Bulatlat.com

Despite Reduced Purchased Power Adjustment (PPA)
Higher Power Rates Still Loom in the Horizon

To truly serve the interest of the people, any move to restructure power industry may have to entail the nationalization of the generation, transmission, distribution and supply sectors. The establishment of the NAPOCOR in 1936 clearly did not achieve this goal, since only the generation and transmission sectors were under government control.

By DANILO ARAÑA ARAO
Bulatlat.com

The government’s order to reduce the purchased power adjustment (PPA) by P1.25 per kilowatt-hour (kwh) ($0.02, based on exchange rate of P49.62 per U.S. dollar) does not necessarily mean lower electric bills in the immediate future.

President Gloria Macapagal-Arroyo claims that the reduction would result in savings of P170 ($3.43) per month for people consuming 200 kilowatt-hours monthly. However, it must be kept in mind that Republic Act No. 9136, also known as the Electric Power Industry Reform Act (EPIRA) of 2001, clearly stipulates the deregulation of prices to be charged by electricity suppliers. (Sec. 29)

Very much like the automatic pricing mechanism in the deregulated downstream oil industry, suppliers can therefore dictate power rates to their captive markets.

As if these are not enough, the EPIRA which took effect on June 26, 2001 introduces a universal charge that is imposed for the recovery of the following: (Sec. 34)

payment for the stranded debts and stranded contract costs of the National Power Corporation (NAPOCOR) and qualified distribution utilities resulting from the restructuring of the industry;
missionary electrification;
equalization of the taxes and royalties applied to indigenous or renewable sources of energy vis-à-vis imported energy fuels;
environmental charge equivalent to one-fourth of one centavo per kilowatt-hour (P0.0025/kwh, or $0.0000504/kwh) which shall accrue to an environmental fund to be used solely for watershed rehabilitation and management; and
charge to account for all forms of cross-subsidies for a period not exceeding three years.

The situation implies that whatever was reduced from the PPA may be included in the universal charge in the immediate future. This is especially true in the light of the government’s reported approval of the $100-million loan of the National Power Corporation (NAPOCOR) to offset the losses incurred due to the reduced PPA. As a result of the deregulated regime, the government is likely to pass this on to consumers through the universal charge.

To make things worse, the EPIRA also seeks the gradual removal of cross-subsidies. (Sec. 36 & 74) The government’s adherence to globalization may be gleaned from its decision to peg rates at full cost recovery instead of providing room for subsidies in depressed areas.

As early as May last year, even the Asian Development Bank (ADB) already admitted that certain areas like Mindanao “are expected to face higher electricity rates” as a result of EPIRA. In its report, “the increment will stem from the withdrawal of existing government subsidies given to Mindanao.”

It may be recalled that in February 2001, the effective rate for the Mindanao grid was only pegged at P2.4031 ($0.0484) per kwh as compared to Luzon’s P3.9067 ($0.0787), Cebu-Negros-Panay’s P3.9561 ($0.0797), Bohol’s P4.1035 ($0.0827) and Leyte-Samar’s P3.6402 ($0.0734). Obviously, Mindanao’s effective rate was lower due to the recognition of the poverty in selected areas of that island group.

While Sec. 73 of EPIRA provides for a socialized pricing mechanism called lifeline rate for marginalized end-users, the EPIRA fails to define what is meant by marginalized, as well as the intricacies of socialized pricing. This point is especially important in the light of the government’s distorted view of poverty.

As discussed in the previous issue of Bulatlat.com (i.e., Poverty Statistics as Instruments of Deception, Vol. 2, No. 13), government only considers poor a person who falls below the annual per capita poverty threshold of P13,823 as of the year 2000.

A person who has P37.87, therefore, can fulfill food and nonfood requirements in one day, as per government standards. Unless government claims otherwise, one cannot help but wonder if the official standard of “marginalized” is also along this line.

Sen. Manuel Villar’s proposal to let consumers use more electricity without incurring additional cost fails to answer the fundamental issue hounding the electric power industry.

That there was excess power may be rooted in the “sweetheart deals” of NAPOCOR with the independent power producers (IPPs). In the wake of the electric power crisis in 1993, the IPPs were assured of government’s purchase of all the electric power they generate even if these were more than what the country needed. Villar’s suggestion clearly skirts the need to not just investigate such transactions but also the impact of the EPIRA on the end-consumers since its implementation in June 2001.

In its search for answers plaguing the electric power industry, it may be high time for government to look for the options beyond deregulation. Bulatlat.com

The preceding is an expanded version of a statement read before members of the media at the weekly Kapihan sa Cypress, Treehouse Restaurant, Q.C. last 11 May 2002.

We want to know what you think of this article.