Trouble after trouble for PH power sector

BY JORDEENE SHEEX LAGARE, Manila Times, Jan 7, 2018

2018 wasn’t trouble-free for the Philippine power sector, which — after a relatively run of the mill legal dispute over planned reforms — saw controversies right up to the end of the year.

Access barred

To begin with, there was a Supreme Court order temporarily halting enforcement of the retail competition and open access (RCOA) scheme. A provision of the Electric Power Industry Reform Act of 2001, RCOA was supposed to enable consumers to choose a retail electricity supplier accredited by the Energy Regulatory Commission (ERC).

The court’s February restraining order stopped the Department of Energy (DoE) and the ERC from implementing the mandatory migration of large power consumers to the RCOA system. The ERC filed a motion for reconsideration — which is yet to be resolved by the country’s highest tribunal — and claimed the court order was hampering competition and customer choice.

The ERC also said that in complying with the court order, it was unable to process applications for licenses and the DoE, for its part, has said it was considering options on how to proceed with the resumption of the RCOA system.

Hoping to clear hurdles Energy Secretary Alfonso Cusi signed two circulars in November with adherence to guidelines being made voluntary rather than mandatory. The first circular calls for the voluntary participation of customers with an average demand of at least 750 kilowatts (kW) while the other provides for the voluntary participation of consumers by June 2018 or an earlier date but with a lower consumption threshold of 500 kW instead of 749 kW.

Waters still disputed

Despite improving relations between China and the Philippines, a sovereignty issue that has hampered exploration in the South China Sea remains unsolved and so a moratorium issued by the previous administration in 2015 is still in effect. The Department of Foreign Affairs and the DoE are scrambling to find a win-win solution and Cusi in August noted a “sense of urgency” with regard to energy security.

Businessman Manuel Pangilinan, who is chairman of PXP Energy, has expressed optimism that exploration activity under Service Contract 72 (SC72) covering the disputed Recto Bank would resume. “I think to the extent that the government has adopted a more friendly, more conciliatory push to China, I think the atmosphere has become better for a resumption of a discussion with China in general,” he said in March. “And we’d like to move in that direction.”

Fitch-owned BMI Research in September noted improving relations between Beijing and Manila had bolstered prospects for a joint exploration in the disputed area but all the optimism has remained talk at this point.

Corruption in ERC

The ERC, which is normally only questioned over its decisions on power rates, found its top officials raked over the coals last year.

ERC Chairman Jose Vicente Salazar was suspended in May over allegations of corruption. Originally under fire over the 2016 suicide of an ERC director who charged Salazar with bid-rigging, Salazar was subsequently dismissed in October on several counts of simple and grave misconduct.

The row exposed rifts within the commission, with Salazar’s fellow officials disputing his actions while in office. The same officials, however, last month found themselves suspended for a year for allegedly approving anomalous power supply deals, a development that has threatened to derail work at the regulator.

Commissioner Alfredo Non, Josefina Patricia Magpale-Asirit, Gloria Victoria Yap-Taruc, and Geronimo Sta. Ana, as well as director Debora Anastacia Layugan were also criticized for taking allegedly lavish trips abroad.

Amid the allegations roiling the ERC, President Rodrigo Duterte named Agnes Devanadera as the new ERC chair in November, replacing Salazar who assumed the post in 2005. Devanadera, who was given a term of up to July 2022, was formerly Justice secretary and government corporate counsel during the Arroyo administration.

One-(wo)man commission

With the four commissioners’ suspensions, Devanadera has been left as the sole official of the ERC. As a collegial body, the ERC needs at least three members to constitute a quorum that will allow the agency to adopt a ruling, order, resolution, or decision, as well as perform other functions to exercise its quasi-judicial and quasi-legislative functions.

“The paralysis starts…,” Devanadera declared following the suspensions. She also described the Ombudsman’s order as regulatory risk that could severely affect the country’s economic and financial environment.

Among the pressing issues left in limbo are decision on power supply deals inked by Manila Electric Co. with its affiliates, not to mention rate adjustment petitions filed industry players whose operations and expansion plans could be affected.