Plunder seen in ‘spinoff’ of electricity market firm

Many laws were broken in the Dept. of Energy’s “spinoff” of a new operator of the wholesale electricity spot market. Those include selection of an unqualified firm, dissipation of state assets, and illicit hundred-million-peso exactions from electricity consumers.

Officials behind the breaches can be liable for graft or plunder, Rep. Jericho Nograles said this week. The selection, asset transfers, and collections of Independent Electricity Market Operator of the Philippines (IEMOP) are void from the start.

Graft covers unduly favoring any party, and deals that are grossly and manifestly disadvantageous to public interest. Plunder, non-bailable, involves a series or combination of crimes to abscond at least P50 million from the government.

The most glaring violation is IEMOP’s collection of half-centavo per kwh of electricity used by homes and shops, Nograles said. Amounting to more than P100 million a month, the fee is for IEMOP “operating” the wholesale electricity spot market (WESM), the electricity trading bourse of generators and distributors. But all electricity exactions must first be approved by the Energy Regulatory Commission. The cardinal rule in the energy industry is that no one may set rates and collect fees without ERC approval. IEMOP has not been granted any authority, much less filed any application or appeared before the ERC, to collect anything, Nograles said. Yet from start-up in late Sep. up to Dec. 2018, IEMOP raked in P322 million. The audited reports for 2019 have yet to be seen.

IEMOP’s unauthorized exaction is 0.86¢ per kwh, not only 0.50¢ that the DoE claimed last week on its webpage, Nograles said. Citing unnamed insiders, he added that the exactions go to bloated salaries of over P1 million a month per IEMOP top brass. Being non-stock and nonprofit, it does not need to declare dividends, but may spend earnings.

Selecting IEMOP violated the Electric Power Industry Reform Act of 2001, Nograles said. The requirements of the EPIRA law were ignored in IEMOP’s selection as WESM operator.

The law set up a spot market and formed the Philippine Electricity Market Corp. (PEMC) as initial operator. PEMC was chaired by the succession of energy secretaries, and supervised by the state’s National Transmission Corp. (Transco). In May 2018 seven IEMOP incorporators paid up P1,000 each to assume operation of WESM. Energy Sec. Alfonso Cusi resigned as chairman, and a transition ensued. Four months later PEMC and IEMOP entered into an Operating Agreement over WESM.

Breached was Rule 9, Section 6(a) of EPIRA’s implementing rules and regulations, Nograles said. The independent operator must be “financially and technically capable, with proven experience and expertise of at least two (2) years as a leading independent operator of a similar or larger size electricity market.”

With measly P7,000 paid-up capital, IEMOP is financially incapable even for a food cart franchise, much more run the multibillion-peso WESM, Nograles said. Technically it could not buy even a good computer or smartphone. It was only four months old when PEMC transferred to it the operation of WESM, far short of the mandated two years’ experience and expertise.

The DoE claimed that IEMOP acquired experience and expertise when PEMC transferred its “system” to the new operator in Sept. 2018. Rejecting that line, Nograles said the two years should be as IEMOP, not its employees formerly with PEMC.

Nograles recounted that PEMC officers first told Congress about the deal in a hearing of the committee on energy late 2019. They claimed that PEMC ceased to be a government-owned or -controlled corporation when Cusi resigned as chairman, and so was free to transfer operations to “non-government, independent” IEMOP.

Nograles said he challenged them to cite the law to the effect that a GOCC becomes private with the departure of its government official head. He said IEMOP claimed to not need to report to the government its collection earnings and operating expenses.

Last week DoE claimed that IEMOP was “spun off” from PEMC, thence Transco ceased to be the supervising agency. Nograles again challenged them to cite the legal basis for the “spinoff”.

The very spinoff, along with the transfer of system that DoE mentioned, is yet another violation, Nograles said. There are laws governing the transfer of government assets and equipment to a private firm. “One of those is public bidding,” he said. “And did they follow the rules of the Commission on Audit?”

Transco originally owned the government equipment, which it transferred to PEMC on the latter’s formation as a GOCC, Nograles recounted. PEMC then transferred those assets for free to IEMOP that claims to be private.

The “spinoff” did not achieve anything, Nograles said. It is merely intended to legalize an illegal contract. That is why he is exposing it before any more dissipation of assets.

The House committee on energy, of which he is vice chairman, will resume investigating IEMOP next month.

Representing Puwersa ng Bayaning Atleta party, Nograles hails from Davao City, President Rody Duterte’s hometown. Last year he exposed the Ponzi scheme of KAPA Community Ministry International Inc. Duterte ordered authorities to crack down on victimizers of investors in Davao region and the rest of Mindanao.

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