Conclusion
SOME non-governmental organizations and militant groups want the Electric Power Industry Reform Act (Epira) abolished. But, in the eyes of the private sector, the law is working, and there is no need to amend it.
Various business groups even expressed concern over the move to amend the Epira, saying that it might send the wrong signal to investors and lending institutions.
The American Chamber of Commerce of the Philippines, Employers Confederation of the Philippines, European Chamber of Commerce of the Philippines, Financial Executives Institute of the Philippines, Japanese Chamber of Commerce and Industry of the Philippines Inc. and the Korean Chamber of Commerce of the Philippines earlier urged the Department of Energy (DOE) to hold a joint stakeholders meeting to, once and for all, permanently address all issues in the power sector.
“What the government should do now is declare that Epira will not be amended, and conduct more dialogues with industry participants to reduce key uncertainties or change material rules midstream,” the associations stressed.
Epira works
Aboitiz Power Corp., a power firm engaged in power generation and distribution, said the Epira is “working just fine.”
“I am a big fan of the Epira. It promised to bring down the cost of electricity. It already has,” Aboitiz Power Corp. President and COO Antonio R. Moraza said in an interview.
Aboitiz Power is the holding company for the Aboitiz Group’s investments in power generation, distribution and retail-electricity services. The company is one of the largest power producers in the Philippines.
To date, Aboitiz Power and its partners produce a total of 3,044 megawatts of power. The company also owns distribution utilities nationwide.
If there is a need to further improve Epira, Moraza said that amending the law is not necessary. “We’re of opinion that Epira does not need an amendment, and that any improvement and tweaking of Epira can be done without having to open the law. Rather, it can be done through rules and regulations,” he said.
Besides, amending the law could not be done overnight. “It takes a very long time with the deliberation, etc. I think you’re just going to introduce a period of uncertainty, which could very well scare some investors, which we don’t want,” the Aboitiz Power official said. Also, he said stable power supply and a level playing field are proof enough that the Epira works.
“The ERC [Energy Regulatory Commission] chairman spoke recently of a level playing field. There are quite a number of players. There’s a lot of power plants scheduled for commercial operation in the future. I think, we are good until mid-2025. So, you see, power isn’t going to be an issue. Again, Epira is working,” he said.
ERC Commissioner Jose Vicente B. Salazar said there are 68 power generators, 14 private distribution utilities, 71 electric cooperatives, 79 bulk users and seven wholesale aggregators registered in the Wholesale Electricity Spot Market (WESM).
In addition, there are 16 retail electric suppliers (RES), 12 local RES and 371 contestable customers. “The numbers speak highly of that level playing field,” Salazar said. “With a level playing field, we all win.”
Salazar, a former undersecretary of the Department of Justice, stressed that his job is to make sure that the level playing field created by the reforms in the power sector is, likewise, protected.
But if there is really a need to improve Epira, the newly appointed ERC chairman, in a text message, proposed the following:
■ Fiscal autonomy of the ERC.
■ Expanded organizational structure of the ERC by providing additional technical and legal positions.
■ Creation of a Consumer Advocacy Office.
■ Revisit the provision on cross-ownership and market share restriction under Section 45 of the Epira.
“The fourth proposal is meant to prevent anticompetitive behavior and market abuse by certain companies,” Salazar explained. The other three proposals, meanwhile, are meant to strengthen the commission to allow it to successfully carry out its mandate.
The cross-ownership provision in the Epira allows power generators and distributors to be owned by the same interests.
The Management Association of the Philippines has been vocal in saying that amending Republic Act 9136 will not solve any problem, because the Epira is not the problem; it is the failure to implement the legislation properly.
“Our position is still the same—no amendments to Epira at this time,” MAP Energy Committee Chairman Ernesto Pantangco said, when sought for comment over the weekend.
An energy specialist of the International Finance Corp. (IFC) commented that the law “has delivered what it was asked to do.”
IFC chief energy specialist Tonci Bakovic earlier said in a forum held that the law has been successful in attracting investors, as well as in fostering competition in the industry.
The IFC official also noted that generation prices have been kept almost on a par with inflation in a country that has been growing lately at close to 7 percent per annum from 2010 to 2014. “That is quite an achievement in a country that grows fast.”
But, if there is a need to do so, Bakovic said the Epira should only be fine-tuned, similar to what Chile, Columbia and Brazil did.
“These countries, at some time during the implementation of their competitive electricity markets, considered changing their electricity laws, faced with volatility and high prices,” he said.
Bacovic said his statements do not necessarily reflect the views of the IFC, a unit of the World Bank.
Give it a try
Department of Energy (DOE) Officer in Charge Zenaida Monsada, in an interview, said the DOE regularly issues a report on Epira implementation. “This is to show what has been done and what still needs to be done. The law is the law. We must all cooperate to achieve success,” she said.
Based on the latest status report on the Epira issued by the DOE, the agency said the law embodies significant achievements in the government’s effort to ensuring adequacy, affordability and reliability of electricity services to all electricity end-users in the Philippines.
The 26th status report on the Epira implementation covering the period of November 2014 to April 2015 highlights the following:
■ Updates on the privatization of the remaining assets, in particular Power Barges (PBs) 101 to 104, and transfer of contract to an independent power producer administrator of Unified Leyte Geothermal Power Plant for the bulk energy;
■ Continuing turnover to qualified distribution utilities (DUs) of the subtransmission assets (STAs) of the TransCo, which has signed 112 sale contracts with 80 DUs/ECs/consortia amounting to about P5.9 billion;
■ Updates on electricity rates to include average electricity rates, such as the summary of Manila Electric Co. residential unbundled power rates, and list of ERC decisions on DUs’ rate applications, updates on universal charge, loan condonation, lifeline rates and mandatory rate reduction;
■ Updates on WESM operations and governance to include operational high-lights on price, supply demand and governance aspects;
■ Monitoring of compliance to installed-capacity limitation under Section 45 of the Epira highlighting the approval of the ERC relative to the Installed Generating Capacity per Grid and National Grid, the Market Share Limitation per Regional Grids and the National Grid applicable for the year 2015;
■ Updates on the implementation of retail competition and open access (RCOA), which highlights the summary of
RCOA registration and retail market transaction status;
■ Power supply-demand situation/outlook, including reports on the significant incidents in the power system, outages for 2014, and various initiatives of the DOE pursuant to Section 71 of the Epira; and
■ Electrification status to include the household-electrification level of the country estimated at 79.9 percent, which corresponds to 17.4 million energized households out of the estimated total household population of 21.8 million.
During this report period, the government faced major challenges in implementing measures to address the foreseen tight power supply during the summer months of 2015, covering the period March to July 2015. Specifically, the DOE recommended to the President of the Philippines to trigger Section 71 of the Epira on Electric Power Crises Provision, the report said.
It turns out that there was no need for President Aquino to be granted emergency powers to avert a possible energy crisis because, as Monsada pointed out, everyone cooperated.
“From the government to the private sector, everyone was willing to help. Supply was available. Power rates didn’t shoot up. The law is working,” she said.
The saying “why fix it if it ain’t broken” could probably best describe what the DOE official wants to convey. It remains to be seen, however, if the situation will change after next year’s elections.