Consumers Domain
Policy failure
"You grieve you learn; you choke you learn; you laugh you learn;
You choose you learn; you pray you learn; you ask you learn…"
-- from "You Learn" by Alanis Morissette
The country's energy policy is embodied in Republic Act 9136 otherwise known as the Electric Power Industry Reform Act or EPIRA. Passed in 2001, EPIRA can be remembered as the law that was passed through massive distribution of payola in Congress.
It is interesting to note that this same EPIRA is a product of a prescription by the Asian Development Bank (ADB) as part of its power sector restructuring program. Yes, the passage of EPIRA, which privatized the power industry in the country, is a precondition to additional loans from the ADB.
The government and the ADB declared that this law would benefit the people, as it will bring down power rates. Today however, we are still reeling from exorbitant electric bills -- charges that put the Philippines in the top 10 list of countries with the highest power rates in the world!
Not only that NPC's debt burden are being passed on to consumers but the Philippine Government is also made to assume the ballooning obligations arising from onerous contracts with Independent Power Producers (IPPs). So again, we received a left hook as consumers and endured a right hook as taxpayers.
When will our government learn?
Below are excerpts from a press statement released by FDC (Freedom from Debt Coalition) and JS-APMDD (Jubilee South-Asia Pacific Movement on Debt and Development) entitled "ADB energy policy a failure".
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Stressing that the Asian Development Bank's energy policy is a failure in its developing member countries (DMCs) like the Philippines, FDC and JS-APMDD on Friday (July 13) trooped to the Bank's main headquarters in Ortigas Center where the last leg of the sub-regional consultations on new energy strategy is being conducted.
The FDC blamed ADB's power sector restructuring and privatization program for the ballooning National Power Corporation and national government debts, higher power rates, unreliability of supply and lesser access by the poor.
The following points illustrate the Philippine experience in power sector reforms/privatization:
It is all about catering to the interests of the corporate private sector;
• The government increased the generation rates to attract more investors/ private sector to participate in the privatization of government's generation assets;
• It legitimized the payments to expensive and onerous independent power producer (IPP) contracts;
It has led to more increases in electricity rates;
• Power rates in the Philippines are among the 10 highest in the world. Metro Manila residential consumers are now paying P9.50/kwh for electricity from only less than P6/kwh before EPIRA was implemented in 2001;
• NPC's debt burden and financial obligations to IPPs are passed on to consumers in the form of present automatic cost recoveries and universal charge beginning 2008, which consumers, whether rich or poor are compelled to pay;
• Some US$3.1 billion worth of universal charge to pay for stranded liabilities to the IPPs contracted by NPC shall be collected from the consumers beginning year 2008;
It has created more debts, not only for the state-owned power corporation, but to the national government as well;
• ADB released in December 1998 a US$300 million power sector restructuring program (PSRP) loan for the restructuring of the Philippine power industry and privatization of NPC. Two technical assistance projects amounting $750,000 and $680,000 were tied to it;
• US$5 million more technical assistances were provided to the government in pursuing ADB's power sector restructuring program for the Philippines;
• NPC and the Power Sector Assets and Liabilities Management Corp. (PSALM) -- which now holds NPC's IPP contracts -- debts and obligations have now ballooned to about P1.4 trillion from only about P500 billion in 1998, when PSRP was approved;
• More debts for the Filipinos as US$9.1 billion or P418.6 b (US$1=P46) government-assumed loans from NPC and deficits/losses from contracts with IPPs are to be serviced/financed in 2006-2010. US$450 million was already released by ADB in December 2006 under the Power Sector Development Program Loan;
Even the promise of energy efficiency/reliability is not assured as well as until now, despite excess generation capacity, the country continues to experience brownouts that are now becoming almost regular; and,
Its competitive electricity market model -- the wholesale electricity spot market (WESM) -- that ADB and the government claim to result in reduction of electricity rates is proving to be a failure in the country as well based on the price manipulations that have occurred in its operation in
Luzon last year. This model is not fitted in countries like the Philippines wherein the market is small.
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