The Electric Power Industry Reform Act of 2001 was intended to remove monopolies in the power industry through the privatization of the National Power Corporation’s assets, which should result in more efficient services and competitive prices.
By virtue of the Epira, power generation was privatized, the ownership of transmission assets was retained by the government-owned National Transmission Company (TransCo), and the operation, maintenance, and expansion of the grid was privatized through a concession. As a result of a public bidding process, the 25-year concession was awarded in 2007 to the privately-owned, National Grid Corporation of the Philippines, which is a consortium of the Monte Oro Grid Resources Corp., the Calaca High Power Corp., and the State Grid Corporation of China. The NGCP was also granted by the Congress a 50-year franchise to operate, maintain, and develop the state-owned power grid. Its nationwide operations include 21,000 circuit kilometers of lines, 20,000 transmission towers, and 140 substations.
Despite the good intentions of the law, we know that the current situation of the power industry can still be improved. Last month, the Luzon Grid was put on yellow alert by the NGCP due to insufficient generation capacity when several power plants went offline. We obviously need more power plants and substations to expand our current power generation capacity. We also need more transmission lines, particularly sturdier ones to withstand natural calamities. Filipino consumers also complain of high electricity prices, which is caused by imported fuel used for power generation that is subject to global market forces, value-added tax on system loss, higher excise tax on petroleum products as an effect of the recent tax reform law and overcharging by the NGCP.
The Epira may not solve all the problems of the power industry, but it is a good start. The law can be amended to further improve our country’s power sector. Let us take the Hong Kong power sector as a possible model. In Hong Kong, there are two main electricity generation companies—the HK Electric and the China Light and Power. The scope of operations of both companies is not limited to power generation, as each of them also covers the transmission, distribution, and retail of electricity. Each single entity is responsible of the end-to-end power process from generation to distribution to end users.
The Hong Kong Electric Company Limited (HK Electric) started its operations in 1890 and is considered as one of the longest-established utility companies in the world; while China Light and Power was established in 1903, and now caters to 80 percent of Hong Kong’s population. These privately owned companies are managed under a “scheme of control” arrangement with the Hong Kong government, which means they effectively operate in a regulated market.
It is worth considering the structure of the Hong Kong power industry, specifically, when single entity is accountable for the end-to-end power process. This would make it easier for the government to regulate the power industry.
We cannot blame the current administration for the inconveniences in our power industry as it has only inherited this kind of set-up. Still, our current officials should do something about it. I look forward to the Executive’s plans and actions to further improve our country’s power sector.
