Does ‘Philippines Inc.’ really want cheap electricity?

Manila Times.net
January 14, 2014 7:50 pm

by Mike Wootton
VIEWS FROM A BRIT

Mike Wootton

Undoubtedly the Electric Power Industry Reform Act (Epira) should be scrapped. The Philippines is simply insufficiently developed for it. But that said, the problem to my mind is less the Epira law itself and is more about the way it is implemented, and the way in which business and the power sector as a whole operates here in the Philippines.

Electric power in most places is a complex and difficult to manage business, power generators are tough and unforgiving people as are fuel suppliers; they have plenty of money and resources, and operate on an international basis supported by extensive lobby groups. With the advent of privatization of national power sectors, regulations have been added to the mix, which are frequently quite complex. It is not a business for the faint-hearted, those with little self-control, or for amateurs.

The Philippines under the umbrella of Epira has made the local power sector a “national family business.” Nearly 80 percent of generation is now operated by local business with little or no experience in the industry, fuel is mostly coal imported [and possibly owned] by the same local business people, transmission is now owned by local business interests with Chinese technical support, and the villainous Manila Electric Co. (Meralco) distributes about 80 percent of all electricity used; the other 20 percent is distributed by rural electricity cooperatives. Perhaps this approach is meant to ensure that the even more villainous than Meralco foreign investors don’t get too involved and rip off the Filipino people through the use of trickery in making what the Chinese like to call “unequal contracts.” The results of such a pithy strategy are plain to see with the latest round of Meralco bills.

But what people who are fuming with Meralco will not generally know is how difficult it is for investors/developers to provide electricity which is cheaper than that currently being used. A case in point is in Palawan, where the electricity cooperative point blank have refused to consider using power which is half the cost they currently pay. The list of facile excuses and outright lies that have been put up over the five years that it has taken to actually forces them in accordance with the law to utilize the power is longer than anybody’s arm. Over the period, the Department of Energy (DOE) has advised the cooperative that the use of renewable energy in island grids is not a good idea [despite their having entered into scores of service contracts with developers to invest in such schemes], and the Energy Regulatory Commission (ERC) has passed without, I am sure, even reading and fully considering proposals for more expensive power to replace already installed cheaper power.

In the Palawan case, the driver for cheap power has been the investor/developer which has significant foreign interests, and which has gained support from local nongovernment organization and the chamber of commerce who do actually understand that cheaper power is the right thing to go for, and that it is perfectly useable in small island grids. So one may well ask that if the “people” and the chamber of commerce understand the economics of the power, why don’t the DOE, the ERC and the local electricity cooperative—after all, they are in positions of control, should be the experts and are mandated to look after the best interests of the nation? This, of course, is not too difficult a conundrum for those who know anything about how the Philippines actually works. It is a strange combination of misplaced nationalism, ignorance, amateurishness, a mass of conflicting regulations and regulatory capture, all mixed in with quite a lot of unethical business practice. It is so counterintuitive it makes your head spin.

So yes, Epira does need sorting out, tear it up and put something in place that confounds the sophisticated ability of Philippines Inc. to ignore what it wants to ignore and does what is in its own best interests, difficult though that may be. Better yet renationalize the power sector, let the National Power Corp. operate it and be responsible for it in a transparent way, and be properly regulated by people with real ethical principles and knowledge of the industry. Let them research and review the case for nuclear power, and let them use their vast knowledge and experience to plan and provide lowest cost power to the people of the Philippines.   source

Mike can be contacted at mawootton@gmail.com