By
Lenie Lectura - June 18, 2017
Sixteen years since the Electric
Power Industry Reform Act (Epira) of 2001 was enacted into law, industry
stakeholders observed more private-sector involvement in the energy industry,
ushering in new power projects that boosted the country’s power supply,
ultimately benefiting consumers.
“Epira came in June 2001. Maybe,
from the start, it was going slow. But from my personal observation, there’s a
lot of power projects that came on stream for the last three or four
years, [and] a lot of capacity still coming on stream. Not bad at all, because
it takes years to put to bed a power project,” Emmanuel de Dios, GE Philippines
CEO and formerly Department of Energy (DOE) undersecretary, said in an
interview.
Based on the 2016 Philippine
Electricity demand-supply data from the DOE, there are 5,068 megawatts (MW) of
committed power projects, some of which are currently under way, and some
18,225 MW of indicative power projects that could take off in the future.
AboitizPower President Antonio
Moraza noted how Epira has helped improved the country’s power supply. “I think
Epira has been very effective. The government is no longer guaranteeing
take-or-pay contracts. It also has freed balance sheet so it can use
resources for other areas of development. Prices have come down. We
now have ample supply. Plants that were privatized have now been rehabilitated
and now more efficient and reliable,” he said in a text message.
The DOE said it continuously
encourages investments in power generation in view of the increasing peak
demand, which is expected to triple by 2040. In 2016 peak demand in
Luzon hit 9,726 MW; the Visayas, 1,893 MW; and Mindanao, 1,653 MW.
Based on projections, the country’s
demand for energy will triple between 2016 and 2040. Petroleum products are
expected to continue to dominate the country’s final energy demand by 2040.
From 13.9 million tons of oil equivalent (MTOE) in 2015, it is estimated to
reach 40.5 MTOE by 2040, representing a threefold increase.
Electricity demand is, likewise, anticipated
to grow four times from its 2015 level, while demand for other fuels, such as
biomass, coal and natural gas, will only be minimal.
On a sectoral basis, the transport
sector will have the highest demand in 2040, at 30.08 MTOE. As a likely result
of the government’s push toward industrialization and urbanization, the energy
demand for the industrial and residential sectors is projected to double, or
even triple, by 2040. “When we talk about infrastructure, people fail to
realize that energy is the blood of economic activity,” de Dios added.
The Manila Electric Co. (Meralco),
for its part, is hoping that the strong investor appetite would continue in the
many years to come.
Joe Zaldarriaga, the utility firm’s
spokesman, said the Epira has encouraged competition, especially in the
power-generation business. The law, he said, also increased efficiencies in
distribution, as evidenced by all-time low system-loss levels. “If we look at
it, further current retail rates approximate that of around eight years back,
which, perhaps, shows that the market is working as it is,” he said in an
e-mail reply.
Aside from all-time low losses,
Meralco also noted the frequency and duration of outages are also at record
lows, and there is more innovation in the power sector. “All the while, strong
load growth is also being supported by private-sector investments. We do hope
that the environment will continue to improve by encouraging more investments
and further increase the efficiency in the power industry for the benefit of
consumers.”
Review
Energy Secretary Alfonso G.
Cusi said last week there is a need to review existing laws, such as
the Epira and those concerning the downstream oil industry and renewable-energy
sector.
He stressed that Epira need not be
amended, but only undergo a review for a more effective implementation of the
law that once promised healthy competition, with hopes that Philippine
electricity rates would be one of the lowest in the region someday.
“The Epira, the downstream oil
industry and renewable-energy industries are also in need of timely
restructuring courtesy of legislative action,” he said.
A review will involve maintaining
efficient working relationships with key stakeholders, Cusi stressed. As such,
his office must also closely liaise and work with Congress in pursuit of a
relevant legislative agenda aimed at improving the energy sector.
“It must be emphasized that a lot of
the DOE’s strategies are hinged on the action of Congress, such as the
introduction of new legislation or amendments to existing legislation, and also
the approval of the agencies’ respective budgets,” he said.
Energy efficiency and conservation,
natural gas, liquefied petroleum gas and declaring energy projects as “projects
of national significance”, are particular areas of concern that are in need of
urgent legislation right now, Cusi said.
Delays
The proposed review is also meant to
correct the delays in the implementation of some of the segments under Epira.
“Some are delayed, but these are now
being scheduled. We have identified the causes of delay and we are now working
on how to speed up the implementation,” Energy Undersecretary Felix William B.
Fuentebella said.
“Indeed, supply has improved.
Price has gone down. There are more players so the price of electricity is
becoming more competitive. In general, the goal is being achieved, but there
are some delays,” Cusi noted.
One of the delays they were
referring to is the implementation of the Retail Competition and Open Access
(RCOA), a landmark policy meant to give consumers the choice to choose their
own supplier of electricity to encourage competition in the generation and
supply sector.
“Epira is incomplete without RCOA,”
Fuentebella said. He could not stress enough how vital this policy is in order
for consumers to fully appreciate the benefits of Epira.
It can be recalled that the Supreme
Court (SC) issued on February 21 a temporary restraining order (TRO)
against a DOE circular and Energy Regulatory Commission (ERC) resolutions days
before when some of the RCOA rules were supposed to take effect.
In particular, power users consuming
an average of at 1 MW per month are required to source power from a licensed
retail-electricity supplier (RES). At present the majority of power consumers
are being supplied by Meralco, the country’s largest distribution-utility (DU)
firm.
The petition for a TRO was sought by
the Philippine Chamber of Commerce and Industry, San Beda College Alabang Inc.,
Ateneo de Manila University and Riverbanks Development Corp. They pointed out
that the Epira does not call for a mandatory switch for customers to purchase
their electricity from a DU to a RES.
Senate Committee on Energy Chairman
Sherwin T. Gatchalian will seek the legal opinion of the Joint Congressional
Power Commission (JCPC) so this can be used to establish the
legality of RCOA during hearings at the SC.
Gatchalian said a legal opinion
would “give a lot of weight to the arguments raised on RCOA”.
“From the consumer standpoint, it’s
a very negative position. The power sector was privatized thinking in the end
that consumers would have the power of choice. But this didn’t happen because
it was stalled. And because of this, only the power generators benefited from
it,” Gatchalian said.
He said the Senate would initiate
the move by recommending the issuance of a legal opinion. “The Senate will
trigger it. Now, we will give a memo to JCPC to study and if it finds merit
then that will be an official resolution from JCPC,” the senator said.
Hopefully, this will be in place
within the month, Gatchalian added.
AC Energy, the power arm of
conglomerate Ayala Corp., said Epira has demonstrated how open competition
helps lower power prices.
However, “Epira should be fully
implemented soon, especially the WESM [Wholesale Electricity Spot Market] in
Mindanao and RCOA at the household level,” AC Energy President John Eric
Francia said.
The spot market in Mindanao would be
launched this month, but the start of commercial operation has yet to be declared.
Fuentebella also noted a delay in
the transfer of WESM to an independent market operator (IMO).
Under Epira, the Philippine
Electricity Market Corp. (PEMC), operator of WESM, must be transformed into an
IMO one year after WESM was launched in June 2006. So far, PEMC has existed for
11 years now.
The transfer of the WESM to the IMO
is also meant to dispel concerns of continuing government intervention at the
WESM.
Currently, the PEMC Board is a
15-man body made up of representatives from each sector of the electric power
industry, as well as independent members. The PEMC Board is chaired
by the energy secretary until the transition to the IMO.
Based on a draft DOE circular, the
composition of the seven-member IMO board includes an economist, academic,
finance person, lawyer, engineer, governance member and the president of the
IMO.
Semirara Mining and Power Corp. CEO
Isidro Consunji shared the same view, saying some of the goals in the Epira
“cannot be felt now”.
Though he agreed that the generation
companies operate better now, he noted some aspects in the power sector that
still need improvement. “Regulatory bodies [like the] Energy Regulatory
Commission [are] not stable, electricity prices yet [to be] optimized due to
effect of take-or-pay contracts still in effect, SPUG [small power utilities
group] areas need accelerated program of development,” Consunji said.
Gatchalian agreed. He noted
“instability within the regulator.”
Challenges
The DOE cited numerous challenges
that could be encountered in meeting the agency’s target additional power
capacity of 43,765 MW by 2040.
“All these ambitious energy plans
are not without their share of challenges that delay or prevent their
fruition,” Cusi said.
Some of the pressing roadblocks to
DOE’s aspirations include the following:
- Ensuring energy security, reliability and reasonably priced energy;
- Passage of energy-related bills (e.g. energy projects as projects of national significance, energy efficiency and conservation, etc.);
- Harmonization of laws/policies;
- Social acceptability of energy resources or technologies; and
- Energy resource development hindered by transnational/geographical boundaries.
“With tenacity and consistency in
adhering to all these well-considered plans and road maps, we will prevail
against the usual bane of ningas-cogon, or the habit of habit of
starting out a task (with overwhelming enthusiasm but leaving it
half-done) mediocrity and shortsightedness, and prove capable of achieving
the long-term energy objectives of the country for the benefit of the present
and future generations of Filipinos,” Cusi said.
One way to address the delays in
some aspects of Epira, the DOE has formally proposed to Malacañang
the issuance of an executive order (EO) that will declare energy-related
facilities as projects of national significance.
“Permitting takes a lot of
time. So, we asked that an EO be issued to declare power projects, not
just [as] power plants,[but] as [projects with] national significance,” Cusi
said.
According to Gatchalian, it takes
1,340 days to secure a permit, 359 signatures for the permits to be signed, and
involves 74 different agencies, including the DOE, which is only 10
percent of the entire process.
“So that’s the amount of complexity.
This is only predevelopment stage, which is apart from building the power
plant,” Gatchlian said.
Hopefully, the government can
overcome these challenges so consumers can immediately feel all the gains that
should be achieved through the implementation of Epira.
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