Thursday, January 30, 2014

EPIRA to blame solely for the Philippine electric power sector's woes - ERM

Representative Edgardo Rama "ERM" Masongsong of the 1st Consumers Alliance for Rural Energy, Inc. (1-CARE)
Representative Edgardo Rama "ERM" Masongsong of the 1st Consumers Alliance for Rural Energy, Inc. (1-CARE)
Party-list Representative Edgardo Rama "ERM" Masongsong of the 1st Consumers Alliance for Rural Energy, Inc. (1-CARE) said that blaming Secretary Jericho Carlos Petilla of the Department of Energy (DOE) and Energy Regulatory Commission (ERC) Chairperson Zenaida Ducut or any officer or player in the power industry will just divert or mislead the people on the main issue of the failed EPIRA law.

Hon. Edgardo R. Masongsong"The DOE has been reactionary rather than proactive ever since in dealing with the problems in the power industry even before Sec. Petilla became its Secretary. The ERC under the Chairmanship of Atty. Ducut, on the other hand, merely acts as an implementor of EPIRA but it cannot go beyond that and therefore EPIRA is the only culprit," according to the Representative.

"This is now the best time for us to amend, if not repeal, the failed EPIRA", ERM added. "It is, however, unfortunate that we have to experience the greatest blunder when Meralco announced its record high power price hike in December last year before we could seriously rethink if we have made the right decision of restructuring the power industry. I know that we will not be productive with blame game and the best we could do right now is to assess our best way forward. But we need to look at current issues besetting the failed EPIRA realistically and there are issues that need to be highlighted," Representative Masongsong said.

ERM believes that the relevance and propriety of the Wholesale Electricity Spot Market (WESM), which is proven to be inefficient since its inception in 2006, is one of the most pressing concerns that need to be addressed. Instead of bringing electricity rates down, as endeavored by EPIRA, it has resulted to unabated price increases to the burden not only of Meralco consumers but all of electric consumers in the country and discouraging potential local investments.

It can be recalled that three months after its operations in 2006 the WESM was already engulfed with a controversy on the allegation of the Philippine Electricity Market Corporation (PEMC) against the National Power Corporation (NPC) and Power Sector Assets and Liabilities Management Corporation (PSALM) for anti-competitive behavior and/or market power abuse (ERC Case No. 2007-421 MC). Based on PEMC's investigation they "found that PSALM, through its trading teams had market power and was exercising it to the extent that it was an abuse of its power". The ERC dismissed the case due to lack of prima facie evidence but it recognized that NPC and PSALM's shares in the market at that time did not reflect true competition, hence their actions impacted prices of electricity in the market. ERC likewise advised NPC and PSALM to be more circumspect and transparent in their dealing with the WESM.

The issue of collusion among power producers in the WESM also resurfaced just before Christmas of last year upon announcement of Meralco of another electricity price increase in the amount of P4.15/kWh, the highest increase so far. The largest power distributor in the country Meralco was quick in declaring that they do not benefit from the increase and that the rate hike was brought about by the scheduled preventive maintenance of the Malampaya natural gas line, creating a deficit of about 2,700 MW out of its customers' 6,000 MW average demand. The timing of the Malampaya shutdown from November 11 to December 11 last year coincided with the inexplicable outages of major power plants in Luzon, prompting Meralco to get more electricity from the WESM at much higher rates.

"The inefficiency and incompetence in the WESM is one of the serious failures of EPIRA that brought in more burden than solutions to the deficient power industry in the country. While we recognize that the objective of the entire restructuring process is competition, we bear witness that this has not been the case because of lack of sufficient number of buyers and sellers in the electricity market. It has become apparent that EPIRA has just paved the way for the oligopolistic business-oriented character of the power industry, from state monopoly. The power industry is dominated by a handful of industry players within market operations that's neither transparent nor competitive," he lamented. On this note, ERM is urging transparency in the WESM and for PEMC to divulge spot market participants in November and December 2013 and the net profit they generated during that period.

Critics have been evoking that EPIRA has not been an effective solution to the problems besetting the power industry. Most important evidences of its failure are the unabated power rates increase, inefficient regulation, and the horrible state of power play in the electricity market. More so, it simply transferred the monopoly privileges from the State to a few private business interests.

"The issues in the WESM, including the failure of the IMEM or the Interim Mindanao Electricity Market which was recently and hastily implemented despite strong oppositions from various groups (i.e. electric consumers, electric cooperatives, LGUs, business community, and other groups in Mindanao), and all the other issues in the power sector can only be blamed to the failure of the EPIRA. So it is therefore incumbent upon Congress to urgently look into the EPIRA as a whole, propose revisions and amendments to address the inherent problems of the power industry. We have to be realistic in our assessments and pragmatic in our decisions because in the end it is the electric consumers who suffer," he concluded.
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