Tuesday, May 27, 2014

Energy Econ 21: Joint Statement on EPIRA Implementation

I just received from a friend, a Joint Statement made today on how to improve EPIRA implementation. Many of these points are practical, some are technical. I fully agree with the statement, "EPIRA is not the problem, failure to implement it properly is." The call by many populist and left-leaning groups to "junk" or "amend towards greater government role" EPIRA is wrong.

Amending or making changes in the Electric Power Industry Reform Act (EPIRA) or the Republic Act No. 9136 will not solve the problems because EPIRA is not the problem, failure to implement it properly is.

If EPIRA is sent back to Congress for review, the uncertainty it will introduce into the regulatory regime of the power industry will lead to a potentially chaotic system, and worryingly put our future needs at risk at a time when our supply of power is marginal.  Brownouts will be inevitable if we don’t build new power plants. International and local investors and financial institutions won’t invest in an industry where the rules are not known and stable. The national government should announce now that EPIRA will not be amended, as amendment will not solve the present problem, and the government should increase dialogue with industry participants to reduce key uncertainties or changing material rules midstream.

For instance, the basis for recent changes in the Wholesale Electricity Spot Market (WESM) prices was unclear. There were also changes in the rules, such as imposing a cap (50%) on the level of output that a Retail Electricity Supplier (RES) can source from its affiliated power generators; and how to count maximum installed generation capacity, which now includes power controlled by RES and results in double counting.  These should not be done without full discussion.

In view of the above, we urge the Department of Energy (DOE) to call a joint stakeholders meeting to address the following issues:

1.            Limits on open access
2.            Fiscal independence of the Energy Regulatory Commission (ERC)
3.            A review of the WESM price cap
4.            What level of power distribution utilities should be required to contract on a
continued basis
5.            How to better monitor and evaluate grid operations
6.            A review of the performance of electric cooperatives and how to improve it
7.            Studying the merits of demand side bidding in WESM and considering revisions to the WESM rules
8.            Making the System Operator and Market Operator independent as a merged group
9.            Deciding on what to do with the Malaya plant.
10.         Privatization of all power plants
11.         Looking for ways to improve bidding for new plants to encourage more participants,and reduce disputes.
12.         Review of the Transmission Development Plan
13.         A review of the taxes on the industry to consolidate them into a simpler system that may lead to lower prices

This meeting should include reviewing the role of each entity involved in the power sector, whether it should retain the responsibilities it now has, whether these should be strengthened, or amended or transferred elsewhere.

Finally, we urge the national government to declare power plants as critical infrastructures or projects eligible for registration with the Philippine Economic Zone Authority (PEZA) to streamline acquisition of permits and approvals from all local and national government agencies.

We believe urgent attention to these and other issues is called for and we look forward to working together with government towards an improved power sector.

American Chamber of Commerce of the Philippines (AmCham)
Employers Confederation of the Philippines (ECOP)
European Chamber of Commerce of the Philippines (ECCP)
Financial Executives Institute of the Philippines (FINEX)
Japanese Chamber of Commerce and Industry of the Philippines, Inc. (JCCIPI)
Korean Chamber of Commerce of the Philippines (KCCP)
Management Association of the Philippines (MAP)

See also:

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