From energy regulation to deregulation, Part 2
By Bienvenido Oplas Jr. – February 6, 2025 | 12:00am
from The Philippine Star
In 2000 or one year before the Electric Power Industry Reform Act of 2001 (EPIRA, RA 9136), the primary energy consumption (PEC, for transportation, cooking, electricity, etc.) of these four ASEAN countries in exajoules (EJ) were as follows: Indonesia 4.19, Malaysia 2.20, Philippines 1.11, Vietnam 0.77. One EJ is equivalent to 277.78 terawatt-hours of electricity.
In 2010 or after a decade, their respective PEC in EJ were: 6.26, 3.36, 1.23, 1.94. Vietnam overtook the Philippines in 2004. And in 2023, their respective PEC in EJ were: 10.11, 4.81, 2.19, 4.89.
The percentage increase from 2000 to 2023 were as follows: Indonesia 141.3 percent, Malaysia 118.5 percent, Philippines 98 percent, Vietnam 534.5 percent.
The main reason for this perhaps is that Indonesia, Malaysia and Vietnam subsidize their energy while the Philippines taxes its energy. The most recent energy tax hike was under the TRAIN law of 2017 (RA 10963): diesel from zero to P6/liter, gasoline from P4 to P10/liter, LPG from zero to P3/liter, coal from P10 to P150/ton.
Aside from energy taxation, energy regulation must have contributed also to slow expansion of PEC in the Philippines relative to its ASEAN neighbors like Indonesia, Malaysia and Vietnam.
The Energy Regulatory Commission (ERC) was created under Chapter IV of EPIRA law with a primary function to “promote competition, encourage market development, ensure customer choice, and penalize the abuse of market power” (Section 43).
There is a Congress Bill amending EPIRA particularly the ERC. In the latest House Committee Report No. 1381 submitted by the Committee on Energy and Committee on Appropriations last Jan. 25, 2025, one proposal is to have “benchmarking rates” not only for transmission and distribution but also for “procurement of necessary power supply for distribution utilities (DUs) and ancillary services (AS)”, meaning power supply agreements (PSAs) between generation companies (gencos) and DUs, AS.
The ERC itself has been conducting consultation and group discussion about this plus other amendments in EPIRA. This “benchmarking” for power generation is wrong and unnecessary, here are five reasons why.
One, generation sector under EPIRA is deregulated and competitive, no monopoly or oligopoly in any region or any technology or source of electricity. Those who over-price will risk not getting any supply contract, those who cartelize can be blindsided by new players and merchant power plants.
Two, competitive selection process (CSP) supervised by the ERC itself is sufficient to ensure price competitiveness. There is no provision in EPIRA stating that the costs of generators shall be regulated by the ERC, no provision that generators must disclose their costs to the ERC.
Three, the retail competition and open access (RCOA) provision of EPIRA makes the end-consumers as ultimate regulator — in pricing, electricity source and other criteria. ERC itself can become relevant only when there is breach of contract between the gencos and end-consumers.
Four, “one price fits all” via benchmarking in generation is price control and hence, price dictatorship. Price differentiation under consumer segmentation allows for best and competitive pricing for different consumers. Even in the same bus company plying same route say Cubao to Baguio, there is no single monthly pay for all drivers, the more experienced drivers are paid higher than less experienced ones.
Five, the main factor that affect electricity pricing is how large the supply is relative to the demand, which determines the level of supply margin and reserves. Energy regulation should be kept to the minimum so that more players, more investors will come in to expand power supply and hence, increase power reserves that can bring down electricity prices both short- and long-term.
Again, the most expensive electricity is no electricity, a blackout. The rich will turn to gensets running on diesel, more costly and more polluting while the poor will turn to candles which can cause fires and damage to lives and properties.
Energy deregulation to further expand energy investment and supply can be the elephant in the room in terms of ensuring price competitiveness. Regulation should focus on enforcement of contracts between power suppliers and consumers, penalize the wrong-doers, discipline the market towards more competition and not deception.
RPA Lecture on Energy Trilemma
Tomorrow Feb. 7 at 3 p.m., the 3rd Ruperto P. Alonzo (RPA) Annual Memorial Lecture will be held at the Elizabeth Yu Gokongwei room of UP School of Economics (UPSE), Diliman, Quezon City. The speakers will be House committee on nuclear energy chairperson Rep. Mark Cojuangco, DOE UnderSecretary Rowena Guevarra, ACEN president Eric Francia and Institute of Climate advisor Albert Dalusung. The lecture is free and open to the public, no need to pre-register.
After the RPA lecture, the UPSE Program in Development Economics (PDE) alumni homecoming will follow at the same venue. Prof. RPA (+) was a highly respected faculty member of UPSE and PDE was his beloved program. Hence, the annual lecture was named after him. Before he passed away, he did a number of energy economics research, he was focused on energy security, stability and price competitiveness. Hence, he was agnostic about where the energy source will come from so long as the power sector can support and sustain the country’s high growth agenda.
