Cusi’s vision for our electricity market

byDr. Jesus Lim Arranza May 12, 2021

https://businessmirror.com.ph/2021/05/12/cusis-vision-for-our-electricity-market/

 

AS to why there are still some quarters that want to impede the road to independence of the Philippine Electricity Market Corp. (PEMC) puzzles me.

Energy Secretary Alfonso Cusi has made a series of actions to make sure the operation and governance of the Wholesale Electricity Spot Market (WESM) will be eventually left in the hands of the private sector, as what the Electric Power Industry Reform Act (EPIRA) clearly envisions.

Yes, the predecessors of Cusi since the enactment of the landmark law in 2001 also wanted to see the EPIRA spirit and intention to have an independent electricity market operator come to fruition.

But it was really in this administration when concrete actions were taken toward achieving this goal.

We saw how Cusi zealously oversaw the election of nominees to the board of directors of PEMC in June 2018 where the private sector can take over the reins of governing the WESM. This, I should say, was the first serious and genuine election conducted by PEMC.

During the early years of the WESM, the DOE secretary sat as automatic chairman of PEMC. Also, the heads of DOE-attached agencies, i.e., National Electrification Administration (NEA), National Transmission Corp. (TransCo), and the Power Sector Assets and Liabilities Management (PSALM) sat in the PEMC Board. This assured the government of complete control of the WESM. It is ironic because these bodies, including DOE, are not even corporate members of PEMC.

After that June 2018 election, the DOE relinquished the chairmanship of PEMC that allowed WESM stakeholders (especially generators, distributors including electric cooperatives) to elect the members of the PEMC Board. And in turn for the PEMC board to elect its chair. Then in October 2020, Cusi issued a circular removing the heads of NEA, PSALM, and TransCo from sitting as advisers in the PEMC Board.

This year, PEMC will be electing its set of directors anew amid continuous challenges from those who want to hinder its independence, or at the least keep it regulated as a government-owned and -controlled corporation (GOCC).

In the previous administration, PEMC was classified as a GOCC. As an independent director in PEMC, I had proposed that a declaratory relief suit be filed in the courts to clarify once and for all the EPIRA provisions that mandate the WESM operator to be private and independent. PEMC then was the interim market operator.

I had based this on a comprehensive legal opinion of retired Supreme Court Justice Jose Vitug, who concluded that “PEMC is a private corporation and it does not qualify as a GOCC.”

It must be stressed that there is no government equity in PEMC. On this score alone, it should not be classified as a GOCC. If it were, five government regulators would insist on having oversight functions over PEMC. These are: 1) Civil Service Commission, 2) Department of Budget and Management, 3) Commission on Audit, 4) the Governance Commission on GOCCs, and 5) Government Procurement Policy Board. Surely, this would translate to direct government interference in the operation and governance of PEMC that is inconsistent with the intent and spirit of EPIRA.

In other countries, no government representatives sit in the body that operates and governs the electricity market. This is totally left to the private sector to promote and enhance meaningful competition as well as ensure a level playing field. This scenario also assures the wholesale electricity market is isolated from politics.

The PEMC Board, however, did not approve my proposal.

That’s why I’m so glad that during Cusi’s tenure, he pursued the transformation of PEMC into a truly private and independent body. Now, the PEMC Board fully supports Cusi’s position that PEMC should be independent and free from government interference.

Dr. Jesus Lim Arranza is the chairman of the Federation of Philippine Industries and Fight Illicit Trade; a broad-based, multisectoral movement intended to protect consumers, safeguard government revenues and shield legitimate industries from the ill effects of smuggling.