Second of three parts
HOUSE Committee on Energy Chairman and Liberal Party Rep. Reynaldo Umali of Oriental Mindoro had tried to amend the 14-year-old Electric Power Industry Reform Act (Epira). Umali, however, said it proved to be an uphill battle as too many were against it.
Epira’s thrust was questioned when power distributor Manila Electric Co. (Meralco) announced that the generation charge, which accounts for more than half of the Meralco bill, went up by P9.10 per kilowatt-hour (kWh) in December 2013 and P10.23 per kWh in January 2014.
Consumers were furious at the Meralco rate increase, which was approved for implementation on a staggered basis by the Energy Regulatory Commission (ERC).
Shortly after it was implemented, the Supreme Court (SC) issued a temporary restraining order (TRO) to stop the power-rate increase. Until now the TRO has not been lifted.
High power rates
The National Association of Electricity Consumers for Reform Inc., which filed a separate petition before the High Court seeking to stop the Meralco rate hike, said Epira has pushed the power rate up.
“It didn’t help. Something should be done. For Meralco, it should have cut the cost of electricity,” said the consumer group’s leader, Pete Ilagan, in a recent forum.
The Philippines’s electricity rates are still the second highest in the Southeast Asian region and seventh in the world. “Sadly, this is still the case,” Umali said.
The Philippine Statistics Authority (PSA) said in a report that Filipinos pay one of the highest rates in the region. It cited data from the Asean Center for Energy showing that among the 10 countries in Southeast Asia, the Philippines has the third highest residential electricity tariffs, fifth highest for commercial and fourth highest in terms of industrial electricity tariffs.
A study conducted by the Perth-based consultancy firm International Energy Consultants (IEC) placed the rates in Luzon as having the ninth highest electricity tariffs of the 44 countries surveyed. Meralco commissioned the IEC to conduct the study. Citing the IEC study, the PSA said one of the main reasons the country’s power rates are higher compared to other countries is the absence of government subsidies for electricity, unlike countries like Indonesia, Thailand and Malaysia, where electricity rates are subsidized by the government.
“These subsidies eat up a large chunk of public budget. In Indonesia, for example, energy subsidies account for 24 percent of the 2013 public expenditure plan,” the PSA paper read.
It also said the generation charge is the biggest component of the electricity cost, accounting for 65 percent of what customers pay for.
But Department of Energy (DOE) Officer in Charge Zenaida Monsada said, without Epira, power costs could have been higher and that the government’s role would have been limited to being the “facilitator” and “catalyst” of the energy sector.
“To some, it may seem that the government was placed in the losing side, however, the reality is that we need to capitalize on the dynamism of the economy as well as the influx of foreign and local investors,”
Monsada said.
Proper implementation
Meralco, which serves over 5 million customers in Metro Manila, Batangas, Bulacan, Cavite, Rizal, Laguna and Quezon, said that while it respects the view of various groups that are calling for amendments to the landmark law that promised reforms in the power sector, the move is “premature.”
“First of all, I think a lot of thought and time were spent by industry experts to write up the Epira. Having said that, I think any amendments is premature. What should be done is to properly implement the Epira,” Meralco Senior Vice President Alfredo Panlilio said in an interview.
The law is the law, stressed the Meralco official. The problem, he said, is implementation. “I think the problem is more of its execution. Of course, we should be cognizant of present market conditions and align [the law] with that.”
Meanwhile, former Energy Secretary Rafael Perpetuo Lotilla said implementation plays an important factor to determine its success or failure.
“Epira is broad enough to cover smarter regulation. Also, aspects of the reform, including deepening retail competition, open access and allowing aggregators still have to be implemented,” Lotilla said in a text message. “Electric cooperatives reform would require separate legislation while competition issues are already covered by new law,” he added.
No to Epira
Research group IBON disagrees. It believes that the problem is not the proper implementation but the law itself.
It said that Epira, by design, actually allows the companies engaged in the power sector to impose the most profitable rates on electricity consumers.
According to IBON, with Epira facilitating the complete takeover of a handful of local and foreign businesses in the power sector, the deregulation of generation rates makes it easy for firms to abuse power consumers with exorbitant rates.
“The recent Wholesale Electricity Spot Market [WESM] controversy wherein Meralco sought what could have been an all-time- high increase in power rates has clearly shown how privatization and deregulation under Epira created a conducive environment to profit from high power rates,” it said, adding that the law creates favorable conditions for collusion and manipulation of supply and fixing prices.
There is currently an investigation against WESM players who allegedly withheld their full capacity in the spot market.
“The latest controversy facing the power industry, plus the impact of Epira on power consumers and on national development, are enough reasons to stop and reverse the privatization and deregulation of the electricity industry,” the group said.
IBON calls on lawmakers to repeal the Epira and work toward building a more rational power sector using the country’s resources,” it said.
To be continued
Image credits: Nonie Reyes