|
THE
Philippine Independent Power Producers Association (Pippa)
echoed Monday the opinion of the Joint Foreign Chambers
that there is neither necessity nor expedience in
amending the Electric Power Industry Reform Act (Epira)
at this time.
“The
implementation of reforms mandated by the Epira has
gained tremendous momentum over the past two years,
eclipsing the laggard pace in the early years following
the law’s enactment,” said Ernesto Pantangco, Pippa
president, adding that a competitive industry structure
has taken root and critical activities are on their way
to completion.
The
successful privatization efforts of the Power Sector
Assets and Liabilities Management Corp. (PSALM) have
resulted in better valuation for old National Power
Corp. (Napocor) assets, which cost from $0.39 million
per megawatt (MW) for a small hydro to $1.55 million/MW
for the 600-MW Masinloc power plant. Pantangco noted
that proceeds from the PSALM privatization process have
yielded for the government $6.66 billion in
value, broken down as follows: National Transmission
Corp. (Transco) at $3.95 billion; Napocor generating
assets at $2.70 billion; and a decommissioned plant at
$2.506 million. More foreign investments are needed, he
added, for the Napocor-independent power producer (IPP)
privatization under the IPP Administrator concept.
Pantangco also pointed out that the Wholesale
Electricity Spot Market has been operational for more
than a year now, exhibiting the capability to trade
electricity with transparent pricing under rules that
provide a level playing field to participants; the
system operation had been devolved from Napocor to
Transco; and the Energy Regulatory Commission (ERC) is
carrying out its functions pursuant to the Epira—promulgating
rules, regulations and decisions as the industry
steadily transitions to a competitive structure.
“With
these successes, the attainment of the declared state
policies is in the offing,” said Pantangco. He added
that amending the Epira now would reverse the successes
that the industry had patiently strived or aspired for,
and endangers the unprecedented momentum in carrying out
reforms. Amendments that would alter the competitive
structure of the industry or change the regulatory setup
at this late stage would be particularly
counterproductive, in his view.
Pantangco said the logical and rational consequence
would be to preserve the successes and continue with the
full implementation of Epira so that its salutary
objectives may be finally realized by the government,
the industry participants and the consumers. “Instead of
amending Epira, the government should actively pursue
the privatization of Napocor’s independent power
producer contracts, a mandated activity that has been
unjustifiably dormant for more than six years since 2001
when Epira was passed into law,” said Pantangco.
He
emphasized that lowering the privatization threshold
from 70 percent to 50 percent will undermine the
competitiveness of the power industry, as “no company or
related group can own, operate or control more than 30
percent of the installed generating capacity of a grid
and/or 25 percent of the national installed generating
capacity.”
He
explained that the mechanism for automatic pass-through
of adjustments to the basic electricity charge has been
subject to stringent regulatory review, and disallowing
it would endanger the reliability of electricity supply.
Fuel
accounts for 30 percent to 60 percent of the total cost
of power generation. In particular, imported fuel
accounts for 35 percent of the fuel mix for energy
generated in Luzon. Higher taxes for natural gas
vis-à-vis other baseload fuels like coal or bunker
further push up fuel prices.
Pantangco said all the forgoing components of the
generation charge, including changes in foreign-currency
exchange rates, are beyond the control of the
generators. Hence, the ERC devised a mechanism by which
the methodology of determining these components are
scrutinized and adjustments are accordingly allowed
under strict conditions.
Applying
this mechanism, changes in the cost of fuel and
foreign-exchange rates, which can be downward or upward,
can be passed through automatically; as the changes are
based on international indices, the adjustment can be
easily scrutinized and verified, he added.
Pantangco added that the automatic pass-through
adjustments are not determined arbitrarily, and are the
results of applying the ERC-approved objective
methodology.
In this
context, according to the Pippa official, the automatic
adjustments have undergone prior regulatory review; and
further review or hearings every time a change occurs
would be redundant and inefficient.
”It
should be considered that without an automatic
pass-through mechanism for the relevant components of
generation costs, the distribution utilities would not
be able to pay the full generation cost to generation
companies, whose payments to the fuel suppliers will in
turn be hampered,” said Pantangco. |
