IN MANY STATISTICS comparing electricity prices in Asia,
Manila/Philippines often rank no. 2, next to Tokyo/Japan. Here is one such
data. Of the 11 major cities in North and Southeast Asia, Manila has the 2nd
most expensive electricity prices for residential tariff, 3rd in generation
cost, 1st in grid charges, and 2nd in tax rates. (See table)
With such a cost structure, it would be a mystery why
some groups and government officials would think of new ways and schemes that
would further raise electricity prices in the Philippines.
Like the feed-in tariff in the Republic Act (RA) No. 9513
or the Renewable Energy Act of 2008 and more recently, the Department of Energy
(DoE) Circular No. DC2015-06-008, “Mandating all Distribution Utilities (DUs)
to undergo Competitive Selection Process (CSP) in securing Power Supply
Agreements (PSA)” through a Third Party.
There are two normal and two abnormal concepts in this
Circular. The normal ones are CSP and PSA, they have been there since many
decades ago, DUs and electric cooperatives doing CSP on their own with power
generating companies (gencos) in getting their PSAs.
The abnormal ones are the (a) mandatory, obligatory CSP,
and (b) introduction of a Third Party. The latter is a private entity or
organization that suddenly has the power to say “Yes” or “No” to a PSA entered
between a DU and a genco. Let us call them “Abnormality A” and “Abnormality B,”
respectively.
Abnormality A is suspicious because it imposes a new
degree of coercion and arm-twisting for the DUs.
In areas or cases where power supply (by gencos) is lower
than the demand (by DUs), there is little or no leeway to do CSP. The key to
have cheaper electricity is to have lots of gencos competing with each other in
supplying electricity to DUs and other institutional consumers via lower
prices.
Abnormality B is even more suspicious because of three
reasons. One, this Third Party is not free, it will impose new cost to the
monthly electricity bill of the consumers with a monthly fee to be paid to
those “foreign and national experts.”
Two, the Energy Regulatory Commission (ERC), a government
agency created by Congress under the RA 9136 or the Electric Power Industry
Reform Act (EPIRA) as the real and institutional Third Party between gencos and
DUs, is now relegated as a mere Fourth Party because there is a new Third Party
-- with zero congressional legal basis or justification -- that was inserted in
the process. The draft implementing rules and regulations made by the DoE gives
lots of powers and leeway for this Third Party.
During the DoE public consultation about the Circular
last Oct. 6 at Intercon Hotel in Makati, it was obvious that some NGOs and
“consumer groups” were lobbying hard and positioning themselves to be the
accredited Third Party. Not only for the potential big money involved from the
fees to be collected, but also for that new bureaucratic power to approve or
disapprove a PSA between legitimate DUs and gencos.
And three, Abnormality B imposes mandatory aggregation of
DUs for their PSAs. Each DU has its own cost structure, own requirements, own
set of consumers (residential, commercial and industrial) that often are
different from those of other DUs. Imposing a one-size-fits-all order removes
the flexibility of DUs to get their own PSAs.
This circular is very successful in creating more
questions than it could answer. It introduces new cost that will raise
electricity prices, thus cancelling or negating its stated goal of lowering
electricity prices.
The DoE seems to be in a hurry to have this circular
become operational within the next few weeks. In the event that it is
ultimately to be implemented, there are at least two remedial measures for the
DUs, gencos and the public.
One, there should be independent audits of that Third
Party to evaluate compliance with rules and regulations set by the ERC and
EPIRA.
And two, the IRR should have a sunset provision or
clause, ordering the DoE and ERC to conduct a study or commission a study on
the Cost-Benefit analysis after one year of implementation, to see if the
circular has indeed brought down the cost of electricity in the country or even
contributed to higher electricity prices. If the benefits are smaller than the
costs, the circular should become void and withdrawn, or be significantly
amended to remove Abnormalities A and B.
Bienvenido S. Oplas, Jr. is the President of Minimal
Government Thinkers, Inc., a free market think tank in Manila, and a Fellow of
the South East Asia Network for Development (SEANET), a regional center based
in Kuala Lumpur advocating free trade and free mobility of people in the
region.
See also:
BWorld 15, The PH electricity market, August 15, 2015
BWorld 17, More on the Philippine electricity market, August 30, 2015
BWorld 18, Non-tariff barriers in the ASEAN, September 12, 2015
BWorld 19, Taxation and regulations in PH mining industry, September 24, 2015
Energy 45, Thailand's bright nights and nat gas power, October 19, 2015
