2014 rising: Power Failure

Manila Times.net
January 8, 2014 9:59 pm

by GIOVANNI TAPANG, PH.D.
PROMETHEUS BOUND

Giovanni Tapang, Ph.D.

In trying to distance itself from the recent Meralco power hike, the Aquino government admitted its uselessness as a defender of the interests of consumers. By saying that “there is no magic wand to wave,” Malacanang is also giving its tacit approval to the increase as well as the Epira mechanisms that brought us— and will still be bringing us— these very high electricity rates.

Deputy presidential spokesman Abigail Valte tries to pass the buck to Congress by pointing to its power to amend the Energy Power Industry Reform Act (Epira) but refrains from certifying measures calling for its repeal as urgent measures. This is not surprising as President Aquino has not lifted a finger since he assumed power to reverse the privatization of the energy industry. This is despite a decade-long failure of the policy to lower energy rates and secure energy supply in the country. From around P 5.76 per kilowatt-hour in 2001 prior to the Epira, electricity prices have risen to a little bit more than P11 per kilowatt-hour for our household’s 200 kWh usage. This is still without the power hike since it was stopped by a TRO granted by the Supreme Court to a the suit filed by the Makabayan bloc.

Junk VAT, ease consumer burden
Power rates have increased due to various recoveries (a.k.a. pass-on costs) derived from the generation companies as well as the transmission and distribution costs of the power utilities. On top of these is a value added tax imposed across all the chain— adding more to an already high power price paid by consumers. If one removes the value added tax on energy, the price of electricity would decrease by more than one tenth. Contrary to Valte’s handwaving, this is one immediate relief that the Aquino government can give consumers.

Yet Valte is correct in pointing out that one of the real reason for the failure in power is the Epira.

The Epira sought to restructure the electricity industry and privatize the assets of the National Power Corporation or the Napocor. Supposedly, the government’s objective in privatizing Napocor is to cut losses from loans and pass on the burden of power infrastructure investment to the private sector, while earning revenues from the sale.

But as we now experience, the Epira has not caused any real decrease in power rates nor any stability in supply. Instead, we see the onerous Purchased Power Adjustments from the independent power producer’s contracts being embedded in the now unbundled rates. Even with the establishment of the wholesale electricity spot market (WESM), bilateral sweetheart contracts between distribution utilities and power suppliers are still the norm.

ERC surrendered its function
What happened in the WESM recently is not new since speculation and the lack of generation capacity has already driven electricity rates to ridiculous levels in 2010. A similar situation has also happened in the Visayas WESM. Since the Energy Regulatory Commission has surrendered its regulatory function in allowing various alphabet-soup automatic recovery mechanisms named as GRAM, ICERA, AGRA and the like, we are forced to accept without benefit of a public hearing these increases due as pass-on charges. Utilities can automatically recover and pass on to consumers currency fluctuations, fuel cost fluctuations and contract obligations by simply submitting these to the ERC.

We should not forget that they also pass-on system loss charges including technical losses, pilferages, and company use or electricity used by distribution utilities such as the Meralco. Because the Epira is geared towards satisfying the profit margins of power industry players rather than consumers, it is not surprising to hear from Luis Miguel Aboitiz of the Philippine Independent Power Producers Association, Inc. (Pippa) describing a threat of a blackout if the increase in generation rates are not granted.

Electric power is a basic service that is needed by households in everyday activities and is equally important for industries to operate. The failure of the government to provide electric power was evident when the country faced massive blackouts during the first Aquino presidency in the late 1980s and early 1990s due to a shortage of power supply. The response of the government to this power crisis was not to build the necessary infrastructure to meet the demand but to contract out power generation to the private sector through independent power producers or IPPs.

Now a few decades after that power crisis, we are faced with a government powerless, and unwilling, to control electricity prices and a people saddled with disasters— both economic and natural. This power failure can be reversed if we reverse the basic policy of power privatization. Government can plan, regulate and ensure affordable and stable electricity if it would be nationalized under a regime that looks out for the people’s welfare rather than private profit and personal gains.   source