BusinessWorld: Energy summit proposals point to gains for industry

BY MARIA KRISTINA C. CONTI, BusinessWorld Reporter THREE DAYS of "hearing and listening" at last week’s Energy Summit may have produced a hodgepodge of solutions, but among it is a concrete support system for the industrial sector. This includes a power system loss differentiation program — lowering the sector’s electric bills at the expense of residential and other commercial customers — and the concept of an industry competitiveness fund, which will help the sector compete regionally. For the long-term, two legislative measures will also likely be endorsed in the final report due to be presented to President Gloria Macapagal-Arroyo tomorrow. These bills, expected to encourage competition in their respective sectors, are the Renewable Energy measure and amendments to the Electric Power Industry Reform Act (EPIRA). Manila Electric Co. (Meralco) President Jesus P. Francisco, talking to reporters after Friday’s workshop on lowering power rates, said his firm was inclined to offer a system loss differentiation scheme. "What we do is target specific segments — this may be an industry or corporation — and we separate their system loss level. It could be smaller, yes, meaning their power bills will be lower," he said. That partiality, however, means system loss for other users, mainly residences, will increase. Mr. Francisco admitted that the scheme would mean higher power costs for some. "It will still need regulatory approval so we will see. But to lower power rates it will largely be one sector’s gain [at the expense of another]," he said. Mr. Francisco said further cuts in the distribution rate, or what Meralco charges for its own services, might be impossible. "We are actually asking for an increase this year," he said, emphasizing that the largest component in power rates are generation charges which are due to power producers. "So it’s really a larger, complex [energy] problem," he said. For their part, industrial groups proposed the concept of an industry competitiveness fund, which is aimed to helping players compete in the regional market. At a processing seminar over the weekend, participants were still debating the fund’s finer details. "It’s still a concept," said Finance undersecretary Jeremias N. Paul, who is part of the core group overseeing investments and fiscal policy. He said the fund may be sourced from the government, or from contributions of industry players themselves. Policy-wise, the Energy Summit had extensive deliberations over the renewable energy (RE) and omnibus power bills. "The RE bill is long overdue. We need it to create a business environment, to bring in resources and technology. It will create a policy framework and predictability in our environment," said Catherine P. Maceda, a member of the RE Coalition. Since the bill is still pending in Congress — Energy committee chairman Senator Miriam D. Santiago has promised to pass it by February — the summit report will reflect stopgap solutions. Within six months, the Energy department has pledged to put up a one-stop shop for RE investments, along with a knowledge center. "We need this in the immediate since there are a lot of investors coming in already [even without the bill in place]," Energy department director for energy utilization Mario C. Marasigan said during discussions. Analysts and the private sector are, however, divided over amendments to the EPIRA. Fernando Y. Roxas, an analyst at the Asian Institute of Management, said it might be time to revisit the law since one requisite for open access, the privatization of independent power producer (IPP) contracts, has derailed competition in power. "Maybe we can remove this from the conditions precedent and make it a transitory provision, giving [the government] a deadline for establishing the IPPA (IPP Administrators, the body which will take over IPP contracts) or an alternative way of reducing [the National Power Corp.’s dominance]," he told workshop participants. The private sector however, has said changing the rules midstream would hamper investments. The Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) wrote Congress, "We strongly believe that the same objectives can be achieved in a manner that is more expeditious yet will not carry the destabilizing effects that amendments to EPIRA will have." Meanwhile, stakeholders across the production chain still hope their own proposals will be incorporated in the final report due tomorrow. The transport groups and the petroleum industry are asking for policy changes, among others. The consumer sector has asked for disparate resolutions such as the expansion of lifeline subsidies and suspension of value-added tax on oil and power. All recommendations will be reconciled Monday. Over the weekend, the Energy department gathered a core team of 40 experts and policy makers at the Asian Development Bank (ADB) to finalize the resolutions for five workshops: - the upstream sector, which aims to reduce the country’s dependence on imported oil; - the renewable and alternative energy sector, which taps non-conventional sources of fuel and energy; - the downstream sector, which operationalizes programs for energy conservation and efficiency; - high oil prices in the world market, which discussed fiscal flexibility in response to the world market; and - high power prices, which racked up myriad solutions from different stakeholders. "The summit report will be a recommended action plan, to be implemented by government, stakeholders. It will not necessarily be approved by the president, except for [the laws]. This is a buy-in; this is a social mobilization effort," Energy secretary Angelo T. Reyes said. The ADB, meanwhile, is backing one project. Sohail Hasnie, ADB senior energy expert, said the agency has committed to renewable energy projects. "We will begin with a $30 million possible loan, which involves a program for energy efficiency in lighting of public buildings, streetlighting, transport efficiency, electric jeepney. The proposal and loan details finalized by early March," he said.