Part Five
Epira
THERE is no subject bitterly stirring up the public’s anger more than rising electricity bills, high oil prices and gas rates,
as these affect households, motorists and the commercial and industrial sectors. Unfortunately, the Executive and Congress, the two branches of government where the wrong policies originated, have not done anything to correct the problem.
When Congress and President Gloria Macapagal-Arroyo made into law the Electric Power Industry Reform Act (Epira or Republic Act 9136), they justified their action “to ensure the quality, reliability, security and affordability of the supply of electric power.” Likewise, in their declaration of policy, they made it clear that the law shall “protect the public interest, as it is affected by the rates and services of electric utilities and other providers of electric power.”
More than a decade after the Epira was passed, consumers continued to bear skyrocketing electricity rates and experience brownouts. A big section of the country’s population, especially in the rural areas, remained without electricity. Incongruously, these were the striking opposite of the things promised by Epira.
Why, then, do problems continue to beset the power industry? It is worth noting that another objective also written in Epira’s declaration of policy was to “provide for an orderly and transparent privatization of the assets and liabilities of the NPC.” Epira changed the Philippine energy landscape, as it accelerated the privatization and deregulation of all power-industry sectors.
Debilitating give and take policy
The fundamental question is: who benefited and suffered most from Epira? With private companies venturing into power generation, the situation reeked of profits for the oligopoly of a few corporate elite, families that were long entrenched in business interests.
Under Epira, power purchase agreements are legitimized, giving birth to “take or pay” arrangements that compel consumers to pay for the production costs of electricity as projected by private corporations and not for the actual electricity they only consumed. While PPA is no longer reflected in current electricity bills, it is unbundled into other several charges, such as generation, transmission and distribution rates, as well as systems-loss charges.
The public is also paying for NPC’s stranded debts, which still amounts to P698.9 billion as of 2014, in the guise of “universal charge.” These NPC debts continued to grow today despite repeated power-rate increases intended to cover it, and these rate increases were, in fact, shouldered by ordinary consumers.
It is also Epira’s aim to “ensure transparent and reasonable prices of electricity in a regime of free and fair competition.” More than a decade after its enactment, the control of more than half, or 52 percent, of the total generation capacity of the country is chiefly at the mercy of the top 4 power players: San Miguel Energy Corp., AboitizPower, the Lopez Group and the group of businessman Manuel V. Pangilinan. Other tycoons have also entered into the energy business.
The unquestionable fact is that power rates have steadily increased since the private sector came to control it. In fact, the Philippines is now one of the countries with the most expensive power rates in Asia. This deterred foreign investors to build businesses here, diverting their projects to neighboring countries where power costs are much cheaper: Indonesia, Thailand, Malaysia and, especially, China.
Critical issues
Privatization of the power sector has failed to ensure public benefits as promised, as shown by the experience of New Zealand, the United States and countries in Latin America and Asia. In many cases, the reform programs created more problems for the sector itself, consumers or whole communities.
In more than 10 years, the world witnessed a series of disastrous brownouts, skyrocketing power rates, increasing corruption and financial problems in the sector, bringing to light the grim consequences of deregulation and privatization of the power sector.
Actually, Asian Development Bank (ADB) and World Bank’s power- sector reform programs came from an erroneous diagnosis, now known as the Washington Consensus, exposed in this column on March 13, that public ownership and government monopolies inherently lead to poor performance of public utilities and, eventually, financial ruin.
This has, in turn, spawned the wrong prescriptions, focused on handing over ownership to the private sector. Meanwhile, the Freedom from Debt Coalition (FDC), a highly reliable social-economic think tank, said the government abandoned the social contract that existed with its constituents, surrendering its obligation to private hands after setting up the electricity infrastructure.
Power-sector reform programs rendered the public vulnerable to high electricity cost, profit motive of private power firm and loss of control over environment regulation. The end-result pointed toward significant impairment of consumer protection and transfer of corporate debts into public hands.
FDC said requiring the implementation of power-sector reform program as a condition for loan disbursements illustrated the way the ADB and other international financial institutions’ belief in a one-size-fits-all model applicable to countries everywhere.
These reforms in the power sector were enforced regardless of differences in the economic level of countries, the level of development of their power sectors, the number of people connected to the grid and the roots of the crisis faced by various public or state-owned utilities.
Indonesia and the Philippines have different stages of power-sector development, different models of electricity-market structure and different conditions, in terms of energy sources. Yet, the FDC said, the models and phases for power reform imposed by the ADB and the World Bank on the two countries were almost the same.
To be continued
To reach the writer, e-mail cecilio.arillo@gmail.com.