Power, oil sector reforms stall amid global crisis

WHILE the country’s green energy initiatives began taking off in 2009, earlier reforms in the sector risked unraveling that year. As local oil companies failed to reflect the sudden fall in world crude prices, the clamor for a revision of the Downstream Oil Deregulation Act of 1998 gained steam.

The debate on how much domestic prices should go down rocked the government, with two key agencies locked in a verbal, and very public tussle over the correct figures.

Mandated by law to monitor fuel prices, the Department of Energy (DOE) claimed that prices were “reasonable” and reflective of market forces.

The National Economic and Development Authority (NEDA), however, thought otherwise, and led the call for revisiting the law.

But allegations of cartel behavior didn’t hold water, as smaller players broke ranks and played a game of one-upmanship against the industry’s stalwarts.

The NEDA chief subsequently resigned over what he claimed were policy differences with Malacañang.

But the Palace was no rabid defender of free markets, as a string of typhoons led the President to impose price controls—a move that was short-lived after drawing flak from the business community.

While the start of the election season broke the momentum of the campaign to revise the Downstream Deregulation Act, critics of the law promised to make this a key campaign issue.

Another reform whose failure loomed large was the Electric Power Industry Reform Act of 2001 (EPIRA).

This law mandated the sale of at least 70 percent of the generating plants and contracted capacities of state-owned National Power Corp. (Napocor) in preparation for a shift to an open regime, wherein consumers can choose their suppliers based on cost-efficiency.

Early in 2009, the power-sector restructuring program, however, stalled, as a buyer of a major plant failed to pay up.

The global financial crisis was partly to blame, as access to credit dried up. This was crucial in the power sector since investments ran to the billions of pesos.

One after another, auctions for other plants fell through, while a buyer of another big facility withdrew, citing delays in promised reforms.

The tide turned, however, later in the year, as state-run Power Sector Assets and Liabilities Management Corp. (PSALM) managed to hit the threshold for Napocor’s generation plants.

It now remains for PSALM to do the same for Napocor’s contracted capacities, which represent power generated by third-party providers, or the so-called independent power producers (IPPs).

Beyond the generation leg, the EPIRA also required government to turn over the reigns of the Wholesale Electricity Spot Market (WESM) to the private sector.

“If you look at it in Luzon practically every Napocor plant has been privatized already. But here you are in Luzon with a lot of success in privatization and yet you have a PEMC that is still in government control,” said Ernesto Pantangco, Philippine Independent Power Producers Association president, referring to the Philippine Electricity Market Corp., which administers the WESM on behalf of the state.

As the Philippines slowly recovers from the global slump, electricity demand is forecast to pick up. Further delays in the EPIRA reforms would stunt this nascent economic recovery.

This early, areas like the Visayas are suffering from rotating brownouts because of insufficient supply. –EUAN PAULO C. AÑONUEVO, Manila Times