Is EPIRA fight really for ‘open access’?

GOTCHA By Jarius Bondoc, The Philippine Star,Wednesday, June 11, 2008

All good attorneys know: “If your case is strong on facts, pound on the facts; if it is strong in law, pound on the law. But if your case is weak, pound the table.” Last week three eminent admin lawyer-senators did just that — slam fists on desks — upon running out of arguments in their own arranged hearing on electricity rates.

Object of ire was the Joint Foreign Chambers, whom Miriam Santiago called to the inquest as head of the committee on energy. Juan Ponce Enrile has a bill to amend the 2001 Electric Power Industry Reform Act (EPIRA). Investors from the US, Japan, Korea, Canada, Europe and Australia-New Zealand oppose any revision. Enrile wanted to know why they had written President Arroyo instead of the Senate where his bill pends. The guests began to read in reply their self-explanatory letter to the highest official who promises open ears. Santiago cut them off, demanding only answers she wanted to hear. Joker Arroyo, once Enrile’s nemesis against martial law and frequent admonisher against going ballistic, joined the bashing as the foreigners “had it coming.”

And yet it’s all there in the May 28 letter. Enrile’s amendments center on “open access and retail competition,” and the foreigners debunk the need for revisions to make it happen. Both sides avow intentions to bring down power rates. Exchanging views, not browbeating invited resource persons, is the tack for parties with similar aims.

“Open access” would enable big users to buy from power suppliers of their choice via “retail competition.” Under EPIRA, factories and facilities that burn at least 750 kilowatt-hours a month should be able to buy cheap straight from retailers. They will just pay rent for the use of transmission lines, which too can be by free pick. The state-run wholesale electricity spot market (WESM) will be their venue for trading, based on buyers’ hourly needs and sellers’ predicted supply. Businesses can adjust operations based on cheap power periods, while power producers can sell excess supply. Buyers save on power bills; generators run on optimum capacities.

The EPIRA initially estimated a “contestable” market for open access at 25 percent of the entire electricity clientele. Examples: electronics makers, airports, hospitals. The other 75 percent is a “captive” market of homes and offices that use moderate electricity. But smart residential and commercial subdivisions can bid too as homeowners’ associations and store chains.

Open access-retail competition should have commenced three years after EPIRA’s passage, subject to five conditions: (1) founding of the WESM, (2) unbundling of transmission and distribution charges, (3) removal of cross subsidies for generation, (4) privatiza-tion of at least 70 percent of Napocor generators in Luzon and Visayas, (5) transfer of management of at least 70 percent of power plants under contract with Napocor to a private-run IPP Administrator.

Only the first three have been met. Open access-retail competition has been delayed four years because Napocor was too slow to sell off its plants. Enter Enrile with an amendment to lower the open access threshold from 75- to only 50-percent sale of Napocor generation assets. It could spell relief long sought by businessmen who have been bearing for the highest power rates in Asia next to Japan’s. Immediately public hearings were set.

Coincidentally, however, Arroyo launched a squeeze play against the Lopez family that controls Meralco, the biggest power distributor. Senators accused the utility of illegally passing on systems losses to users, although allowed by the EPIRA and so approved by energy regulators. Congressmen led by the President’s son Mikey, House energy chair, flayed “sweetheart deals” of Lopez-owned generators with Meralco.

Energy firms, mostly members of foreign chambers of commerce, grew apprehensive. Congress moves to open the EPIRA may not end with lowering the 75-percent threshold, but touch as well on deals inked under the Emergency Power Act of 1992. Testimonies in the first Senate hearing bolstered suspicions. No less than Jose Ibazeta, chief auctioneer of Napocor plants, swore that his Power Sector Assets and Liabilities Management Corp. already has sold 48 percent. Moreover, the state firm can bid out up to 82 percent of remaining plants by yearend. There was clearly no need to amend the EPIRA threshold. The foreign chambers and other industry groups wrote to Malacañang and the energy department to say they could even start retail trading at once.

But Napocor continued to press for lower threshold. Industry men wondered if this was to retain its managers’ control of coal purchases for Luzon plants. In Apr. 2007 and Feb. 2008 the Napocor brass imported coal on “emergency” at billions of pesos costlier than market rates. The senators must have heard of this reason for resistance to EPIRA revisions. But the foreigners were not about to confirm it.   

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E-mail: jariusbondoc@workmail.com