EPIRA needs a review and relevance

Gauging just how much – or little – has been achieved by a law is certainly prudent, and this is more true for the 2001 Electric Power Industry Reform Act (EPIRA) which is aimed at restructuring how the country would deliver electricity for future generations.

The law lists 11 objectives, and going through a comprehensive review of each would give our country’s leaders and lawmakers enough fodder to determine what tweaking is necessary so that goals are accomplished. On a macro level, this would also provide a categorical answer as to whether EPIRA is moving in the right direction.

Let’s go through some of the more relevant objectives and give a cursory assessment of where the law stands:

Total electrification

When it comes to the goal of total electrification, the law is obviously lacking. The Department of Energy recently put the number of Filipino households still not connected to any power grid at five million.

The National Electrification Administration similarly puts household electrification at 95 percent, although  the agency is optimistic it can bring the figure to 100 percent by 2022. Whether or not this is doable in the next three years, remains to be seen.

A review should highlight the workable programs that the more successful rural electric cooperatives have adopted, while tackling many outstanding issues of losses, mismanagement, pilferages, and others that continue to hog electric cooperative operations.

Supply security and affordability

The law cannot claim to have accomplished supply security and affordability. During latter part of the summer months, the country was witness to several yellow and red flags, warnings that the power system was without adequate reserves to cover for the drop in hydroelectric power sources.

Supply was compounded by poor reliability, a condition that power generators attributed to ageing power plants that were a legacy of the pre-EPIRA days. Power affordability, on the other hand, continues to be high compared to our neighboring countries.

A review should yield a definitive answer to why EPIRA has not significantly brought down electricity prices.

Transparent and reasonable pricing

Given the Supreme Court’s recent ruling voiding supply contracts approved by the Energy Regulatory Commission between power producers and distribution utilities (DUs) for not going through competitive bidding, a bureaucratic lapse seems to have occurred.

This casts doubt on the rate charges made by the concerned DUs, and which could induce a flood of consumer calls for rate rollbacks that would burden the ERC’s credibility as a regulator that pursues the best of public interest.

There are allegations also of monopolies in the power sector, of too few companies controlling the industry today. More importantly, issues are being raised about DUs inking supply contracts with affiliated power plants.

A detailed review of such supply contracts is needed, as well as a thorough assessment of the reasonability of their pricing.

Private sector participation

From a monopoly by the National Power Corp. (NPC) before the law was passed, we now see a widened base of private capital in all sectors of the power industry, from generation to transmission and distribution. But just how broadened this private sector participation is needs to be vetted to ensure that the spirit of free enterprise is kept alive.

The power industry requires huge investments that can only be recovered over longer periods. While private sector participation is encouraged, its operating terms must not impinge on customers’ welfare and the country’s long-term growth.

We have learned how “onerous” provisions are justified during periods of crises, like when the Philippine economy was held captive by brownouts and NPC’s massive debts before the turn of the century. This kind of vulnerability must never happen again.

Environment-compatible

EPIRA aims to assure socially and environmentally compatible energy sources and infrastructure, and yet, government policy continues to skirt the issue of “dirty” coal and indigenous people’s guardianship over watershed areas.

Assessing this objective of the law will be difficult given the irrefutable logic of getting cheaper electricity from coal-fired power plants until today. On the other hand, the need of a rapidly growing economy to exploit energy sources from water could become more important than indigenous people’s rights.

We need a clearer direction of how the country will tackle these conflicting interests.

Renewable energy

The law seeks to promote indigenous and renewable energy resources in power generation, thus reducing the country’s dependence on imported energy. Yet, over the years, use of coal and similar fossil fuels has grown faster than non-fossil sources.

The DOE has introduced several mechanisms that encourage private sector to invest in power generation using sun, wind, water and steam energy. But these may not be enough. This definitely is one area where new inputs to the law will be needed.

NPC privatization

The Power Sector Assets and Liabilities Management (PSALM) Corp. continues to struggle in paving the way of an orderly and transparent privatization of NPC’s assets and liabilities, one of the key objectives when EPIRA was passed.

Doubts persist on how PSALM will settle its inherited loans, as well as additional liabilities incurred with the continued operations of NPC until 2026, the prescribed end of PSALM’s corporate life. Definitely, this will need a diligent review given the financial mess it now is in.

Timely independent review

Now is not a bad time to initiate this thorough and comprehensive review of EPIRA. The independent review process may be parceled out to a number of research institutions with the required expertise before being sent through the legislative mill.

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