MALACAñANG on Sunday admitted that the Electric Power Industry Reform Act (Epira) is defective because it contains provisions that run counter to the intent of the law, which is to ensure reasonable electricity rates.
Presidential Communications Secretary Herminio Coloma Jr. said the Palace is throwing it support to some sectors that are pushing the repeal or amendment of the EPIRA law.
“The one that was passed sought to propose reforms and we realized that the provisions are not enough because we noted a lot of weaknesses or provisions that do not really help but instead are even damaging,” Coloma said.
The official said it is high time for all stakeholders to engage in wide discussions to determine the views of those in the power sector.
Coloma said stakeholders must join these discussions and suggest
concrete actions that should be taken and come up with a national consensus on what the new EPIRA law should contain.
“That’s why all stakeholders must prepare and the government will do what is right to ensure a smooth process in accepting proposals for a new legislative proposal that would pave the way for reforms in the electric power industry,” he stressed.
He said it is important for power industry players, lawmakers, the executive branch and other agencies concerned to join the consultations and craft measures to reform the existing law.
Critics noted that while the EPIRA law of 2001 vows “to ensure transparent and reasonable prices of electricity in a regime of free and fair competition, ” it contains provisions that is contrary to this objective.
Its section 45, for instance, specifies limits to the corporate elite’s participation in the industry in order “to promote true market competition and prevent harmful monopoly and market power abuse.”
The second paragraph of this particular provision adds that “distribution utilities may enter into bilateral power supply contracts subject to review by Energy Regulatory Commission [ERC].”
Critics noted that this provision subverts the goal idea of creating a competitive market for the trade in electricity. Such a market could have brought prices down. Instead of participating in a spot market, generators and distributors could simply resort to bilateral contracts, since the cost of electricity purchased by a distributor such as Manila Electric Company (Meralco) would be passed on to consumers anyway.
This provision negates the intention of the Wholesale Electricity Spot Market (WESM) since more than 90 percent of its transactions does not Involve spot trading but bilateral contracts.
The WESM, which was created to bring down the cost of electricity for ordinary consumers and industries, therefore, is ineffective, according to critics. Since the Epira allows bilateral contracts indefinitely, generators and distributors entered into bilateral contracts.
Coloma, meanwhile, scored power generators and other industry players for their failure to prepare for the adverse impact of the maintenance shutdown of the Malampaya gas plant.
He said President Benigno Aquino 3rd himself had set three basic principles with regard to the problem of high power costs.
“Number one, preparation and contingency planning. Because the shutdown of Malampaya was made known to all industry players that’s why they should have prepared for that,” Coloma further stressed.
“The second is the aspect of regulation. The EPIRA prohibits collusion, especially if this would result to unjust costs which brings us to the third aspect which is to defend the interest of the people and ensuring that they will not be burdened by high electricity rates,” the official added.
Coloma also agreed with Sen. Sonny Angara that red tape should be removed from the application for the entry of new power plants where around 100 signatures of government officials are needed. He said there is a need for new players to come in.
“That’s why we are one with proposals like that which would remove hurdles that prolong the process of application to ensure that new plants that will suplly electricity,” he pointed out.
At the same time, Coloma said there is a “sense of urgency” in the ongoing probe on the alleged collusion among power generators and Meralco in hiking power rates.
“There are many angles, many aspects and it has complexities. This is not a simple issue… and this aspect is being thoroughly studied by the DOE [Department of Energy] and Office of Competition of [the]Department of Justice,” Coloma said.