14 November 2007
The Freedom from Debt Coalition today criticized the House Committee on Energy for its “misguided focus” on open access and the privatization of the electricity power sector as the Committee began its hearings on amendments to the Electric Power Industry Reform Act (EPIRA).
FDC vice president Wilson Fortaleza hit the concentration the committee, led by presidential son and Pampanga Rep. Juan Miguel “Mikey” Arroyo, placed on fast tracking open access by reducing, from 70 percent to 40 percent, the targets in the privatization of the generation assets of the National Power Corporation including the generation capacities under contract with the independent power producers.
During Tuesday’s hearing on EPIRA amendments at the House Committee on Energy, the panel decided to take up apriori House Bill 3042 which is a consolidation of other bills seeking to amend EPIRA but focuses on expediting open access and privatization of NPC generation assets.
“Accelerating open access under the present condition where the power plants are owned by few entities will still not lead to so-called competition envisioned by the government to reduce electricity rates. Besides, the electricity trading will still happen at the wholesale electricity spot market, the integrity of which is still in question as the price manipulations that occurred last year have not yet been fully resolved until now,” said Fortaleza.
Fortaleza added that the proposed amendment would only further the misery the people is experiencing due to escalating electricity rates and still increasing power-sector restructuring related debts.
“The Arroyo-led committee should instead focus on finding ways that would arrest the increasing power rates in the country, the highest in Asia in terms of industrial electricity rates, as well as the huge debts that the government continues to incur in pursuing the restructuring and privatization of the power industry” he added.
FDC studies show that the government incurred $450 million loan from the Asian Development Bank last December and another $300 million loan from the Japan Bank for International Cooperation in February this year for the Power Sector Development Program which the coalition asserts will be used to pay NPC debts and liabilities to IPPs. This assertion was affirmed during the plenary deliberation on the 2008 budget at the Lower House last October 12 of this year.
“Rushing open access with a mere 40-percent threshold will produce an anomalous situation wherein few plants power companies dominate the field with the power to set power rates among themselves,” he said.
Fortaleza said that government should ensure that in instituting reforms in the power industry, a transfer of monopoly from public to private hands will not happen.
“The judicial decisions regarding refund to consumers by private companies like Meralco and by Panay Electric Company for their overcharges to the consumers in Metro Manila and in other neighboring provinces and in Iloilo, respectively, should provide some lessons. A private monopoly cannot be expected to bring down electricity prices. Rather, power rates will tend to increase as private owners will try to maximize their earnings, often by imposing excessive profits,” he said.
“Retail competition and open access will not effectively reduce power rates as long as onerous and expensive contracts with independent power producers (IPPs) remain effective and costs of which are recovered from the consumers,” said Fortaleza.
He said that despite the findings of the Interagency IPP Review Committee that some NPC contracts with IPPs were highly onerous, the government refused to take steps to at least amend the onerous provisions and mitigate high electricity rates.
“The government claimed a US$1-billion in savings from the so-called renegotiations but consumers have yet to feel the effects of these purported savings. This amount is also a drop in the bucket compared to the guaranteed profits of IPPs,” he said.
FDC reiterated its position that aside from canceling the onerous IPP contracts, one of the reforms that have to be in place in the power industry and to be reflected in the law is the explicit prohibition of cross ownership not only between and among generation, distribution, and transmission, but also with supply to ensure that there would be no monopoly or cartel of a few companies.
He said this would prevent sister companies in the different power industry sectors from entering into bilateral contracts and fix rates to their advantage, but detrimental to the consumers. ###