13 July 2007
Stressing that the Asian Development Bank’s energy policy is a failure in its developing member countries (DMCs) like the Philippines, members of Freedom from Debt Coalition (FDC) and Jubilee South-Asia Pacific Movement on Debt and Development (JS-APMDD) on Friday trooped to the Bank’s main headquarters in Ortigas Center where the last leg of the sub-regional consultations on new energy strategy is being conducted.
FDC vice president Wilson Fortaleza said that as an upshot of the ADB’s energy policy, specifically its power sector restructuring program which prescribed the passage of Electric Power Industry Reform Act (EPIRA) in the country, the Filipinos are now suffering from more social and economic problems rather than being alleviated from poverty that it has aimed to achieve.
The FDC blamed ADB’s power sector restructuring and privatization program for the ballooning National Power Corporation and national government debts, higher power rates, unreliability of supply and lesser access by the poor.
Fortaleza raised the following points to illustrate the Philippine experience in power sector reforms/privatization:
1. It is all about catering to the interests of the corporate private sector;
- The government increased the generation rates to attract more investors/ private sector to participate in the privatization of government's generation assets;
- It legitimized the payments to expensive and onerous independent power producer (IPP) contracts;
2. It has led to more increases in electricity rates;
- Power rates in the Philippines are among the 10 highest in the world. Metro Manila residential consumers are now paying P9.50/kwh for electricity from only less than P6/kwh before EPIRA was implemented in 2001;
- NPC's debt burden and financial obligations to IPPs are passed on to consumers in the form of present automatic cost recoveries and universal charge beginning 2008, which consumers, whether rich or poor are compelled to pay;
- Some US$3.1 billion worth of universal charge to pay for stranded liabilities to the IPPs contracted by NPC shall be collected from the consumers beginning year 2008;
3. It has created more debts, not only for the state-owned power corporation, but to the national government as well;
- ADB released in December 1998 a US$300 million power sector restructuring program (PSRP) loan for the restructuring of the Philippine power industry and privatization of NPC. Two technical assistance projects amounting $750,000 and $680,000 were tied to it;
- US$5 million more technical assistances were provided to the government in pursuing ADB’s power sector restructuring program for the Philippines;
- NPC and the Power Sector Assets and Liabilities Management Corp. (PSALM) – which now holds NPC’s IPP contracts – debts and obligations have now ballooned to about P1.4 trillion from only about P500 billion in 1998, when PSRP was approved;
- More debts for the Filipinos as US$9.1 billion or P418.6 b (US$1=P46) government-assumed loans from NPC and deficits/losses from contracts with IPPs are to be serviced/financed in 2006-2010. US$450 million was already released by ADB in December 2006 under the Power Sector Development Program Loan;
4. Even the promise of energy efficiency/reliability is not assured as well as until now, despite excess generation capacity, the country continues to experience brownouts that are now becoming almost regular; and,
5. Its competitive electricity market model — the wholesale electricity spot market (WESM) — that ADB and the government claim to result in reduction of electricity rates is proving to be a failure in the country as well based on the price manipulations that have occurred in its operation in Luzon last year. This model is not fitted in countries like the Philippines wherein the market is small.
“With all these problems that continuously arise from ADB’s energy policy, what good does a new strategy make? Before ADB ponders on its new strategy, it must first review, if not overhaul, its policy,” said Fortaleza.
Meanwhile, FDC president Ana Maria R. Nemenzo raised at the sub-regional consultation inside the ADB headquarters that impacts of the ADB energy policy, program, and/or projects must be one of the questions that must be answered during the break-out sessions.
“The issue on impacts of ADB's energy policy/projects must surface and be part of the records of the consultation that have to be seriously given consideration to in ADB’s review of its energy sector operations,” said Nemenzo.
Nemenzo lamented that the draft strategy is silent on the real impacts of ADB's energy policy, nor of power sector programs. “What were the bases of ADB’s draft energy strategy? Were the people, especially the affected sectors, involved? Was there a real assessment of ADB's power projects, wherein the people have participated in?” she asked at the consultation.
The draft strategy, which will guide the Bank’s future operations in the energy sector, is expected to address key issues, including: energy security; global warming/climate change; sector policy reform and governance; and, energy efficiency. ###