Tag Archives: Independent Power Producer

[Press Release] Urban poor to ERC: Not so fast -SANLAKAS

Urban poor to ERC: Not so fast
March power hike to cost a kilo of rice a month, says activist group

sanlakas-logo2Ortigas, Pasig City – An urban poor group led by Sanlakas and the Kongreso ng Pagkakaisa ng Maralitang Tagalungsod (KPML) trooped in front of the Energy Regulatory Commission (ERC) office at Ortigas to insist that ERC’s rejection of a petition to include stranded debts (SD) as part of the universal is not enough and that it should have rejected the petition on stranded contract cost (SCC) as well.

“If ERC thinks that it can already get away because it rejected the petition of Power Sector Assets and Liabilities Management Corp. (PSALM) on stranded debts, it has to think twice. It is still guilty of passing to consumers an illegitimate claim on stranded contract costs,” Sanlakas Secretary-General Manjette Lopez said in a statement.

Republic Act 9146 or the Electric Power Industry Reform Act (EPIRA) defines stranded contract costs as the excess of the contracted cost of electricity under the contracts of National Power Corporation (NPC) with Independent Power Producers (IPPs) over the actual selling price of the contracted energy output of such contracts in the market. ERC allowed this week PSALM to claim as much as P53.58 billion worth of SCC from the consumers.

Electoral backlash

Sanlakas also claims that the disapproval of stranded debt petition after approving stranded contract costs “smacks of hypocrisy”.
“Rejecting the stranded debt petition gives credence to the argument that SCC should not be included in the universal charge. We suspect that the ERC backed off on stranded debts in order to protect its Liberal Party bosses from further backlash as we approach the 2013 elections,” Lopez claims.

Lopez said that ERC should instead probe PSALM’s failure to reduce NPC debts despite selling 80 percent of its generation assets and IPP supply contracts, as well as initiate another investigation on “onerous IPP contracts”.

A Kilo of Rice a Month

The urban poor group KPML on the other hand slammed ERC for “denying the urban poor a kilo of rice a month”, claiming that the ERC failed in its mandate to protect the consumers.
“The 19.38 centavos to be collected starting next month will cost us an additional P38.76 which is even more expensive than a kilo of rice which costs P35-P38 only,” said KPML.

The protesters dramatized their “disgust at the ERC sell-out of the poor’s interests” by holding a boodle-fight in front of the ERC office.

February 22, 2013

FOR IMMEDIATE RELEASE
PRESS RELEASE
Contact Person: Manjette Lopez, Sanlakas Secretary-General @ 0922-860-8863
Val De Guzman, Media Liaison @ 0919-965-7509

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[Press Release] After 10 years of implementation: EPIRA enriches “Voltage 5”

Ten years since the passage of the Electric Power Industry Reform Act (EPIRA), its promise of affordable and accessible electricity to all through privatization and a leveled playing field in the industry has turned into its complete opposite.

Today, the Philippines suffers from the highest residential and industrial power rates in Asia, even higher than Japan.  As a consequence, millions of Filipino consumers are much poorer, electricity wise—adding another facet to the worsening problem of Philippine poverty, including the increased burden on our women.  Another victim is our industries, the share of which in our gross domestic product (GDP) has been on a downward path for the past 25 years and our agriculture which has generally declined as a share of our GDP since postwar years.

In contrast to our electricity-starved citizenry and economy, five super-rich families have become much, much richer, having cornered the fruits of EPIRA privatization which in practice has dropped all pretensions of opening up the electric power industry to as many competitive players as possible.

The Lopez and Aboitiz families have reaped the oligopolistic super-profit bonanzas from the cross-ownership of power generation and distribution. To share the ever-enlarging super-profit pie now is the rising “pacman,” Manny V. Pangilinan to whom controlling ownership of Meralco, the distribution super-monopoly of Luzon, has passed.  Not far behind is Danding Cojuangco’s San Miguel Corporation which has grabbed 30 percent of power generation nationwide.

In addition, the formerly state-owned National Transmission Corporation (TRANSCO), which handles high-voltage power transmission from power generation to distribution companies, is now in the hands of the private joint venture corporation, the National Grid Corporation of the Philippines (NGCP).  Co-owners of NGCP are Monte Oro Grid Resources Corporation which is now owned by the One Taipan Holdings, Inc. of Henry Sy of SM chain of giant malls fame, the Coyuito-led Calaca High Power Corporation, and the China State Grid Industry Development Ltd, a Chinese State corporation which owns 40 percent of the shares. The current NGCP president is Henry Sy Jr., son of the SM taipan.  It is interesting to note that the Sys bought Monte Oro from Enrique Razon Jr., who is closely associated with former President Gloria Macapagal Arroyo and who made a large killing out of this sale in less than a year after winning the bid.

We recall that one of the desperate messages contrived by the Ramos administration to justify EPIRA is the need to pay the gargantuan debts of the state-owned National Power Corporation or NPC.  By 2001, total NPC debts stood at $16.3 billion or P831 billion (P51: US$1, 2001 exchange rate).

In accordance with EPIRA, the Power Sector Assets and Liabilities Management Corporation (PSALM) was set up to privatize NPC power plants and settle its debts.  But as of 2010, NPC debts stood at $15.8 billion or P679.4 billion (P43: US$ 1, 2010 exchange rate), registering a small reduction.

PSALM’s failed to retire NPC debts despite repeated power rate increases and power adjustments under EPIRA which were all shouldered by consumers, not to mention the burden of additional taxes used to invest in NPC power plants – more than 90 percent of which have been sold to pay NPC debts. In addition, PSALM made major blunders that further aggravate its financial status like the losses from Wholesale Electricity Spot Market (WESM) trading in October 2008 to almost P1 billion. This is aside from an unconfirmed report that the agency gave an eight-month salary bonus to its officials and employees in 2010 despite its discouraging asset management performance.

So powerful has been the oligarchic clout over the electric power industry and oligarchic influence over state agencies that regulatory capture is the word that can best describe the fate of the Energy Regulatory Commission (ERC). Time and again, consumers are up in arms protesting the bias of its decisions in favor of Meralco and other large distribution companies.

Against all facts and figures indicating the damaging effect of privatization under EPIRA on our consumers and the national economy, large vested interests and their allies in government are still hell-bent on privatizing the rural electric cooperatives.  This remaining social sector or non-profit, non-state sector of the electric power industry got the mandate to electrify most of our provinces, particularly during the Marcos regime.  Despite the traditional politics and management and financial troubles of a number of these cooperatives, many of them can claim success.

Ten years of a failed privatization scheme under EPIRA should convince the Philippine government, especially Congress, to overhaul it.  Our people need and deserve a new electric power reform law that will really provide affordable, accessible and clean electricity to all. They need and deserve an electric power industry where private participation can have a place but where the State and the public/social sector dominate to secure public welfare and guarantee a national development that is based on equitable growth, sustainability and gender equality.

RICARDO B. REYES
President, Freedom from Debt Coalition

Contact person:
Ricardo B. Reyes, FDC President, +63.918.907.0674
PRESS STATEMENT
08 June 2011

[Event] National Power Summit: “Lessons Learned, Challenges and Prospects for the Philippine Power Industry” – www.fdc.ph

On the 10th year anniversary of EPIRA
An initiative by
Freedom from Debt Coalition (FDC)

in cooperation with

1st Consumers Alliance for Rural Energy Partylist (1-CARE)
Association of Mindanao Rural Electric Cooperatives (AMRECO)
Institute for Climate and Sustainable Cities (iCSC)
Foundation for Sustainable Society Inc. (FSSI)
Fair Trade Alliance (FTA)

convenes a

National Power Summit

“Lessons Learned, Challenges and Prospects for the Philippine Power Industry”

Introduction

The power industry in the Philippines is at a crossroads.

With one of the highest industrial and residential power rates in Asia and in the whole world, the industry has made life harsher and harder for poor Filipinos.  Economic growth is also slow as the high cost of power has made our industries uncompetitive in the international market, the consequences of which are being shouldered by ordinary people – by workers for instance who suffer depressed wages and job losses, and by consumers who bear the brunt of high prices of goods and services.

Regrettably for over a decade, the Filipino people have not come close to savoring the taste and smell of an affordable and reliable supply of electricity. Under the pre-EPIRA set up wherein power generation and transmission were concentrated in a state monopoly, and where rural electric cooperatives tended to serve a more political than developmental (and democratic) function, rent-seeking, corruption and political patronage became the norm, culminating in the monstrosity of the Bataan nuclear power plant, the severe power shortage of the 1990s, and debts that even the World Bank found unsatisfactory.

The power crisis from the late 80s up to the early 90s was exploited by the International Financial Institutions (IFIs) and the power-brokers in Malacanañg to tap the private sector in addressing the crisis by liberalizing the entry of Independent Power Producers (IPPs) in power generation.  The supply shortage was addressed but the prohibitive cost of such cure was not told to the public until the mid-1990s.

The apparent haste of the National Power Corporation (NPC) in entering into contracts with IPPs without it seems much consideration of actual and realistically forecasted supply and demand conditions, and without prudent assessment of the risks and costs attached to such risks that NPC was absorbing in these contracts, created a new problem for the power sector. From a situation of shortage the pendulum shifted to an over-contracted supply that consumers had to pay for whether or not they were actually using the contracted capacity. This and many anomalous details in the contracts with IPPs also sank the NPC deeper into debt: US$9-B[1] of new debts arising from the purchased power contracts with the IPPs.  These onerous IPP contracts gave rise to the unjust collection of purchased power adjustment or PPA from the consumers.  From then on, PPA constituted the single biggest item in NPC’s tariff rates, amounting to not less than P3/kWh before the unbundling of rates. This quick fix solution also allowed the entry of dirty power plants utilizing fossil fuel such as coal and diesel which pollute the environment and add to CO2 emissions.

The enactment of the Electric Power Industry Reform Act (EPIRA) in 2001 has put the IFIs power reform program in the country into full motion, with privatization as its main motor and deregulation as its accelerator.  With its proclaimed mission of lowering rates and ensuring efficient and reliable energy supply, EPIRA as it has been implemented over the past ten years has resulted to more price hikes and less competition.  In addition, the newly-created Luzon grid spot market under WESM has not been spared from price manipulation as highly concentrated demand and supply conditions make it extremely profitable for the players (private and state) to exercise and abuse market power.  Moreover, injury is aggravated when consumers are rendered helpless against these abuses and manipulations as the Department of Energy (DOE) and Energy Regulatory Commission (ERC) do nothing to stop or prevent these from happening. And they continue to happen, with impunity.

The few families that dominated the power sector in the past remain as entrenched as ever if not more so, with two or three wealthy individuals and big business groups entering the fray since the passage of EPIRA in 2001. Privatization of the government’s assets has not resulted in de-monopolization and competition, but rather, higher concentration, vertically; and horizontally. This together with deregulation of generation and supply courtesy of the EPIRA has resulted in market abuse that has so far been unchecked by the regulators. And since the government’s liabilities were not privatized, we have recently learned that privatization of the assets of the National Power Corporation has done little to reduce its debts which will now be passed on to electricity consumers, rich AND poor.

Notwithstanding all these unmet objectives of EPIRA, the IFIs, government, and power-brokers/marketers contend that while reforms in the power industry may have suffered setbacks, all these are but a work in progress as actual privatization of the assets of NPC began only five years ago. Yet with privatization continuing at a more harried pace today, the future of the industry and the dream of consumers to have universal access to affordable, sustainable and reliable power, remain bleak. As far as ordinary consumers and the poor are concerned, the lights are still off.

A. Objectives:

1. To craft strong and unified positions on the government’s campaign to privatize remaining assets of NPC (Angat, Agus-Pulangi and Unified Leyte Geothermal Plant) and the rural electric cooperatives, and on the privatization of transmission

2. To develop and promote Filipino consumers welfare and interest in the power industry

  •     Affordable power rates
  •     Reliable, secure power supply
  •     Strategic and programmed democratization of ownership and control particularly in generation and distribution sectors
  •     Strategic and programmed shift towards renewable energy
  •     Active role of the public sector in transmission and in crucial power generation

B. Target participants:

1.       119 Rural Electric Cooperatives
2.       Legislators
2.1    Hon. Senator Chiz Escudero
2.2    Hon. Senator Gringo Honasan
2.3    Hon. Senator Antonio Trillanes
2.4    Hon. Deputy Speaker Erin Tañada
2.5    Hon. Congressman Walden Bello
2.6    Hon. Congresswoman Kaka Bag-ao
2.7    Hon. Congressman Michael Angelo Rivera
2.8    Hon. Congressman Salvador Cabaluna III

3.       Consumer groups
3.1    Save Angat Dam (SAD Sale)
3.2    Coalition of Consumers for the Deferment of the Privatization of the Tongonan Geothermal Power plants (UNIFIED Leyte)
3.3    PALAG Mindanao
3.4    FDC Local chapters (Ilo-ilo, Cebu, Negros, Evis, Davao, Westmin, Gensan)

4.       Business groups (c/o FTA)
5.       Associations and unions under REC’s (c/o APL, PM, NSU-NSA)
6.       Department of Energy (DOE)
7.       Energy Regulatory Commission (ERC)
8.       Power Sector Assets and Liabilities Management Corporation (PSALM)

C. Concept and description of activities:

Day 1 – Pre-Summit (Public Forum and Focus Group Discussions)

  •     Morning session – Public Forum sponsored by the University of the Philippines-National Engineering Center

Lessons Learned – “Dissecting the Anatomy of EPIRA”

  •     Afternoon session – Breakout Groups (Focus Group Discussions)

Challenges – “Moving beyond the failures of EPIRA: Recommendations and other measures”

FGD (Session 1) – How to reduce power rates in the Philippines?
FGD (Session 2) – Solutions to NPC debts: Some recommendations
FGD (Session 3) – Making power industry more efficient, reliable and secured
FGD (Session 4) – A Viable and Democratic REC’s
FGD (Session 5) – What kind of regulation do we need and how?
FGD (Session 6) – Renewable Energy: Moving Forward

Day 2 – National Power Summit

Prospects

  •     (Moring session) – A Sustainable Framework for Electric Cooperatives in Regulated Public Utilities
  •     (Afternoon session) – Citizen’s report and recommendations on Power Industry – Multi-stakeholders gathering

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

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