The Promise of a Better Power Future

A Look into the EPIRA of 2001

Lower cost of electricity means lower overhead costs for the university means lower tuition. A decrease of 30 cents/kWh could translate to about P2000.00 savings a year!

But is the EPIRA of 2001 or what is now known as RA 9136 since June 8, 2001, that much of a "good news"?

President Gloria Macapagal-Arroyo seems to think so. Her infomercial about the Power Reform Bill affirms her support, with lines that say that the bill will help the economy, that it is a step to alleviate poverty in this oh-so-poverty stricken land. The proponents of the new power bill further say that the changes will assure the Filipinos of "reliable and competitively priced electricity". It promises better service and rates once the bill is passed into law.

THE MAKINGS OF THE PROMISE

The EPIRA enshrines two major changes: 1) The privatization of the National Power Corporation (NAPOCOR) and 2) the restructuring of the power sector.

In a fact sheet released by the government, power restructuring is defined as the change in the overall structure of the electric industry. The previous structure only involved three sectors: Generation, Transmission, and Distribution. However, under RA 9136, there will be a fourth sector, Supply. Furthermore, to adopt the new structure, new offices will have to be arranged. The National Transmission Corporation will be created to take over some NAPOCOR responsibilities and the Energy Regulatory Commission will replace the Energy Regulatory Board in monitoring electrical rates.

According to the government, restructuring is needed for the following reasons:

1. Rates are high for the end consumer; restructuring would pave the way for lower rates. 2. Competition in the Generation sector is not "real" 3. Long term investments have uncertain funding 4. Distribution sector is highly fragmented 5. Absence of consumer choice 6. Lack of incentives for industry stakeholders.

By restructuring, proponents claim to be able to solve these problems. But will it really be able to do so? The promise that lower rates will become available to the end-user is questionable. In the figure below, latest trends show a continuous rise in the effective power rates.

In addition, deregulation is not always full-proof. Reminiscent of the oil deregulation law, the price of electricity may increase over time as soon as the handlers or the private owners find it necessary to do so. According to Section 33 of the bill, distributors can raise their prices if it is needed for "recovery". Alongside restructuring is the privatization of the industry. Instead of a "monopoly" by the government, two out of four of the industry sectors will be given to private companies or business ventures which in effect would supposedly give the consumer more options to choose from. The two sectors that would be privatized are the extreme ends of the electricity production process, Generation and Supply.

By privatization, the government wishes to achieve real competition in the Generation sector and to be able to spare itself from the need to fund hugely capital-intensive funds.

Actually, privatization is not new in the power industry. Executive Order (E.O.) 215 issued July 10, 1987 allowed private investors in the generation of power by the Build-Operate-Transfer and the Build-Operate-Own schemes. This proved problematic as the "new entrants" in the generation sector have investment deficiencies raising NAPOCOR's costs. These institutions currently co-generating Philippine energy is known as Independent Power Producers or IPP. In the bill, together with the Generation sector, the Supply portion of the power production will also be opened to private businessmen to create more competition and to enhance efficiency in production.

The benefits of privatization is also questionable. The privatization of the Generation sector in the 80s proved to be faulty, having "no real competition". Now, the government is trying to remedy it by privatizing another sector. In rationalizing the privatization and restructuring of the power industry, the government claims that NAPOCOR has already accumulated a large amount in short-term loans and that it would be incapable to invest in the power industry. Moreover, the government is trying to focus itself on health, education, and agriculture programs. Thus, using government funds to augment for NAPOCOR's losses will affect the programs of the aforementioned departments.

Such investments are deemed necessary since there will arise a need for the country to be energy self-reliant in the coming years. In the Philippine Energy Plan (PEP) of 2000-2009, demand for primary energy is expected to increase at 6.3% per annum. In response, the Philippines should increase its Energy Self-Sufficiency level or its ability to produce its own energy. To be able to do this, an investment of about P1.3 Trillion is needed for the span of 10 years. In connection to this, the government expects 90% of the amount to come from the private sector. There are no other better options, concludes the proponents of the EPIRA, aside from privatization and restructuring. Some would think otherwise.

The Philippine government proposes the EPIRA "to make ends meet". However, isn't there any other way? There are reasons why the government is not getting enough money. And the solution is not as easy as 1-2-privatize.

Looking at the bidders for privatization, most of the contenders are multinational companies which means more of our assets will be based on foreign banks. In an import oriented economy such as ours where even horse hair is imported, steps such as these which are globalization-oriented will not be of benefit in the long run. Our place as a periphery country and our standing as a third world country will only be emphasized.

Restructuring and Privatization does have its benefits, like better facilities, better accessibility, among others. It only goes to show that the government is not where the money is. Nonetheless, the trend in the Philippines is slowly turning the country into a large-scale franchise system. Private companies, mostly foreign, are doing the government's job. You get privatized water, privatized transportation, privatized banks, privatized hospitals, privatized insurance, privatized state education, and now, privatized electricity. What's next? Privatized government? Soon enough we will not be served by public officials and representatives but by foreign private businessmen and a few showbiz personalities on the side.

If restructuring and privatization is to be done because it is necessary, the government should make sure that these industries fall into the hands of the people-of the Filipino people. Then only can there be an assurance that the ends of this industries will put the Filipino interest first. Moreso, improvement can also mean being resourceful and finding other sources of energy within the country. More time and effort should be put in for the creation of a feasible energy plan in the Philippines.

We shouldn't jump in the bandwagon just because everybody else has.