Players in power industry reject continuing calls to amend Epira

by Lenie Lectura – January 18, 2016

from Business Mirror

The private sector believes the 14-year-old Electric Power Industry Reform Act of 2001 (Epira) is working just fine, contrary to the views shared by a lawmaker, an expert and an economist.

Aboitiz Power Corp. CEO Erramon I. Aboitiz is a firm believer that Epira has, so far, been successful.

“Without Epira, plants like this would not have been constructed. That’s why, I really believe that Epira is working,” he said in an interview. He was referring to the newly inaugurated 300-megawatt (MW) coal-power plant of Therma South Inc. (TSI), a subsidiary of Aboitiz Power, in Davao. The plant is an important long-term solution to the Mindanao power-supply problem. Its dependable capacity is roughly equivalent to one-fifth of the Mindanao grid’s highest peak demand in 2015.

In a speech he delivered last week, Aboitiz pointed out that Epira has allowed private investments to come in and help Mindanao secure its power needs.

‘No longer monopolized’

“Epira has positively transformed our power industry from a monopolized, politicized and heavily subsidized structure into one that is competitive and bears the true cost of power. The competitive structure was envisioned to attract investment; drive down power costs; and empower the end user—things we are actually seeing happen in our country today,” he said.

AC Energy Holdings Inc. (AC Energy), the development arm of the Ayala group in the power
sector, said the law is effective. As such, there is no need to amend it.

“Yes, I believe it’s working. But again, it will take time for the market to realize the Epira objectives. But we are getting there,” AC Energy President John Eric Francia said in a separate interview.

He added: “I don’t think there’s reason to amend the law, because, so far, it’s working.”

Energy Regulatory Commission (ERC) chief Jose Vicente Salazar enumerated the following points should there be a need to amend the law.

“The fiscal autonomy of the ERC is one thing. Another is an expanded organizational structure of the ERC by providing for additional technical and legal positions. Likewise, a Consumer Advocacy Office should be created. And, last, the provision on cross-ownership and market share restriction under Section 45 of the Epira should be revisited,” he said in a text message.

“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 successfully carry out its mandate.

The cross-ownership provision in Epira allows power generators and distributors to be owned by the same interests.

Epira amendments premature

For Manila Electric Co. (Meralco), which services over 5 million customers in Metro Manila, Batangas, Bulacan, Cavite, Rizal, Laguna and Quezon, any move to amend the landmark law that promised reforms in the power sector is premature.

“First of all, I think a lot of thought and time was spent by industry experts to write up the Epira. Having said that, I think any amendment is premature. What should be done is to properly implement the Epira. We should be cognizant of present market conditions, and align [them] with that,” Meralco Senior Vice President Alfredo Panlilio said in an interview.

But the price of electricity has been and continues to be a recurring consumer complaint, according to Rep. Reynaldo Umali, who is also the chairman of the House Committee on Energy and cochairman of the Joint Congressional Power Commission.

“Consumers were made to believe that with the Epira, a decrease in the price of electricity will occur. The opposite happened,” he said.

The Philippines, according to an expert in energy planning and electricity-markets regulation, still has one of the most expensive power rates in the region.

Epira ‘bashers’

“The country’s electricity price is almost twice of the average price of the region,” said Rowaldo del Mundo, associate professor at the Electric and Electronics Engineering Institute of the University of the Philippines.

Meanwhile, the National Economic and Development Authority Director General Arsenio M. Balisacan said the country has yet to achieve an “affordable and quality power that can go on 24 hours in a week.”

“The cost of energy must fall,” Balisacan pointed out.

Umali believes that competition among industry players did not happen as promised in the Epira. “The Epira had a time line that would have caused real competition among the industry players, which would have brought down the price of electricity. Delays in implementation of the Epira mandates were blamed as the culprit,” he said.

Umali noted that two declared policies in the law were not met.

These include the policy “to ensure the quality, reliability, security and affordability of the supply of electric power,” and the policy “to ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operational and economic efficiency, and enhance the competitiveness of Philippine products in the global market.”

“Undeniably, power supply is unreliable because of recurring brownouts, particularly in Mindanao, where two to seven hours of brownouts occur on a daily basis, while reserve capacities in the Luzon and Visayas grids are precariously low, especially at times when large power plants go on preventive maintenance or forced outages,” Umali said.

But Aboitiz said the private sector is already doing something to address Mindanao’s power woes.

Following the groundbreaking and construction of TSI’s plant, other private power producers have started to invest in Mindanao. “We hope their entry in the coming years will eventually lead to a steady and reliable supply of power in this region. For us, this is a strong attestation that Epira is, indeed, working,” he said.

President Aquino, who was present during the inauguration of the Davao baseload plant, said the private sector has committed at least another 11 power projects in Mindanao that will come on line between 2016 and 2020. These envisioned to produce at least another 675.30 MW of capacity, which will be more than enough to cover the projected increase in demand for those years.

“Rest assured, we will fulfill our promise to leave Mindanao in a better situation,” said Aquino, whose six-year term ends this year.