Drastic drop in power rates seen

The public will finally reap the benefits of the Electric Power Industry Reform Act (Epira) in two to three years’ time now that all prerequisites mandated by the law have been achieved, said an energy industry expert.

Alan T. Ortiz, president and COO of San Miguel Global Power Holdings Corp., believes that power consumers may expect a 25-percent drop in electricity prices by 2014 or 2015, when the open access and retail competition mechanism would have been fully implemented and the new generation facilities start commercial operations.

“In three years’ time, (power) rates should come down particularly when all these capacities become available in an open market…. There’ll be a cutthroat competition to give consumers the cheapest and most reliable scenario. It’s reasonable to expect that,” Ortiz said.

Ortiz, who headed the state-run National Transmission Corp. (Transco), noted that when the Epira was drafted and passed in 2001, it was estimated that it would take 10 years to complete all the requirements that would allow the government to lower electricity rates and reduce the staggering debt of state-run National Power Corp. (Napocor).

Such requirements included the sale of at least 70 percent of government-owned power generation assets and contracted capacities and the establishment of a wholesale electricity spot market in Luzon. It was only earlier this year that the Energy Regulatory Commission declared that all requirements had been met, thus paving the way for the open access regime to commence.

“Historically, in other parts of the world, rates have come down by 25 percent [within a couple of years from the completion of the requirements]. So it’s an important threshold we have to watch,” Ortiz added.

Ortiz pointed out that the good thing about the Aquino administration was that it was able to gain the confidence of both local and foreign investors, who decided to pour much-needed capital to boost the Philippine energy sector.

But some concerned groups claimed that Filipino power consumers are worse off now than they were 10 years ago because the Epira failed to achieve its targets of reducing power rates and Napocor’s debt.

The Bagong Alyansang Makabayan (Bayan), for one, pointed out that the average power rates of Manila Electric Co. customers more than doubled during the past decade. From P4.87 per kilowatt-hour in 2000, the average generation rate rose to P10.35 per kWh.

Bayan secretary general Renato Reyes Jr. said the same trend was also apparent for Napocor’s generation rates for the Luzon grid, which almost doubled during the 10 years that the Epira was being implemented. The average rate in 2000 was P2.39 per kWh while that for 2010 stood at 4.67 per kWh.

The liabilities of Napocor, however, increased significantly. Even if the government were able to pay $18 billion over the past 10 years, Napocor’s debt still stood at a staggering $15.821 billion as of end-2010.