Playing with power

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Our readers will recall that President Gloria Macapagal-Arroyo ordered the Department of Trade and Industry (DTI) during the Energy Summit to petition the Energy Regulatory Commission (ERC) to lower power rates.

Two months after the President’s directive, the DTI finally filed the petition with the ERC, even as she ordered the National Power Corporation (NAPOCOR) to lower its selling price to Meralco (the country’s largest electric power distribution utility), according to the Philippine Daily Inquirer’s May 3 front page banner story.

It certainly boggles the mind why the administration is hell bent on pushing for palliative measures when it could leave a lasting legacy for the long-term economic benefit of the citizens it professes to serve.

As we have said in our previous column, Dissecting the Energy Summit, the solution lies in curing the defects that allows power high rates in the first place, which is Republic Act No. 9136, also known as the Electric Power Industry Reform Act (EPIRA).

However, the House version that was authored by the dutiful First Son, and dutifully approved by the Energy Committee which he also heads, merely opens the market to access by other players in the power generation market.

On the other hand, the Senate version authored by Senator Juan Ponce Enrile offers a more practical, viable, and long-term solution to the ills bred by EPIRA. The Enrile bill will:

1. Require the Wholesale Electricity Spot Market (where electricity is traded by power generators) to prioritize dispatching power from the supplier that offers the lowest price at any given time.

2. Disallow the recovery by distribution utilities and NAPOCOR of their stranded costs. Currently, EPIRA allows distribution utilities and NAPOCOR to charge their stranded costs to the consumer.

3. Exempt self-generators (entities that consume power they themselves generate) from coverage of the universal charge.  Owners of generator sets are also to be exempted from the coverage of the universal charge.

4. Allow the President to lower the royalty rate that generators of indigenous energy resources remit to the national government.

5. Limit the amount of franchise tax that local government units can levy on distribution utilities operating within their jurisdictions.

6. Restore the system loss cap prescribed by Republic Act No. 7832. Effectively, distribution utilities should be prohibited from passing on their pilferage and systems losses to consumer, and should spur utilities to be more efficient and run after persons who steal electricity. Currently, the caps are set by the ERC.

7. Ban any entity or its affiliates, from owning more than 30 percent of a grid’s installed generating capacity and/or more than 25 percent of the country’s installed generating capacity. The ban will prevent any one person or entity from controlling the market and dictating the price of electricity.

8. Prevent distribution utilities from sourcing more than 50 percent of their energy requirements from their affiliated companies. Under this scenario, Meralco will be forced to shop for energy from the market, which should offer the least price.

9. Strengthen antitrust provisions of the law by specifically requiring the ERC to go after “monopolization, cartelization, abuse of market power, or anti-competitive and/or discriminatory act or behavior” on the part of any industry participant.

If the administration or, for that matter, the President is indeed serious in genuinely reforming the electric power industry to protect consumers against high power rates, then it should embrace the Enrile bill in toto and not go through the motions of petitioning the ERC.

The President can provide long-term solutions by pushing for the passage of the Enrile bill, and then telling the dutiful First Son to adopt it to remove the need for a bicameral conference committee.

Finally, the President’s order puts in jeopardy NAPOCOR’s continued viability. Remember when early in her first term, she ordered NAPOCOR to cap its increase by 40 centavos? In the long term, consumers wound up paying for the incremental increase anyway. Guess who will pay for it next time around?

Disclaimer: The views and opinions advanced in this article is the author’s own, and may not necessarily represent the views and opinions of THE LOBBYiST, its editors, or its publishers.

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