“Government measures such as the subsidy and failed takeover of Meralco management will not result to lower power rates,” said Dr. Giovanni Tapang of AGHAM.
BY RONALYN V. OLEA
BULATLAT
Vol. VIII, No. 18, June 8-14, 2008
The Arroyo government is locked in a corporate battle to wrest control of Meralco from the Lopez family purportedly to lower power rates.
Also, Mrs. Gloria Macapagal-Arroyo announced last week, the allocation of a P2-billion ($45,325,779 at an exchange rate of $1=P44.125) subsidy for small power users. An estimated four million lifeline users or those with a 100kwh or lower monthly electricity consumption will receive P500 ($11.33) for their electric bills.
In an interview with Bulatlat, Dr. Giovanni Tapang, chairperson of scientist group Agham and convenor of the People Opposed to Warrantless Electrity Rates (Power) said, “Government measures such as the subsidy and failed takeover of Meralco management will not result to lower power rates. Apparently, such populist posturing is meant to fend off reactions to increasing prices of basic commodities. Mrs. Arroyo seems to be preparing for her next state of the nation address (SONA) in July.”
Tapang described the subsidy announced by the Arroyo government as a “one-shot deal” that can never be sustained.
In a separate statement, Engineer Ramon Ramirez, spokesperson of POWER, said, “There’s some deception here since the electricity subsidy will be coming from the value-added tax (VAT) which is also paid for by consumers. It’s the consumer subsidizing the consumer. Government is desperately trying to justify the existence of the VAT by making it appear that it is helpful for the poor.” The group has called for the removal of VAT on power.
Tapang said that aside from the removal of VAT, their group is calling for the repeal of the Electric Power Industry Reform Act (EPIRA), which, according to him, has put the Filipino consumers at the losing end.
EPIRA
Signed into law by Mrs. Arroyo in June 2001, the EPIRA seeks to restructure the electricity industry and privatize the National Power Corporation (Napocor).
One of the purported objectives of the EPIRA is to ensure the reliability and affordability of supply of electric power. After almost seven years, however, what happened is the opposite; the cost of electricity has increased due to numerous charges considered legal under the law.
Sec. 36 of the EPIRA mandates the unbundling of rates. This is consistent with the privatization thrust of the EPIRA wherein the power sector is segregated into generation, transmission and distribution sectors.
Hence, the controversial Purchased Power Adjustment (PPA) has been deleted from the consumer’s monthly electricity bill. However, Tapang said that the unbundling of rates has not removed the PPA; it has merely hidden it.
The PPA stemmed from the onerous contracts between Napocor and independent power producers (IPPs). Even without producing a single watt of electricity, the ‘take or pay provisions’ stated in the contracts guarantee payment for installed capacity of generation plants.
In its paper titled ‘Ever increasing rates from the EPIRA: A closer look at the electric power industry in the Philippines,’ Agham said that the PPA remains to be a large part of electric power rates of end-users albeit under different names. It is distributed in the various line items in the new electric bill such as the generation charge, the transmission charge, system loss charges, subsidies and franchise taxes.
System loss charges include technical losses, pilferages, and company use or electricity used by distribution utilities such as the Meralco.
Moreover, Sec. 32 of the EPIRA paves the way for the national government to directly assume a portion of Napocor’s debt amounting to P200 billion ($4,532,577,903). The so-called stranded cost recovery is reflected as a separate item in the consumer’s billing statement.
Other stranded debts of Napocor in excess of the P200 billion ($4,532,577,903) as well as qualified debts of distribution utilities form part of the universal charge stated under Sec. 34 of the EPIRA.
Other components of the universal charge include missionary electrification, environmental charge, among others.
The missionary charge is a compulsory contribution to a fund to be used for electrifying remote barangays (villages). Agham asked, “But why are we charged for a job the government should be doing? This is also true of environmental charges. Why are we charged for the havoc that the generation plants of Napocor or these IPPs do to the environment?”
Sec. 25 of the EPIRA states as a policy the full recovery of “prudent and reasonable” economic costs of a distribution utility.
The same Agham paper said that this particular provision gives authority to distribution utilities to recover and pass on to consumers currency fluctuations, fuel cost fluctuations and contract obligations. The Generation Rate Adjustment Mechanism (GRAM) and the Incremental Currency Exchange Rate Adjustment (ICERA) are concrete examples of these charges.
Tapang blamed the EPIRA and the privatization of the power industry for soaring prices of electricity rates. He said, “We have lost control over the power industry because it is already controlled by local big business and foreign investors whose main interest is to accumulate huge profits.”
Foreign interests
According to the Agham paper, most IPPs are owned by transnational corporations (TNCs) in partnership with local business tycoons. At least 22 out of 41 IPPs are largely foreign-owned.
Last week, Inquirer reported that the Joint Foreign Chambers (JFC) of the Philippines wrote a letter to Mrs. Arroyo asking the latter not to alter EPIRA and not to ‘tinker with IPP contracts.’ Asked for a reaction, Tapang said that the JFC’s statement only shows that foreign investors and financial institutions benefit from the EPIRA at the expense of the Filipino people.
Sec. 68 of the EPIRA mandates the creation of an inter-agency committee tasked to review IPP contracts. According to Agham, the said committee found that only six out of 35 contracts were without any legal or financial issues. The rest were supposed to be renegotiated by the government.
The privatization of Napocor, along other power sector reforms, is a long-standing recommendation of the International Monetary Fund (IMF). This is part of the structural reform program (SAP) the country has to implement as a pre-condition to the granting of more loans.
Tapang challenged the Arroyo government to stand up against the interests of foreign investors by deleting the ‘take or pay’ provisions in the IPP contracts and to stop the privatization of Napocor. However, Tapang quickly added, “Based on Mrs. Arroyo’s track record, she can not risk foreign investments even as the Filipino people grow angry.”
As a long-term solution, scientist Tapang said, “Power is a strategic utility that should be run by government. We should nationalize the power industry and improve our capacity to produce electricity from indigenous sources of energy.”
He deplored the current thrust of the Arroyo government to sell out the country’s energy resources to foreign investors. “Our natural gas and other indigenous sources should be utilized to serve the Filipino people, not foreign interests.” Bulatlat