Why we can’t have a ParisJuly 8, 2013 11:00 pm
PARIS: With its streets and monuments twinkling the whole night, it’s not surprising the French capital has taken on the nickname La Ville Lumiere, or City of Light.
As France Info notes, the moniker was originally used in recognition of Paris as a cultural center during the Age of Enlightenment in the 17th and 18th centuries although it took on the more traditional meaning when the city installed gas streetlights in the early 1800s.
The extravagant light show around the city is something Parisians can well afford because France has one of the cheapest power prices in Europe. In fact, France is the world’s largest net exporter of electricity due to its very low cost of generation.
Although the electricity market in France is deregulated much like the Philippines, this European nation created a “regulated” tariff market that offers lower pricing in a more stable environment from which households and businesses can purchase their requirements.
Recently, the French energy watchdog Mediateur National de l’Energie even put up an internet-based price comparison guide to allow users to find cheaper electricity prices—and to publicize that people can change suppliers.
In the Philippines, however, deregulation has brought power rates higher instead of lower.
Today, our country has the most expensive electricity in Asia.
According to a study by an international independent think-tank, with the average retail rate of electricity in the Philippines at 18.1 US cents per kilowatt/hour (kwh), it has eased out Japan—which charges 17.9 US cents per kwh —from the top of the list.
Perhaps this is also why the country’s power rates are also the fifth highest in the world at P10.52 per kilowatt-hour (kwh), behind Austria, which charges an equivalent of P11.78 per kwh, Italy (P11.84), Germany (P13.87), and Denmark (P14.98).
The high cost of power does not bode well for the Philippines, especially with the Aquino government’s plan to lure foreign investments into the country. Foreign direct investments (FDI) rely on power to operate brick-and-mortar businesses. Factors like power rates that can sigficantly impact on the cost of doing business is enough reason for potential investors to bring their money elsewhere.
We therefore need to make drastic reforms in the power sector if we are to attract long-term investments into the country, and more importantly, to keep up with the growth forecast for the Asian region.
The 2013 Asian Development Outlook (ADO-ADB) of the Asian Development Bank recently pegged Asia’s growth at a collective 6.3% to 6.4% by 2014. But the higher growth rate for the region is anything but solid.
The 2013 ADO report mentions significant cogs in the growth wheel that could drastically affect the region, the most pressing being the cost of power generation.
Which brings us to the question: Is it time to scrap Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (Epira)?
Based on the Department of Energy (DOE)’s website, the law was crafted to bring down electricity rates and to enhance the delivery of power to end-users “by encouraging greater competition and efficiency in the electricity industry.”
The so-called reforms envisioned by the law, however, seem to have been systematically delayed as prices of energy skyrocketed over the years. And despite annual increases in power rates, the country’s energy infrastructure has not improved commensurately as shown by the power crisis in Mindanao.
The lack of true competition in the power sector has stunted the country’s economic growth. While we have the Wholesale Electricity Spot Market or WESM—a sort of auction house for electricity—the tight power supply and the limited number of players has not produced real choices for Filipinos.
If we are to foster true competition in the power sector and bring down power rates, we need to scrap or amend the Epira law—and soon.
This should be the Aquino government’s primary reform agenda in the energy sector. The law hardly delivered on what it was supposed to accomplish: lower electricity rates and the dismantling of the power monopoly.
The government bailed out bankrupt National Power Corporation (Napocor) and electric cooperatives with taxpayers’ money only to have them mired in huge debts again more than a decade after Epira. One can hardly stress it enough: the people’s money was used to bail out Napocor even as it continues to exact high prices from the public.
The country must draft a new law (and rules) that will foster true market competition, dismantle monopolies, and spur investments in new—rather than newly-owned but existing—power facilities.
Unless that’s done, the country is destined for a dark future—literally and figuratively.
Will this be the legacy of the Aquino administration in 2016?