Shakeup in energy sector: Stakeholders highlight need to keep Epira, with some provisions revised

By Lenie Lectura – June 18, 2017 

from Business Mirror

Sixteen years since the Electric Power Industry Reform Act (Epira) of 2001 was enacted into law, industry stakeholders observed more private-sector involvement in the energy industry, ushering in new power projects that boosted the country’s power supply, ultimately benefiting consumers.

“Epira came in June 2001. Maybe, from the start, it was going slow. But from my personal observation, there’s a lot of power projects that came on stream for the last three or four years, [and] a lot of capacity still coming on stream. Not bad at all, because it takes years to put to bed a power project,” Emmanuel de Dios, GE Philippines CEO and formerly Department of Energy (DOE) undersecretary, said in an interview.

Based on the 2016 Philippine Electricity demand-supply data from the DOE, there are 5,068 megawatts (MW) of committed power projects, some of which are currently under way, and some 18,225 MW of indicative power projects that could take off in the future.

AboitizPower President Antonio Moraza noted how Epira has helped improved the country’s power supply. “I think Epira has been very effective. The government is no longer guaranteeing take-or-pay contracts. It also has freed balance sheet so it can use resources for other areas of development. Prices have come down. We now have ample supply. Plants that were privatized have now been rehabilitated and now more efficient and reliable,” he said in a text message.

The DOE said it continuously encourages investments in power generation in view of the increasing peak demand, which is expected to triple by 2040.  In 2016 peak demand in Luzon hit 9,726 MW; the Visayas, 1,893 MW; and Mindanao, 1,653 MW.

Based on projections, the country’s demand for energy will triple between 2016 and 2040. Petroleum products are expected to continue to dominate the country’s final energy demand by 2040. From 13.9 million tons of oil equivalent (MTOE) in 2015, it is estimated to reach 40.5 MTOE by 2040, representing a threefold increase.

Electricity demand is, likewise, anticipated to grow four times from its 2015 level, while demand for other fuels, such as biomass, coal and natural gas, will only be minimal.

On a sectoral basis, the transport sector will have the highest demand in 2040, at 30.08 MTOE. As a likely result of the government’s push toward industrialization and urbanization, the energy demand for the industrial and residential sectors is projected to double, or even triple, by 2040. “When we talk about infrastructure, people fail to realize that energy is the blood of economic activity,” de Dios added.

The Manila Electric Co. (Meralco), for its part, is hoping that the strong investor appetite would continue in the many years to come.

Joe Zaldarriaga, the utility firm’s spokesman, said the Epira has encouraged competition, especially in the power-generation business. The law, he said, also increased efficiencies in distribution, as evidenced by all-time low system-loss levels. “If we look at it, further current retail rates approximate that of around eight years back, which, perhaps, shows that the market is working as it is,” he said in an e-mail reply.

Aside from all-time low losses, Meralco also noted the frequency and duration of outages are also at record lows, and there is more innovation in the power sector. “All the while, strong load growth is also being supported by private-sector investments. We do hope that the environment will continue to improve by encouraging more investments and further increase the efficiency in the power industry for the benefit of consumers.”

Review

Energy Secretary Alfonso G. Cusi said last week there is a need to review existing laws, such as the Epira and those concerning the downstream oil industry and renewable-energy sector.

He stressed that Epira need not be amended, but only undergo a review for a more effective implementation of the law that once promised healthy competition, with hopes that Philippine electricity rates would be one of the lowest in the region someday.

“The Epira, the downstream oil industry and renewable-energy industries are also in need of timely restructuring courtesy of legislative action,” he said.

A review will involve maintaining efficient working relationships with key stakeholders, Cusi stressed. As such, his office must also closely liaise and work with Congress in pursuit of a relevant legislative agenda aimed at improving the energy sector.

“It must be emphasized that a lot of the DOE’s strategies are hinged on the action of Congress, such as the introduction of new legislation or amendments to existing legislation, and also the approval of the agencies’ respective budgets,” he said.

Energy efficiency and conservation, natural gas, liquefied petroleum gas and declaring energy projects as “projects of national significance”, are particular areas of concern that are in need of urgent legislation right now, Cusi said.

Delays

The proposed review is also meant to correct the delays in the implementation of some of the segments under Epira.

“Some are delayed, but these are now being scheduled. We have identified the causes of delay and we are now working on how to speed up the implementation,” Energy Undersecretary Felix William B. Fuentebella said.

“Indeed, supply has improved. Price has gone down. There are more players so the price of electricity i