Bernardo M. Villegas
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Need to Fully Implement EPIRA

           As a founding member of the Makati Business Club, I fully subscribe to its position that, rather than opening up the Electric Power Industry Reform Act (EPIRA) now for amendments or changes, what is needed is the full implementation of its provisions as written in the law.  More than ever, as recent developments have shown, we need to provide a stable and reliable regulatory framework to encourage long-term investments in the power sector.  In our view, opening up EPIRA for review and amendments now will reinforce the perception of the private sector that there is so much uncertainty in the investment climate, and would end up causing the deferment or even cancellation of pending investments, especially in power plants. We should be glad that practically all large business conglomerates in the country today are bullish in their plans to put up power plants in different regions of the Archipelago, including Mindanao.  Although EPIRA is not perfect, we believe that it provides a reasonable and generally acceptable regulatory framework.  Here, I reproduce the position paper issued by the MBC last June 3, 2014.

          Without amending EPIRA, there are changes in the regulatory framework that can be made to further promote and protect long-term consumer interests and encourage a more competitive market.  Since the Department of Energy (DOE) is the department of the government that is mandated to prepare, integrate, coordinate, supervise, and control all plans, programs, projects, and activities of the government relative to energy exploration, development, utilization, distribution, and conservation, the DOE should:

          -Avoid further delay of the establishment of a reserve market, in compliance with Section 37 of EPIRA; and

          -Execute the much delayed transfer of functions, assets, and liabilities of the market operator to an Independent Market Operator (IMO) in compliance with Section 30 of EPIRA and IRR Rule 9 Section 6a, which should have occurred within one year of the establishment of the Wholesale Electricity Spot Market (WESM).

          As the Energy Regulatory Commission (ERC) has the mission to promote and protect long-term consumer interests in terms of quality, reliability, and reasonable pricing of a sustainable supply of energy, the following actions can be taken:

          -Complete the implementation of open access by 30 June 2015 to allow end-users with load of 750kw (both single and aggregated loads) and above to source their own power as provided by Section 21 of the EPIRA;

          -Further accelerate open access through allowing end-users with loads of 500kw (both single and aggregated loads) and above to source their own power by 30 June 2016;

          -Amend Automatic Generation Rate Adjustment (AGRA) rules applicable to distribution utility (DU) generation by: a) allowing complete pass-through of ERC-approved bilateral contracts; b) allowing complete pass-through of WESM purchases if prices are equal to or less than ERC-approved bilateral contract prices; and c) for WESM purchases above approved bilateral contract prices, require prior ERC approval for pass-through of the price differentials;

          -Establish policy on the treatment of wholesale aggregators executing Power Supply Agreements (PSAs) with distribution utilities.  Such a policy would utilize a combination of market- and cost-based methods as a means of determining reasonable price levels for bilateral contracts of distribution utilities accompanied by the issuance of bidding rules, to widen supplier choices available to distribution utilities;

          -Reference the 4% threshold level of DOE Circular DC2013-12-0029 to offered capacity; in this connection, the "must offer rule" should be maintained; and

          -Diligently monitor anti-competitive behavior and take action accordingly.

          To further encourage a competitive market, the privatization of the remaining government power assets and contracts such as Casecnan, Mt. Apo, Pulangi, STEAG, Gensan, and Zamboanga should be accelerated by the Power Sector Assets and Liabilities Management (PSALM) Corporation.  To enable distribution utilities to plan ahead, the system operator of the National Grid Corporation of the Philippines (NGCP) should publish on a regular basis the annual planned outages of power plants.  This list should also be reviewed by the ERC in anticipation of potential shortage in power supply, improve transparency, and avoid providing unfair advantages.  Finally, the National Transmission Company (TRANSCO) should revisit the Transmission Development Plan (TDP) and accelerate the implementation of the Leyte-Mindanao underground cable interconnection.  TRANSCO should also ensure that the grid can accommodate all the required new capacity for the next five years.

          With the appropriate political will, all the above contain a list of "doables" within the next two years.  We should leave the amendment of EPIRA to future Congresses.  We don't have the luxury of time as can be gleaned from some of the desperate statements  made by our government officials involved in energy policy as a response to some of the most recent natural disasters. I can only quote the ending statement of the MBC position paper:  "While the Philippines has enjoyed robust economic growth  in the recent past, it is imperative that we improve our competitiveness through stable policy direction and by creating an  environment that is conducive to investment."  For comments, my email address is bernardo.villegas@uap.asia