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Probing the high cost of electricity

Amid record-high inflation threatening to derail the country’s economic growth, independent think tank Stratbase ADR Institute (ADRi) and consumer advocacy group CitizenWatch Philippines recently partnered to hold a forum on a critical aspect of this economic story at a critical moment in its unfolding: the power situation.

Entitled “Energy Outlook: Supplying Rising Demand at Lower Cost,” the event gathered stakeholders from government, industry, civil society, and the academe to assess where the country’s energy sector is situated in the context of the times and what directions it can take.

The wide gamut of speakers and participants included representatives from the Senate and House Committees on Energy, the Department of Energy, the Philippine Chamber of Commerce and Industry, National Power Corporation, Power Sector Assets and Liabilities Management Corporation, Foundation for Economic Freedom, the American and Vietnamese embassies, SGV, Meralco, and UP Diliman.

In his opening remarks, Stratbase ADRi President Dindo Manhit set the stage and said the Philippine power sector is “at a critical juncture” as electricity, gas, and fuels are among the commodities that contributed to the seemingly runaway inflation, which accelerated from 3.8 percent in January to 6.4 percent in August.

“The challenge to ensure affordable, reliable, and accessible power lies at the heart of balancing price fluctuations, in view of the increasing inflation rates, and meeting the economy’s growing demand,” he said.

There is no question that cushioning the impact of inflation should be a government priority, and one of the ways to protect consumers from such blows is to “lower the price of electricity in the economically efficient manner,” he added.

For his part, Senator Sherwin Gatchalian, chairman of the Senate Committee on Energy, said one of the ways to bring down the cost of energy is to promote competition within the industry. He clarified that while the Philippines has one of the most expensive power rates in the region, it’s one of only two countries that does not subsidize power, which translates to consumers paying the true cost.

“Some 52 percent of our electricity bill is the generation cost, whereas other charges include universal charges, stranded costs, and stranded debts,” he said.

The proposed Energy Virtual One Stop Shop Act, he said, is envisioned to drastically reduce red tape in the energy bureaucracy. If enacted, it will not only simplify the gruelling and time-consuming application process—359 signatures, 74 agencies, 43 contracts and licenses over a total of 1,340 days—it will also result in potential savings of P0.35 per KwH. The bill has already been approved in the senate and is currently on third reading in the lower house.

As with all policy, however, Gatchalian said such reforms will require a lot of political will, and for the executive and the legislative to work.

The director of DOE’s Electric Power Industry Management Bureau, Mario Marasigan, said the Power Sector Roadmap is currently in different stages and marked with a number of milestones, all intended to bring down the cost of power and make it truly accessible.

For the generation roadmap, the agency is now conducting performance assessments and audits as well as pursuing the entry of new and emerging technologies. For transmission, there are transmission projects that are undergoing completion even as the agency is working on instituting policies to enable adequate contracted capacities for reserves.

For the distribution roadmap, Marasigan said the DOE is crafting several procedural regulations, including the Competitive Selection Process (CSP), direct connection application rules, and uniform monthly electricity bill format. The agency is also facilitating the inclusion of Indigenous Peoples as host communities under the household electrification roadmap, en route to achieving 100 percent electrification by 2020.

For market development, Marasigan said WESM will be introduced in the Mindanao market soon, in time for the commencement of commercial operations by the first quarter of 2019. Public consultations on the proposed amendments in the EPIRA Law are also being conducted.

Still in the area of policy, economist Raul Fabella, Energy Policy and Development Program fellow, called for reforms geared to improve the performance of electric cooperatives (EC), which serve 80 percent of the country compared to the 20 percent served by private distribution utilities such as Meralco.

The National Electrification Administration, he said, should be strengthened to raise the accountability of EC boards. Privatizing ECs must also be removed from NEA’s roles to prevent conflict of interest, he added.

Jose Alejandro, chairman of PCCI’s Energy and Infrastructure Committee, echoed the critical need to attract investments and cut red tape in the sector.

“The Philippines is a small market of 12,000 megawatts, but we are so confused and entangled in different processes and in the effort of bring down costs,” he said.

The government must also consider subsidizing power because even with lowered costs, envisioned rates are still not competitive compared to other markets in the region, he said.

Bantay Konsyumer, Kuyente, Kalsada (BK3) convenor Louie Montemar pointed out the urgency of lowering energy cost and called on regulators to immediately address extra economic factors that are delaying the development of more power plants so that competition will drive down costs and expand to underserved communities.

Indeed, for Manhit, the relationship between the power sector and the overall health of the economy is clear. The power industry is a “key driving force” for growth and development in that prohibitive rates and unreliable supply may prevent an economy from fully accelerating, not least when its consumers cry foul over high electricity bills.

“Addressing gaps in the sector is crucial now more than ever. We are hopeful that this energy forum can be a source of solutions which can foster cooperation among government and private sectors toward creating the conditions necessary to ease the burden of millions of Filipinos.”

Topics: CitizenWatch Philippines , Energy Virtual One Stop Shop Act , Dindo Manhit , Sherwin Gatchalian
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