Powering development through proper energy policies

Atty. Hannah Viola, Energy and Infrastructure Fellow of the Stratbase ADR Institute and Convenor of CitizenWatch Philippines

Last week, consumer group CitizenWatch Philippines, in partnership with Stratbase ADR Institute, hosted an energy stakeholder’s forum entitled “Energy Outlook: Supplying Rising Demand at Lower Cost.” The forum aimed to provide different stakeholders in the power industry a conducive venue to tackle the key issues affecting the real cost of electricity in view of price fluctuations, market volatility and rising energy demand.

The forum’s theme was quite timely, if not, controversial. Since the start of the year, the inflation rate has made a considerable jump from 3.8% in January to 6.4% this August, and is further expected to increase by September.

Pulse Asia recently released its survey results which reflected that rising inflation remains one of the most urgent concerns of Filipinos. Out of 1,800 respondents surveyed, 63%, compared to last month’s figure at 51%, consider inflation an issue that the Duterte administration must immediately address. Sometime last month, Pulse Asia also released a report that a majority of Filipino adults (60%) are dissatisfied with electricity prices.

Senator Sherwin Gatchalian, the keynote speaker, discussed legislative measures that would address this concern, namely: 1) Energy Virtual One Stop Shop Act, which seeks to establish a single electronic network-based platform under the Department of Energy where companies can apply and submit all documents for new energy projects and receive action on these applications within a mandated timeline. This measure translates to Php 0.35/ kWh potential savings for a typical household consuming 200 kWh; 2) Recoverable Systems Loss Cap, which aims to lower the cap from 8.5% to 5% for distribution utilities and 13% to 10% for electric cooperatives resulting in Php 0.1196 kWh potential savings; 3) Electricity Procurement Act, which seeks to reduce rates to Php 0.13 kWh by proposing a uniform Competitive Selection Process across distribution utilities and streamlines the procedure as facilitated by a Single Third Party Auctioneer regulated by the Energy Regulatory Commission and; 4) Murang Kuryente Act which lowers electricity prices by Php 0.5745 kWh by using the Malampaya Fund to pay the stranded contract costs and stranded debt of the National Power Corp. If all four measures are approved, the approximate amount of savings for Filipino consumers is Php 1.1741 kWh for a typical household consuming 200 kWh.

Meanwhile, Director Mario Marasigan of the Electric Power Industry Management Bureau of the Department of Energy presented an update on the implementation of the power sector road map. With regard to the generation road map, DOE is currently developing guidelines for the accreditation of a third party independent auditor for the performance audit and is pursuing the entry of emerging technologies for power generation through the expanded Energy Storage System. For the transmission road map, Director Marasigan underscored the timely completion of projects, such as the Mindanao-Visayas Interconnection Project by 2020. He also discussed the distribution road map, which tackles policies concerning the Competitive Selection Process, Retail Competition and Open Access, Smart Grid, Direct Connection Application for end-users and Uniform Monthly Electricity Bill Format. More importantly, Director Marasigan presented a comparative analysis of ASEAN Rates using data as of July 2018. While it is true that the Philippines has one of the highest electricity rates compared to its ASEAN neighbors, this is only limited to the residential customer class. On the average, Cambodia has the highest electricity rate, followed by the Philippines, Singapore, Myanmar and Thailand.

Dr. Raul Fabella called for reforms within the current legal framework to improve the efficiency of electric cooperatives (ECs) by providing for loss of franchise for non-performance and removing the privatization of ECs from National Electrification Administration due to conflict of interest. Based on data presented, 56% of the Philippine households are served by electric cooperatives, 34% are served by private distribution utilities, and 10% are served by private investor owned utilities or local government unit owned utilities.

Francis Saturnino C. Juan, president of the Independent Electricity Market Operator of the Philippines, Inc., also showed that inflation has steadily increased, despite the relatively stable Wholesale Electricity Spot Market (WESM) settlement prices. He elaborated that the supply margin and WESM prices are highly correlated as price spikes usually coincide with a thin supply margin. Another pertinent point discussed was the projected 3-year price increase due to the TRAIN Law, going as high as Php 0.904/kWh for 2018, Php 0.1111/kWh for 2019, and Php 0.1311/kWh for 2020.

As the business sector representative, Jose Alejandro, Chairman of Energy and Infrastructure Committee of the Philippine Chamber of Commerce and Industry, remarked that power costs can be subsidized to become more globally competitive and attractive to investors.

The country’s power situation is often cited as one of our Achilles’ heel, hindering us from achieving our full growth potential. Beyond the noise surrounding price fluctuations and market volatility, the country’s future depends on long-term and sustainable energy policies. By bringing different stakeholders together, we hope to foster partnerships in the power industry, particularly within and among government and private sectors, towards the creation of well-thought-out policies that will ultimately ease the burden of millions of Filipinos.

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