THE Electric Power Industry Reform Act (Epira), on its 18th year, is in a state of stagnation, a lawmaker who chairs the Senate energy committee observed, citing delays in the implementation of some of the segments of the law and the need to further improve some of it.
“We stagnated. We did not move forward. We did not move backward. I say we stagnated because WESM [Wholesale Electricity Spot Market] prices are healthy and WESM prices are low.
“But even if WESM prices are low, if you ask ordinary Filipino consumers, they can’t feel it. May kulang pa [Something else is missing] and one is the RCOA [Retail Competition and Open Access]. We need to understand bakit kulang pa [why we’re still missing it],” said Sherwin Gatchalian, Senate energy committee head.
RCOA is meant to give consumers the right to choose their own supplier of electricity to encourage competition in the generation and supply sector.
A Supreme Court order on February 21, 2017 stopped the Department of Energy (DOE) and Energy Regulatory Commission (ERC) from implementing the mandatory migration of large power consumers to RCOA.
RCOA requires power users consuming an average of at one megawatt (MW) per month to source power from a licensed retail electricity supplier (RES).
At present, majority of power consumers are being supplied by Manila Electric Company (Meralco), the country’s largest distribution utility (DU) firm.
The migration was supposed to take effect on February 26, 2017 while customers with at least 750kilowatts (kW) of power consumption a month were scheduled to source electricity from their chosen RES on June 26, 2017.
The case remains pending.
Gatchalian said the incoming 18th Congress will review Epira once it resumes session on July 22.
“We will have another review of Epira. We will find out where we are in terms of its implementation. Bottom line, our rates should further go down because that is the thrust of Epira,” said Gatchalian, adding that the review will be done through the Joint Congressional Power Commission (JCPC).
The JCPC, which serves as the country’s primary watchdog in the power sector, will be renamed Joint Congressional Energy Commission (JCEC) once the 18th Congress opens later this month. JCEC will reflect the expansion of its oversight powers to the entire energy sector with the recent passage of Republic Act 11285, or the Energy Efficiency and Conservation Act.
“Hopefully, we get a counterpart in the lower House that will be consumer-oriented,” he said.
Energy Secretary Alfonso Cusi, in an interview, commented that “Epira is a good law” but it “needs to be corrected,” citing adjustments that need to be done in the transmission sector, cross ownership and capacity building initiatives, among others.
“There’s a law and we are making the most out of it. The intention is good but there are some debates. Just like any law, you need to attune it with the time. The objective of the law is very good but things such as problems in transmission, in building capacity and on cross ownership, well those have to be debated upon,” said Cusi.
Interlocking ownerships
The same issues were raised by Laban Konsyumer Inc. (LKI), which noted that interlocking ownerships in power generation and distribution companies continue to limit the effectiveness of the spot market.
“The interlocking ownerships of generation and distribution companies continue to cast doubts on the transparency of the electricity pricing. The expectation of lower prices in the spot market is hardly felt by the consumers,” said LKI President Victor Dimagiba when sought for comment.
LKI also observed that consumers continue to shoulder the inefficiencies of the industry, such as added costs of universal charges, missionary electrification fees, system losses and stranded costs and debts of the National Power Corp.
The group also noted the lack of consumer participation in the regulatory and governing boards.
Debate: change through legislation or not?
As such, LKI called on lawmakers to “overhaul” Epira, which was enacted on June 8, 2001, and took effect June 26 the same year.
Another consumer group, Murang Kuryente, also urged lawmakers to amend Epira. “We believe Epira should be amended in a way that would prioritize consumers and that we, including the government, should no longer be at the mercy of private companies,’’ said the group’s spokesman Gerry Arances.
The energy chief disagreed. While Cusi recognized the prerogative of lawmakers to amend the law, he cited other ways to improve Epira and make it more effective.
“We don’t need to amend the law. There are things not properly defined but these can be corrected through the issuance of a circular or IRR [Implementing Rules and Regulations],”said Cusi.
For the private sector, the law that restructured the energy sector is working and has benefitted consumers in so many ways.
In the view of Meralco, Epira had a major influence on the power industry in the past two decades.
One key takeaway from Epira and its impact is accessibility to electricity, said Meralco Assistant Vice President and head of Public Information Office-Corporate Communications Joe Zaldarriaga.
“Before Epira, only 76 percent of families had access to electricity [NSO 2000]. The figure went up to 91.1 percent in 2015, up by 15 percentage points. Epira has vastly improved reliability, quality and affordability of electric supply,” said Zaldarriaga in a text message.
Meralco also noted that Epira resulted in a better supply situation, noting that the number of cases and of households experiencing power outages dropped dramatically. Moreover, the country has been experiencing lower electricity prices since Epira was passed, added Zaldarriaga.
Power players weigh in
Aboitiz Power Corp. Chief Operating Officer Emmanuel Rubio said the success of Epira could be measured in three things:
“Did it increase capacity? Did it bring the prices of power down? Did it usher in competition for better value and services to open access customers?” he said in a reply sent via e-mail.
Rubio said that from 2011 to 2018, generation capacity in the country grew by some 60 percent from 13,380 MW in 2011 to 21,423 MW in 2016. The industry expects to generate 5,000 MW more in 2020.
In terms of electricity cost, prices in the spot market have gone down from P6.43/kWh in 2010 to around P3.62/kWh in 2018.
Competition has also helped bring down prices. Rubio said there are now around 15 major players in the power industry competing for customers and offering the most competitive prices and the best services to contestable customers.
“The power industry still faces a lot of challenges. But capacity is up, prices to contestable [customers] are going down, and competition is intense,” Rubio added.
Under RCOA, so-called contestables or consumers of more than 750kw can choose their electricity supplier.
“Looking at these three things, then Epira is working. And it must be allowed to continue working—maintain a competitive environment so we can bring in more capacity and fully implement open access to further bring down prices,” said Rubio.
Eric Francia, president of AC Energy Inc., the power arm of conglomerate Ayala Corp., also observed that Epira has attracted strong private-sector participation and resulted in significant investments in the power sector. Also, the implementation of RCOA in the last six years or so has helped lower the cost of power for contestable customers, albeit limited to large users.
Francia said that in order for consumers to reap Epira’s benefits, the law must be fully implemented. “Consumers will only realize the full benefits of Epira when RCOA is implemented all the way to the household level. This is long overdue and hopefully will be addressed soon,” he said.
Aboitiz Power President and Chief Executive Officer Erramon Aboitiz also said industry leaders must focus on Epira’s full implementation. “Full implementation, that’s what we must focus on. RCOA and privatizing the remaining power assets,” he said in an interview.
Semirara Mining and Power Corp. Chairman Isidro Consunji noted that the power assets sold to the private sector are “now more productive under private hands.”
So far, the Power Sector Assets and Liabilities Management Corp. (PSALM) has privatized 31 power-generation assets. PSALM is the agency tasked to manage state-owned power assets under Epira.
Alcantara-led Alsons Power Group said privatization has relieved the government of the burden of providing for new generating and transmission capacity, thereby freeing up scarce public funds for use in perhaps the social and developmental needs of the country.
“For the most part, Epira accomplished its objective of privatizing much of the power industry,” said company vice president for project development Joseph Nocos in a text message.
Urgent concern
Eighteen years after, Nocos said now could be the time to streamline the implementation of the provisions of the law toward expediting and rationalizing the expansion of generation capacities. “With power reserves in Luzon thinning out to less than 2 percent, this has become rather urgent at this time,” he said.
Senator Gatchalian said it is never too late to prepare for the summer months when supply is expected to become tight again.
When Congress resumes, Gatchalian said supporting bills could be introduced to further improve Epira to address pressing concerns on additional capacity, delays on policy implementation, among others.
“We may need to attract newer generating technology. Aside from reliability, we also have to look at the aspect of sustainability, so we will start off with that,” he said.
He also said the Senate energy committee will follow up on the deliverables of the ERC and the DOE in terms of putting accountability of the generators. “We also want to talk about following up on the deliverables of ERC and DOE in terms of putting accountability of generators. We will do it when we convene. They are moving but we want to put that in hearing because we do not want to wait for summer again,” said Gatchalian.
Competitive selection
The committee will look into the competitive selection process (CSP), which requires distribution utilities and electric cooperatives to undertake competitive bidding to secure power supply agreements (PSAs) with generation companies.
“We want to also have hearing exclusive on CSP because CSP was also part of the accountability mechanism of the generators. What Epira didn’t cover is CSP. Still, 80 percent of the power contracts are sourced bilaterally and only 20 percent from the spot market. CSP has a consumer aspect that we want to make sure that the consumers are benefiting from this CSP,” he said.
Eighteen years after, Epira has indeed reformed the complicated and trouble-ridden Philippine power sector, but industry leaders, experts and players all agree on one thing: much, much more remains to be done.
Image credits: Tibor Balog Nagy | Dreamstime.com