(last of two parts)

The basic debate among those seeking reforms in the power industry is whether or not to continue implementing the neoliberal policies mandated by the Electric Power Industry Reform Act (EPIRA).

On one hand, you have free market believers who say all that is needed is to tweak EPIRA’s implementing rules and regulations to make privatization, liberalization and deregulation work. On the other hand are those critical of such policies like me who believe EPIRA should be radically amended or even repealed in favor of a new law that strengthens regulation over the power industry and gives back to government the authority and capacity to build and run power plants and related facilities.

Power industry too important to be left to the mythical free market

The importance of electric power to national development cannot be overemphasized. From ordinary households to large industries, electricity is a necessity; its cheap and adequate supply a requirement for the achievement of various social, economic and even political goals.

This is the reason why, in most countries of the world, power is highly regulated, owned by the state to a substantial degree, and subsidized by public funds. The logic is that for such strategic public utilities, not only should prices be kept low and stable but government itself, as protector and promoter of the public interest, should have a direct hand in its planning and operation.

EPIRA repudiates this tried and tested formula. Its success is premised on the existence of an efficient free market, uninhibited by government, where many buyers and sellers transact to arrive at an optimum price that is both affordable to the buyer and profitable to the seller. In such a market, government’s only role is ensuring a “level playing field.” Unfortunately, there is no such market in the Philippines, at least as far as electricity is concerned. What we have is a market controlled by an oligopoly and overseen by an inutile and corrupt government whose main concern is looking after the interest of their benefactors in the industry.

Given the nature of power utilities as natural monopolies with immense market power, abuse and anti-competitive behavior is expected. The recent incident involving Meralco’s unprecedented P4.15/KwH rate hike is a case in point. In fact, because of the opportunities for super profits in public utilities like power and water, these have become the favorite targets of big capitalists and transnational corporations. No wonder in the 80s and 90s era of imperialist globalization, the International Monetary Fund, World Bank and Asian Development Bank demanded the liberalization, deregulation and privatization of public utilities as loan conditions in order to facilitate the entry of foreign monopoly capital in search of gargantuan profits.

True enough, 12 years after EPIRA, the power industry is not only concentrated in the hands of a local oligopoly but worse, is effectively owned and controlled by foreigners. Take Meralco, which is now controlled by the Salim group of Indonesia (see Bobby Tiglao’s column in the Manila Times) and the National Grid Corporation of the Philippines (NGCP), 40% owned by the State Grid of China Corp. This has grave economic and security implications for the country, to say the least.

How can we possibly allow the power industry to be held hostage by such a market?

What is to be done

What is the alternative to EPIRA and its neoliberal prescriptions? Short of a socialist revolution, the following can be done to establish a responsive, sustainable, state-led power industry:

1. Categorize power generation and supply as public utilities

EPIRA redefined power generation and supply as ordinary private enterprises not subject to government regulation. This has opened the door to onerous pass-through charges and unconscionable rates of return. Just like transmission and distribution utilities, power generators and suppliers are imbued with public interest and should be strictly monitored and regulated. A mechanism for subsidies should also be put in place to ensure competitiveness with neighboring countries who do likewise.

2. Re-establish Napocor’s role as power generator

EPIRA relegated Napocor to the fringes as an operator of decrepit and unprofitable plants in far-flung missionary areas. This has severely restricted government’s role in ensuring an adequate supply of cheap electricity where it is needed most – in the urban areas and industrial belts. In fact, not one power plant has been built under EPIRA, as all projects were already underway prior to the law’s enactment in 2001. Unlike private companies that would rather wait for a supply shortage before coming in to maximize their profits, Napocor plants can be built and operated at break even to serve strategic national objectives.

3. Regain control of the national grid

The National Transmission Corporation (Transco) was the crown jewel of the state-owned power industry, earning revenues prior to privatization. As a natural monopoly and strategic infrastructure for the entire power industry, it should not have been sold in the first place.

4. Reinvigorate the electric cooperatives

Our electric cooperatives should be overhauled and member-consumers empowered in order to provide the best services possible. Control and management of these cooperatives should be removed from the politicians and vested interests in the power sector and given back to the members.

5. Strengthen ERC’s regulatory capacity

The ERC’s Performance Based Regulation (PBR) is too complex for the public to effectively participate in the rate setting process even as it allows industry players to unfairly charge consumers for future capital expenses. It should be replaced by a rate setting mechanism based on a reasonable return on equity.

6. Abolish the WESM

Power distributors should be required to contract 100% of their supply requirements via public bidding. The electricity spot market, if any, should be limited to reserve and ancilliary services and strictly monitored and regulated by the government.

7. Further develop indigenous, clean and renewable energy sources

Our reliance on imported, fossil fuel-based technologies sould be reduced to a minimum. Considering the wealth of renewable energy sources in the country, it will be cheaper and more sustainable in the long run to develop biomass, hydro, geothermal, solar, wind and other renewable energy technologies.

Admittedly, these are just broad strokes for an alternative, forward-looking energy policy. But I believe it is time we take up the challenge of crafting such an alternative. The current policy under EPIRA simply does not work for the Philippines. No amount of tweaking it will.#

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