Today, 08 June 2007, the Electric Power Industry Reform Act (EPIRA) turns six. But its aims of quality, reliability, security, and affordability of electricity supply in the country appear to be far from being realized, if at all. Even its target of further increasing private sector participation in the power industry remains to be seen as evidenced by the slow pace of privatization – only 11% of the National Power Corporation’s (NPC) generation assets have been sold as of 2006 while bidding for a concession agreement for the National Transmission Corporation had failed four times since 2003. To make privatization more attractive to the private sector, the government has increased power rates time and again and has done considerable effort to pay the debts and liabilities of the NPC to the detriment of the public.

One of the major reasons for the passage of EPIRA that mandates the privatization of NPC and the restructuring of the entire power industry was the growing debts and liabilities to the independent power producers (IPPs) of the state-owned power corporation. Six years after, this problem still exists, reaching an alarming level.

More debts have been incurred by the government and NPC, largely to pay NPC’s debts and other maturing obligations. As of 2004 alone, P200 billion of NPC's long-term debts of about P600 billion was transferred to the national government. Bills at the 13th Congress had proposed to increase to P500 billion the amount of debts to be assumed by the government. Loans have been contracted such as the $450 million Power Sector Development Program loan from the Asian Development Bank that was released in December 2006. Billion dollars worth of bonds have also been issued by NPC, PSALM, and the national government through the years, also to pay NPC's debts and maturing obligations – at least $2.5 billion worth of bonds floated in 2006, $1.3 billion and P5.6 billion zero-coupon bonds in 2005, $750 million and $400 million zero-coupon bonds in 2004, $750 million in 2003. It could be remembered that NPC's debts and financial obligations have greatly contributed to the fiscal crisis in the country in 2004. Despite these gargantuan debts, both the government and PSALM still plan to embark on more borrowings through bonds issuances and commercial borrowings to address the debts of NPC.

While EPIRA legitimizes NPC debts and liabilities to the IPPs by continuously honoring these through provisions of paying for these, power rates have soared in six years. Unfortunately, the public’s suffering from paying high electricity rates will not cease in the near future as an estimated $9 billion dollars is needed by the government from 2006 to 2010 to pay off absorbed NPC loans ($140 million for principal and $1.2 billion for interest) and $6.7 billion-deficit by the Power Sector Assets and Liabilities Management Corporation (PSALM) which now holds NPC’s contracts with the IPPs. The government intends to meet this financing requirement through: (i) $3.162 billion from universal charge for stranded liabilities to be introduced by January 2008 (ii) $1.889 billion from the government budget allocations to cover part of interest payments of Government-absorbed NPC loans, (iii) $450 million from government commercial borrowings (from ADB) to cover interest and principal payments of Government-absorbed NPC loans, and (iv) $3.670 billion from PSALM’s commercial borrowings with Government guarantee to cover PSALM’s deficit.

Today, Metro Manila consumers pay P9 to P9.50/kwh for electricity from only P5.65/kwh before the implementation of EPIRA in 2001. Almost all areas in the country experience increases in their electricity rates as well. Other reasons for high power rates brought about by EPIRA are removal of cross-subsidies, desperate drive to sell NPC generation assets resulting in power rates increase of about P1/kwh in 2004, failed power trading at the wholesale electricity spot market (WESM), and the implementation of new rate-setting methodologies. Ironically, the WESM operation in Luzon beginning June 2006, claimed by the government no less than Gloria Arroyo herself in her state of the nation address in 2006 to bring down electricity rates, is proving to be a failure as price manipulations resulting in increase of generation charge happened and there is no guarantee this will no longer recur.

Meanwhile, EPIRA has failed to ensure even the dependability/reliability of power supply as consumers are beginning to experience again almost regular brownouts in the last two months when the temperature was extremely hot. Seemingly, the supposed electricity that should be there could not be delivered due to failures by the power plants – most of these would be of the IPPs’. Our old suspicion that some of the IPP plants could not really deliver its declared installed/dependable capacity is proving to be true. This may also be the reason why a technical review of the IPP plants was not conducted when the government reviewed the IPP contracts in 2002. It is outrageous for consumers to be made to pay for electricity that is not there and cannot be generated. Long brownouts should not be experienced in the country these days since we have installed generating capacity of 15,803 MW (as of 2006), more than enough to supply the country’s demand of only 56,764 Gwh. Power shortage will only happen if the plants could not generate at all its declared energy capacity.

We don't want another six years of being charged with high electricity rate and huge debts arising from onerous transactions such as the expensive and grossly burdensome contracts with the IPPs and still getting inefficient, unreliable service. Lower power rate is achievable if only the government has the political will to do the right thing such as non-payment and cancellation of onerous IPP contracts. We want the flawed EPIRA to be repealed and replaced with a law that institutes pro-people reforms in the power industry, a new law that genuinely serves the interest and welfare of the public not only of the few elites and capitalists. The Filipino people deserve a better life.

FDC Chapters

chapters