Get reacquainted with power sector, Tañada tells PHL government

Government must reacquaint itself with the power generation sector so it can address current failures in the market and curb anti-competitive behavior of private players, a lawmaker said in a forum on Monday. Citing failure of the Electric Power Industry Reform Act (EPIRA) to achieve its goals of power security and affordability, among others, Deputy House Speaker Rep. Lorenzo Tañada said "minor tweaking" in the landmark measure wouldn't be able to address the sector's current problems. In June, President Benigno Aquino III signed into law two major amendments to the EPIRA — the 10-year extension of the implementation of both the lifeline rate and the Joint Congressional Power Commission. Tañada said that with the EPIRA's failure to reach its goals in the allotted deadline, government must act in order to prevent another power crisis from occurring. "It was a big mistake for EPIRA to completely strip government of any role in power generation," Tañada claimed. In the ensuing ownership structure after EPIRA's implementation, Tañada said the industry has become dominated by big power players such as San Miguel Energy Corp., which owns 22 percent of the country's total generating capacity; the Lopez group (18 percent) and Aboitiz (14 percent). "Ten years into its implementation, we raise serious concerns over EPIRA's outcomes," he added. Between 2009 and 2014, Luzon needs an additional capacity of 1,050 megawatts (MW) but only 815 MW is expected to be provided, Tañada said, citing the Department of Energy's (DOE) 2009-2030 Power Development Plan. In Mindanao, the requirement is for 500 MW but only 100 MW is expected to come on stream. "It is only the Visayas that is foreseen to resolve its power supply outlook for this period," Tañada said. The private sector's failure to provide new capacity is something that the government should not easily gloss over. "Despite the substantial lead time afforded by the oversupply of power after the Asian crisis, reserve power has thinned to below adequate levels," Tañada said, citing the power outages in Mindanao in 2010 and the thinning of reserves in Luzon and Visayas. Privatization efforts a ‘hemorrhage’ The deputy house speaker described government's efforts in the privatization of power assets through the Power Sector Assets and Liabilities Management Corp. (PSALM) as a "hemorrhage" due to the amount of liabilities it has incurred over the years. When the EPIRA was implemented, the National Power Corp. (Napocor) had a debt of $16.39 billion, but after selling almost 92 percent of the company, its obligations still stood at $15.82 billion. "If we count the P200 billion [Napocor] debt that was transferred to the national government in 2004 as part of EPIRA, government indebtedness in the power sector has even increased," Tañada said. "In other words, in ten years EPIRA's only achievement has been the privatization of [Napocor]; the liabilities remain with PSALM at almost the same levels, with the national government absorbing huge liabilities to boot," he added. In an earlier report, PSALM belittled such criticisms, saying it could have practically wiped out all of Napocor's debt had it stayed in their 2001 level. But due to the pressing need to sustain its operations, Napocor's total debt went up to $22.35 billion in 2003 for the commissioning of new Independent Power Producer plants. According to the deputy house speaker, PSALM's "financial hemorrhage" does not stop at the debt level alone. In 2009, Tañada said, the Commission on Audit (COA) found that PSALM's hiring of legal advisors or consultants went against a COA circular prohibiting government entities of private lawyers, unless justified under certain circumstances. "The COA also found the consultancy fees and reimbursable expenses to be excessive," Tañada added, noting how an entry in PSALM's financial statements under Professional Services balloned to P1.16 billion in 2009 from just P118 million the year before. Passing debt to consumers With PSALM in such a situation, Tañada said it has no other recourse but to pass its debt and losses to the consumers. "Last June 28, PSALM already filed petitions for the recovery of stranded debt and stranded contract cost," he said. For stranded debts, PSALM is looking to recover from consumers some P65 billion, while its stranded contract costs from 2007 to 2010 amount to about P74.3 billion. "PSALM cannot be left alone to manage its own debts and losses," Tañada emphasized. "We urge the executive and Congress to discuss and decide whether consumers can afford a full pass-on of the PSALM debts and losses," he added. — VS, GMA News