Think tank: Congress needs to review EPIRA

Congress should review the existing law on electric power reform, particularly the provisions allowing cross-ownership between the generators and distributors of electric power, according to a think tank founded by former Justice Secretary Alberto Agra. These provisions in the Electric Power Industry Reform Act of 2001 (EPIRA) tend to undermine the free-market competition and drive up electricity rates, the Forensic Law and Policy Strategies Inc., also known as Forensic Solutions, said in its 11th policy paper. The paper — authored by Agra and Asian Development Bank (ADB) consultant Mari Jennifer Bruce — noted that the provisions run contrary to the ultimate goal of EPIRA, which is to break the monopoly in the electric power industry. EPIRA or Republic Act 9136 let power distributors and generators enter into “sweetheart deals" and let associated generation companies dictate the price of electricity in the spot market, resulting in high electricity rates for consumers, the paper said. “The allowable cross-ownership between distribution utilities and generation companies must be abolished. Otherwise, the last three decades would be nothing but one botched-up attempt after another to reform the electric power industry," Forensic Solutions pointed out. “To get to retail competition, we must first clean up the fundamentals of wholesale competition," the think tank noted. When EPIRA was enacted, Congress sought to "prevent harmful monopoly and abuse and [secure] lower electricity rates," the think tank added. However, instead of achieving these goals, EPIRA encouraged associated generation companies to determine the price of electricity in the spot market, Forensic Solutions said. Distribution utilities “entered into sweetheart deals and purchased their energy requirements from these associated generation companies and independent power producers even if the prices were higher than the Napocor rates," the think tank said. According to the paper, EPIRA also adopted the “wholesale competition" model in an attempt to eliminate the monopoly of the National Power Corp. (Napocor) and encourage the private sector to invest in the electric power industry. In this model, distribution utilities purchased electricity directly from generators, and were able to monopolize over retailers in their respective franchise areas, the paper read. Under this setup, consumers cannot choose their power suppliers but would have to settle for the distributors that control the monopoly over electric power in their respective areas, Agra and Bruce said. “In either instance, the cost of electricity is passed on to end users," Agra and Bruce pointed out. Agra and Bruce said the wholesale competition model should be scrapped because “it is vulnerable to anti-competitive conduct among the power industry players, especially because electricity distribution and power generation has been limited to only a powerful few." “There is actual market power when one or a few companies control the generation sector to an extent that they are able to exercise horizontal market power and drive up prices," the think tank said. The full competition in the power industry should allow open access to transmission and distribution networks together with associated facilities, Forensic Solutions said. Distribution should also be separate from retail activities, the paper stated. “Retail competition and open access ideally frees end users to choose their own suppliers, thereby forcing suppliers to respond to customer demands in terms of price and quality, and ultimately improving overall service to compete with other suppliers for customers," the think tank added. — JE/LRS/VS, GMANews.TV