Under the Rules of Court, PSALM and DOE are entitled to the presumption that official duty has been regularly performed. It is for the Powercom hearing to determine whether there is evidence to overthrow this presumption. Santiago said.

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