Senate approves amendment of EPIRA

Published by rudy Date posted on April 24, 2009

The Senate approved Wednesday on second reading the amendment of the eight-year-old Electric Power Industry Reform Act (EPIRA) “to ease the burden of power consumers, [eliminate] stranded-cost recovery and enhance competition among power industry players.”

Senate President Juan Ponce Enrile, the principal author of the amendatory bill, said the main highlights of the approved measure are the hastening of open access, the cap on systems loss and the institution of rights and privileges of power consumers.

“Open access” gives certain power consumers the privilege of choosing which power utility would supply their power needs. EPIRA states that the open-access regime will take place once the state-owned National Power Corp. (Napocor) has privatized 70 percent of its power-generating assets.

Enrile said that under his bill, the threshold of privatization is scaled down to 50 percent, “which means that retail competition and open access would be immediately implemented.”

He added that “system loss” had generated a lot of controversy when it was learned that some power-distribution utilities are passing on their own power consumption to consumers as “system loss.”

The amendatory bill states that “the one-percent administrative use of electricity by distribution utilities shall be removed as part of the system loss that may be passed on to the end-users.”

The corporate income tax of a distribution utility will no longer be passed on to the end-users of electricity while the Energy Regulatory Commission is directed to review the allowable systems loss caps and the proper allocation of system loss.

Incentive to utilities

“The ERC will also grant incentives to distribution utilities that reduce their systems losses below the mandated caps to allow consumers and distribution utilities to share equitably in the efficiency gains,” Enrile said.

He explained that the non-recovery of stranded debts and contract costs by Napocor, the Power Sector Assets and Liabilities Management Corp. (PSALM), generation companies and distribution utilities will result in the reflection of the “true cost of power and avoid additional burden to consumers.”

“Stranded contract costs” refer to the excess of the contracted cost of electricity over actual selling price of energy in the market. “Stranded debts” refer to any unpaid obligations of Napocor that have not been liquidated by the proceeds from the sales and privatization of its assets.

Enrile also cited the provisions in the amendatory bill on the protection and promotion of consumer rights and interests. Among the provisions are granting consumers adequate access to information on electric service, prompt and speedy resolution of complaints and freedom to organize themselves as a consumer group in the franchise area where they belong.

The House Committee on Energy headed by Rep. Juan Miguel “Mikey” Arroyo of Pampanga had issued a manifestation declaring that the panel was no longer interested in amending the act.

Enrile said this manifestation meant nothing to him and the Senate.

“I cannot dictate on them [congressmen], but the Senate will do its duty,” he added.

Enrile admitted that the amendment of the act would not have as immediate an impact on lowering power rates as two other bills that he had introduced. One bill seeks to impose on power-distribution utilities just a franchise tax of three percent on gross distribution income in lieu of income tax, the 12-percent value-added tax, business taxes, licenses and any and all taxes, duties, fees and charges of any kind.

Enrile noted that under the system at present, power-industry players merely pass on their ordinary income tax, as well as the 12-percent value-added tax to consumers. He pointed out that a franchise tax is not a pass-on tax, so the amendment would “ease the burden of consumers, as well as allow industry players to enjoy a more equitable tax regime.”

The second bill seeks to reduce the royalties, returns and taxes of the national government for the exploitation of all indigenous sources of energy. –Efren L. Danao, Senior Reporter, Manila Times

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