Blackout

Sunstar Davao
By Radzini Oledan

Slice of Life

Tuesday, March 26, 2013

THE Electric Power Industry Reform Act (Epira) of 2001 has argued in its comprehensive power plan that the privatization of the generation, transmission and distribution of power will provide the public with ‘quality, reliable, secure and affordable supply of electricity.’ Using the free market argument, it is suppose to compel firms to compete with each other resulting to reduction in electricity rates.

It showed otherwise. Reports from the Department of Energy show that the residential rate for electricity in the country has reached US$ .18 per kilowatt hour (kWh). This is more than double its equivalent in 2001 (US$.08 cents) and even higher than other countries in Southeast Asia. The electricity rate for residential customers in Japan is US$ .17/kWh and US$ .15 in Singapore. Commercial rates are also high at US$.13 while these are at around US$ .14/kWh in Singapore, and US$ .12 in Japan.

Under the implementation of Epira, rates have increased due to dubious contracts with Independent Power Producers (IPPs) which are passed on to consumers as payment of the franchise, energy and value added tax to the benefit of power utilities. Epira was an attempt to solve the problems of the power industry. The law aimed to restructure the industry and called for the privatization of the NPC which has incurred huge losses in its operations instead of earning revenues. It restructured the power industry by unbundling the stages of operations of NPC. It also called for the entry of foreign investors for the efficient management of all sectors.

The contracts with IPPs that the government entered into however had provisions requiring the National Power Corporation (NPC) to pay IPPs whether power generated was actually consumed or not. Of the 90 percent generating capacity that NPC pays IPPs for, only 10 to 40 percent is actually produced and used. This is on top of other risk-free provisions in the contracts as fuel costs and foreign exchange loss guarantees.

The arrangement was detrimental to the NPC which was forced to postpone needed increase in electricity tariffs, requiring more foreign borrowings. To help pay for NPC’s foreign debt and recover other losses caused by the contracts with the IPPs, higher electricity tariffs were charged and this was done by adding the Power Purchased Adjustment (PPA) to electric bills.

The Epira was unable to lower the electricity rates nor provide a stable and reliable supply of energy. Instead, it strengthened the monopoly in the power sector. Today, various parts of Mindanao suffer from 10 to eight hours of brownouts everyday and nothing is being done about it, except the resolve of national government officials who are batting for the construction and operation of coal power plant through the private sector as the way out of the crisis. As outlined by the President during last year’s Mindanao Energy Summit, residents from Mindanao should sacrifice and pay more.

More than a decade after the passage of Epira, the current energy crisis in Mindanao only goes to prove that privatizing the power sector is not an answer to power woes nor to the promise that it can make electricity affordable to the public. We also doubt that the track of putting in place coal power plants will do the same.   source

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