[Press Release] EPIRA a “massive failure” – FDC

Posted on May 22, 2011 by Human Rights Online Philippines Leave a comment

MANILA, Philippines – For not succeeding in achieving its objectives of reducing the debts of the National Power Corporation (NPC) and bringing down the power rates in its 10 years of implementation, the Electric Power Industry Reform Act (EPIRA) is a “massive failure,” according to the Freedom from Debt Coalition.

FDC issued the statement echoing the opinion of Senator Joker Arroyo who said that “EPIRA is a failure” during a public hearing of the Joint Congressional Power Commission (JCPC) last Thursday at the Senate.

The advocacy group asked the JCPC to compel the NPC and the Power Sector Assets and Liabilities Management Corporation (PSALM) to make public their financial statements. PSALM is the agency in charge of selling government power assets.

FDC secretary-general Milo Tanchuling, who participated in the JCPC public hearing, stressed that after ten years since EPIRA was passed the power rates have increased and the total amount of NPC debts have remained virtually the same.

He explained that the figures presented by PSALM showed that the NPC’s debt and other financial obligations stood at US$16.387 billion in 2001 when EPIRA was passed. At the end of 2010, it amounted to US$15.821 billion, or a difference of only US$500 million.

“With regard to the basic generation rates of NPC, there have been two rounds of increases since EPIRA was approved, first in 2005 when NPC was granted a P1.03 per kilowatt per hour (kWh) increase and in 2009 when NPC was again granted increases of P0.4682 per kWh in Luzon, P1.1460 per kWh in the Visayas and P0.7147 per kWh in Mindanao,” he said.

Tanchuling said during the JCPC public hearing that his organization was “dismayed by the fact that the huge debts of NPC have remained in spite of repeated power rates increases and power adjustments under EPIRA which were all shouldered by ordinary consumers, not to mention the burden of additional taxes used to invest in the NPC power plants—most of which have now been sold supposedly to pay the NPC debts.”

“It was clear that, EPIRA did not provide for any substantial and meaningful renegotiation of NPC’s contracts with independent power producers (IPPs), even though these contracts require NPC to purchase electricity whether or not these are actually generated or dispatched, and to supply fuel to IPPs that are in operation. The price NPC agreed to pay for this electricity was overstated to begin with, and many of these contracts have clauses that allow the IPP to raise rates over time,” he pointed out.

Tanchuling noted that EPIRA’s failure to meet these two objectives were also the reasons mentioned by Senator Arroyo during the JCPC meeting for the failure of the EPIRA.

Tanchuling proposed to the JCPC that NPC and PSALM should release their annual financial statements to the JCPC so that the public may know why NPC’s indebtedness was not reduced even after selling the bulk of its assets, hiking its generation rates twice and, on top of these, receiving regular payments of its so-called deferred accounting adjustments through the Generation Rate Adjustment Mechanism (GRAM) and Incremental Currency Exchange Rate Adjustment Mechanism (ICERA).

“Moreover, a debt audit of the NPC debts and financial obligations is needed to determine if these were contracted under fair terms and conditions, and then used wisely and prudently. The Filipino people will also have a solid basis to demand the repudiation of any onerous debts and financial obligations of NPC,” he added, “which if passed on to electricity consumers and taxpayers would be a grave injustice.”

Press Release
Contact Person: Milo Tanchuling
Tel. No. (02) 921-19-85