True Competition in Power…. Our Simple But Very Elusive Dream
David Celestra Tan, MSK
29 December 2019
The supposed aim of the EPIRA Law was simple enough. To assure sufficient supply of power at fair and reasonable costs. To achieve that, it is supposed to create true competition to give consumers the benefits of least cost.
Agreeing on that general objective turned out to be the easy part even at the legislative bill’s birth as the Omnibus Power Bill.
To create true competition, it is supposed to privatize the power sector that had been a government monopoly, unbundle the industry into five sectors, deregulate it where there will be competition in each one. To insure that it will work, the Energy Regulatory Commission was created and supposedly strengthened with motu proprio mandate to protect the public interest, i.e. insuring that there is true competition and the consumers receive least cost power. The Department of Energy was tasked with providing the policy direction towards those aims.
It is the how that became a battle of vested interests. And the reason the bill took more than six (6) years to complete and pass in June 2001. By that time though, the law that was finally named The Electric Power Industry Reform Act of 2001 (EPIRA for short) or Republic Act 9136 was so full of loopholes to accommodate the all out lobbying of the vested interests, mainly Meralco.
Cross Ownership
The first battleground provision was on cross ownership where clear minded legislators wanted to prohibit any cross ownership among the three main sectors, generation, transmission, and distribution. This was thought to be critical to creating true competition.
A powerful Mindanao Senator quietly negotiated cross ownership to prohibit only between the Transmission Company and the power generation and distribution. There can be cross ownership between a distribution utility and generation companies which found its way in the law as Section 45, the most hypocritical, inconsistent, and deceptive provision of the law.
The senior Senator Juan Ponce Enrile was totally against cross ownership because he knew its implications to true competition but he compromised once he realized the law will not pass unless the vested interests and their allies get their way. In fact, Senator Enrile proposed only 30% of its power requirements that a DU can buy from an associated generating company. Meralco itself had been lobbying for 35%. In the last two days of finalizing the Epira Law, it magically became 50%! Worse, it is 50% of the DU’s demand, not also energy requirement. A subtle but big difference. Even the Senator was surprised.
I am not sure whether even Senator Enrile and the Osmena cousins imagined that this opening can spawn the creation of not only an 800-lb gorilla in power distribution but also an 800lb gorilla in power generation.
Essentially, the government owned power generation monopoly will be taken over by a private power generation cartel who has the added advantage of having also the distribution monopoly, something even the government monopoly did not have.
Cross ownership prohibition would have insured that even if there is an 800lb gorilla in distribution, there would be enough 200 to 400 lb gorillas in generation competing healthily against each other to reduce the pass on generation charge to the consumers. The distribution charges even by an 800-lb gorilla are thought can be regulated by an ERC. (Or so we thought)
In June 2015 the Department of Energy passed a rule mandating the subjecting to Competitive Selection Process (or bidding) the procurement of power supply for the captive markets. It is amazing to see most distribution companies, Meralco and even electric coops in the off-grid areas, continue trying to play games to control who wins at what price. Everyone is trying to outsmart true competition.
The Simple Dream of True Competition will remain to be very elusive until the ERC Shares the Dream.
The several versions of the ERC’s new CSP guidelines prominently included loopholes for swiss challenge, unsolicited proposals, and exemptions for negotiated contracts. So far it had held in abeyance its supposed new methodology in computing the concentration of generating capacity to determine compliance with market domination limits. We have yet to see a new commitment to true competition.
It is a new year. Another year to hope.
Matuwid na Singil sa Kuryente Consumer Alliance Inc.
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david.mskorg@yahoo.com.ph
