EPIRA is 16 years old and it is working

Reposting this nice article today by a friend, Orly Oxales.

orly

It was 16 years ago when Congress enacted Republic Act No. 9136, or the Electricity Power Industry Reform Act. The law was envisioned to make the local power supply reliable and affordable by fostering competition in the industry. Broadly speaking, anyone who is old enough to remember the blackout-laden years of the 1990s would perhaps agree that Epira achieved its minimum goal of at least bringing some semblance of stability into an otherwise volatile industry.

By a stroke of coincidence, this June saw a record decrease in electricity rates, perhaps a testament to Epira’s general effectiveness. After a P0.29-per-kWh reduction in May, distribution utility firm Manila Electric Co. announced an additional P1.43 of decrease for June, effectively bringing down the rate to P8.17 per kWh, the lowest in nearly eight years, since December of 2009. For a typical residential household consuming 200 kWh, this translates to a P285 decrease in electricity bill.

The June rate also reflects the refund of Meralco’s over-recovery on pass-through charges amounting to P6.9 billion from 2014 to 2016. Meralco successfully petitioned the implementation of the refund with the Energy Regulatory Commission, which granted the request on May 11.

To many, that current retail rates are the same eight years ago, combined with evidently improved distribution efficiency (systems loss at an all-time low), record low outages, and increased innovation, demonstrate that Epira was achieving its intended vision for the power sector. It has let the market work as it should, foremost of which was successfully allowing private sector investments to drive strong load growth.

Indeed, many stakeholders believe that it is private sector involvement—the much-needed lifeline to the then ailing, notoriously corrupt state-controlled energy bureaucracy—that has proven to be Epira’s most vital legacy. After all, the series of big-ticket investments in the power sector could not have been possible without the landmark law.

“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 undersecretary, told Business Mirror.

Among others, this requirement for long-term big-ticket investments is the wisdom behind Epira’s market-driven stance. It had the foresight to anticipate burgeoning domestic demand for energy, which some estimates say will triple by 2040. It thus recognizes the pivotal role that a stable energy supply plays in economic development, an area where a vibrant, competitive investment market is non-negotiable.

Another of Epira’s innovations, the Wholesale Electricity Spot Market (WESM), has, as envisioned, become a venue for market competition, resulting in fair and competitive power prices. In fact, overall generation charge has decreased this June by P1.0253 per kWh, from P4.88 in May to P3.86 this month. A crucial factor here is the P1.25-decrease in power sourced from WESM. It is important to note that this became possible despite the expected higher power demand in Luzon in the summer months, in addition to fewer plant outages.

In the last two summers, we thankfully did not see a repeat of the power price hikes of 2013. Brown-outs were minimal. This is encouraging but one or two breakdowns from base load power plants will quickly cause debilitating outages. To sustain economic momentum, we need to encourage more investments in power plants that use the newest technologies and operate with the highest efficiency. These power plants will ensure reliable supply at the most affordable prices while at the same time being compliant with environmental regulations.

Environmentally friendly renewable energy, about which there is much hype, is still an expensive and unstable source that threatens to further burden all consumers with another move to increase rates. It is a policy that needs serious re-thinking and merits a congressional investigation on how much and where all the Feed In Tariff—which by now might be in the billions­—was spent.

At the end of the day, it is the consumers—from individual households to multi-billion-peso industries—that ultimately benefit from an energized power sector. Stable prices lead to savings. Increased operational efficiency of generation companies lessen blackouts. No one is exempt. Now on its 16th year, the Epira is by no means a perfect piece of legislation—domestic power rates remain one of the most expensive in the region—but it has successfully laid the groundwork for a buoyant energy sector.

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