DOE seeks review of 2 key EPIRA provisions

by Myrna Velasco – August 24, 2016

from Manila Bulletin

Two key provisions of the Electric Power Industry Reform Act (EPIRA) will be set for review or amendments so the Department of Energy (DOE) could execute legally binding maneuvers to reduce electricity rates.

According to DOE Undersecretary-designate and Spokesperson Wimpy Fuentebella, the review process will look into feasible cost reduction strategies that could be done out of the system loss and the charges on stranded liabilities in the rate components.

Early this week, Malacañang announced that it is supporting the planned policy shifts being propounded relative to the power industry reform law to finally attain that elusive goal of wiping out the residual liabilities of the power sector.

Fuentebella noted “it’s just a continuing review, but we are looking at system loss and the universal charges (UC) on stranded debts and stranded contract costs to be covered by energy resource development fund.”

In gist, the plan is to retire the estimated P245 billion worth of outstanding debts and obligations of the power sector – primarily by paying them off out of the government’s revenue share from the Malampaya project and other upstream petroleum ventures.

Fuentebella added the process “will be more of a review rather than amendments in the law,” and in the end, DOE will have to take its cue from there as to what policies it will enforce to pare power rates for the consumers.

The proposal to re-channel “Malampaya or the energy resource fund” to expunge power sector debts will need to go through another legislative maze, but the DOE is hoping that a law will be passed to underpin its policy move. Once accomplished, this will eventually rid the UC components in the bills – primarily on the stranded debts and stranded contract costs.

Based on preliminary numbers crunched by the Power Sector Assets and Liabilities Management Corporation (PSALM), the combined impact of the remaining stranded liabilities will be at a pass-on rate of R0.28 per kilowatt hour (kwh) – levelized over the company’s remaining corporate life of nine (9) years.

Another proposal of the energy department is to scrap the 12-percent value- added tax (VAT) being levied on system loss charge, one discomforting component in the electric bill.

Energy Secretary Alfonso G. Cusi told a Senate committee on energy hearing last week that once the “identified subsidies in the rates” are removed, Philippine power rates will be down in the ranking compared to neighbor-countries in Asia.

He opined that while being ranked number two in the region on power rates remains debatable, the government will not ignore the fact that there is an urgent need to ease people’s burden over unduly expensive electricity rates.