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By Euan Paulo C. Ańonuevo, Reporter
For Philippine manufactured
products to stay globally competitive—granted that there is no
issue about quality—the export price must be comparable to similar
goods from other countries.
The high cost of power in the
Philippines is often blamed for making local products uncompetitive
in the global market. And until assets of the National Power Corp. (Napocor)
are privatized, exporters believe the promise of lower power costs
will not be realized.
“Our power rates are the
highest in Asia, running close to Japan,” said Jose Ibazeta,
president of the Power Sector Assets and Liabilities Management
Corp. (PSALM).
“People are asking why our
rates are high, but actually they are not,” he added. “What is
happening is that the Philippines is the most transparent nation in
terms of power rates, because we do not have subsidies.”
Countries like Vietnam, China,
Thailand and Malaysia, which enjoy lower rates compared to the
country, have “hidden subsidies” that the Philippine government,
as a policy, does not provide, Ibazeta said.
“The cost of producing energy
is the same for everybody, whether it is coal, gas or geothermal.
There is no difference. The distribution costs are the same. So the
difference in rates must go down somewhere,” he said.
To bring down the country’s
electricity costs, the government is banking on the implementation
of the Electric Power Industry Reform Act (EPIRA) of 2001 to spur
competition in the once state-controlled power sector.
Many of the objectives of that
law have been accomplished, including the unbundling of power rates,
the restructuring of the power sector and the establishment of the
Wholesale Electricity Spot Market (WESM). Still, local rates are
high, and what remains to be done is the privatization of
government’s power assets.
PSALM is tasked to carry out the
privatization by selling at least 70 percent of state-owned
Napocor’s generating and contracted capacity.
Once these provisions are met,
open access can start in the power sector, and will allow consumers,
starting with large power users, to choose from whom to source their
power supply.
At present, the asset management
firm has achieved a 42.8-percent privatization threshold for power
plants and would only need to auction off a couple of Napocor’s
large plants to reach to 70-percent target, Ibazeta said.
The process of privatizing
Napocor’s contracted independent power producers (IPP) by bidding
this out to IPP administrators, who will market the plants’ energy
output, will only start in August. But already a number of groups
have already expressed interest in participating.
PSALM aims to complete these
tasks within the year. This will ensure that open access begins in
2010.
Besides the promise of lower
rates, PSALM’s privatization mandate also assures the country’s
future power supply because the government is prohibited under the
Electric Power Industry Reform Act to enter into new power purchase
agreements with independent power producers. The private
sector—meaning the independent power producers—must expand their
facilities or start new ones.
The Department of Energy’s
Supplemental Power Development Plan 2006 to 2014, released in the
last quarter of 2007, foresees that the country’s power supply
will be critical for the Luzon grid in 2010, the Visayas grid in
2011, and the Mindanao grid in 2009.
Unless new plants are expanded or
put up altogether by the private sector, then the country would be
facing rotating brownouts reminiscent of the ones experienced in the
early 1990s.
Meanwhile, questions still remain
as to how PSALM will privatize Napocor’s contracts with
independent power producers, because this is the first time such an
endeavor will be carried out anywhere in the world.
Ibazeta said earlier that the
agency may come up with a decision on how to go about it within
April, as it has already narrowed down its options to two
possibilities.
One option is to transfer
Napocor’s fuel procurement functions from the independent power
producers to the IPP administrators in order to attract the interest
of investors.
When PSALM completes its mandated
privatization threshold, however, household consumers could be
disappointed.
Ibazeta said it is
industries—not households or other small consumers of power—that
will directly benefit from the lower rates. But household consumers
will indirectly benefit from “the multiplier effect” of having
more businesses and foreign investors operating in the country
providing better jobs and services.
The second option is to retain
the status quo.
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