The search for
affordable and competitive electricity prices in the Philippines and elsewhere
remains a continuing adventure for consumers and many industry players.
In a previous column entitled “DoE’s new circular will
raise, not lower, electricity prices” (Oct. 21), it was argued that the
Department of Energy (DoE) order mandating competitive selection process (CSP)
by distribution utilities (DUs) would have the potential of increasing, not
lowering, electricity prices.
There is an existing platform for CSP by electricity
producers and distributors in the country via the Wholesale Electricity Spot
Market (WESM), created under Republic Act No. 9136 or the Electric Power
Industry Reform Act of 2001 (EPIRA). Managed by the Philippine Electricity
Market Corp. (PEMC), the spot market became operational in June 2006 and it
allowed the Philippines to join three other Asian developed economies -- Japan,
South Korea, and Singapore -- to have a power exchange market. (See table 1)
RECENT WESM PRICES
During the WESM Market Participants Update sponsored by
the PEMC last Thursday, Oct. 28 at Intercon Hotel in Makati, the corporation
reported uptick in WESM prices from April to June 2015, then significant
decline from July to September 2015. The main reason is the increase in power
demand in May-June due to warm weather, then decrease in power demand in the
wet and cool weather of July to September. There is also bigger capacity by the
hydro power plants. (See table 2)
The September price is really good news for the
consumers, be they residential, commercial, or industrial. Also during the
period April to September 2015, total market transactions at WESM was 33,101
gigawatt hours (GWh), of which 91.4% are done via bilateral, medium- and
long-term contracts and 8.6% via spot market contracts.
GOVERNANCE ISSUES IN PEMC
From the WESM Web site, the PEMC Board is composed of 15
representatives/directors from various sectors of the electric power industry,
plus independent members:
One from the Market Operator, one from the National
Transmission Corp. (now known as the National Grid Corp. of the Philippines),
four from DUs; one from WESM customers including but not limited to suppliers;
four from generation companies (gencos); and four independent of the Philippine
electric power industry and are nominated by WESM members.
With that said, there should be NONE from the government.
In reality though, there are at least three from the government: DoE Secretary
as Chairperson, the head of Power Sector Assets and Liabilities Management
Corp., and the head of National Power Corp.
The presence of the DoE Secretary as Chairman of the PEMC
Board should be temporary and not extended with no clear timetable. Under
Section 30 of RA 9136 it says that:
“...Not later than one (1) year after the implementation
of the wholesale electricity spot market, an independent entity shall be formed
and the functions, assets and liabilities of the market operator shall be
transferred to such entity with the joint endorsement of the DoE and the
electric power industry participants.”
WESM was created in June 2006. This means that an
independent market operator should have been in place by June 2007, but more
than eight years after, this did not take place. What happened?
There are many government agencies regulating the power
sector already: DoE (overall), Energy Regulatory Commission (tariff rates),
Securities and Exchange Commission (corporate matters), Department of
Environment and Natural Resources (environmental permits), Bureau of Internal
Revenue (national taxes), local government units (local taxes and permits) and
so on. Having government as key player within PEMC is unnecessary and a
violation of EPIRA.
The key to having affordable and competitive electricity
prices is via competition among market players, especially among generation
companies -- harsh and fierce competition as much as possible. More government
regulations, permits, and taxes do the opposite and result in market
distortion, expensive electricity and unstable supply in certain periods of the
year.
PEMC should be allowed to operate as truly independent of
government. Let the various players, gencos and distribution utilities, and
consumers, and independent directors, debate and settle among themselves
various issues with the end-view of having low and competitive electricity prices
for the consumers.
Bienvenido S. Oplas, Jr. is the head of Manila-based
Minimal Government Thinkers, Inc., and a Fellow of Kuala Lumpur-based South
East Asia Network for Development (SEANET).
--------------See also:
BWorld 18, Non-tariff barriers in the ASEAN, September 12, 2015
BWorld 19, Taxation and regulations in PH mining industry, September 24, 2015
BWorld 20, DOE Circular to raise electricity prices, October 25, 2015
BWorld 21, More internet use means lesser corruption?, October 31, 2015
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