By Satur C. Ocampo
At Ground Level | The Philippine Star
June 8, 2011 marked 10 years of implementation of the controversial Electric Power Industry Reform Act (EPIRA), which then President Arroyo railroaded into approval by the 11th Congress and promptly signed. This law has systematically hastened the transfer of control over power generation and distribution from the state to private hands.
The promises given were that the EPIRA would cut electric power rates by fostering competition, reduce the debts of the National Power Corporation (NPC), and make the power industry administration more efficient.
Today the promises remain unfulfilled. Look at how things stand:
• Over 10 years, power rates have more than doubled. Meralco rates for residential users have risen by 112.5 percent, from P4.87 per kilowatt hour in 2000 to P10.35 in 2010. Those of the NPC went up by 86 percent in the same period, from P2.39 to P4.45 per kwh.
• In 2001, the NPC had debts at $16.39 billion (P834.29B). In 2010, it still owed $15.8B (P713.64B) – despite having paid off $18B over 10 years. This financial obligation is partly being passed on to the citizens as taxpayers, even as they shoulder the higher power rates.
• With NPC privatized, three big Filipino firms now control 52 percent of the power generating industry: San Miguel Corp., 20 percent; the Lopez group, 17 percent; and the Aboitiz group, 15 percent. The 30 percent still held by the state through NPC and the Power Sector Assets and Liabilities Management Corp (PSALM) is set to be sold to the private sector. Various smaller power enterprises account for the 18 percent.
Energy security (power sufficiency) is far from being attained even as higher rates loom in the coming years. Specifically, the power situation in Mindanao remains precarious.?
• We get this distressing picture of the power industry today, with detailed explanations, from a report titled “Power failure: 10 years of EPIRA.” Dated June 2011 and dubbed “a people’s review” on the impact of the EPIRA, it’s a collective research project by four organizations: People Opposed to Warrantless Electric Rates (POWER), Bagong Alyansang Makabayan, IBON Foundation Inc., and AGHAM (Advocates of Science and Technology for the People).
We have no space here to discuss all the aspects of this interesting report. Let’s begin with what impelled EPIRA’s enactment (RA 9136).
As a precondition for granting additional loans, our major creditors led by the World Bank, Asian Development Bank, and the Japan Bank for International Cooperation aggressively pressed for the privatization of NPC’s assets and contracts via legislation. Buckling under such pressures, and ignoring strong popular opposition to the EPIRA bill, President Arroyo rammed through its passage in the final session of the 11th Congress.
The law has set up new government agencies, structures and processes to make the sale of NPC assets and contracts most favorable to the buyers and make their operations most profitable at the expense of consumers.
The agencies are the PSALM, the National Transmission Co., and the Energy Regulatory Commission. The structures and processes are the wholesale electricity spot market (WESM), the generation rate adjustment mechanism (GRAM), unbundling of power rates, and various codes and rules implementing the EPIRA.
According to the report, the WESM, purportedly a leveling mechanism to bring down power prices, instead helped spur speculations that caused power rates to soar in 2010. Meantime, the ERC has initiated a new process, called performance-based regulation, under which it sets rates “based on promises of operation performance, costs and capital outlays planned by the (distribution) company.”
Consequently, we the consumers pay for the cost of plans yet to be accomplished.
Successive spikes in the Meralco rates have come mostly from drastic increases in generation charges, passed-on costs of transmission and distribution utilities plus the value-added tax on all components of the bill.
The biggest passed-on cost is the Purchase Power Adjustment (PPA). This was instituted in the early 1990s when then President Ramos enticed private investors to build power-generating facilities through a build-operate-transfer (BOT) scheme. These became the Independent Power Producers (IPP); the NPC guaranteed the IPPs full payment for the power they produced, whether consumed or not.
To recover NPC’s losses on overpayments to the IPPs, the cost is tacked on the power rate as the PPA. By June 2002, the PPA accounted for more than half the electric bill that we pay. It has been spread in the billing as part of charges for generation, transmission, systems loss, franchise taxes, and the GRAM.
But there’s more bad news ahead.
• By June 26, some 6.9 million families who consume 100 kilowatts or less will lose their lifeline-rate subsidy. Starting July they’ll pay more. The EPIRA mandates that, to show the “true cost” of electricity, subsidies will be gradually removed over time.
• On or before June 30, PSALM is expected to file “another set of petitions to recover (NPC’s) stranded debts and stranded contract costs.” This reportedly calls for 12-15 centavos per kwh-hike in the universal charge set by the ERC.
As a congressman in 2001 President Aquino voted against the EPIRA. We, hapless consumers, ask him to urgently review the law and see for himself that it needs to be repealed. Reposted by