Exemption from Epira blamed for power crisis

The exemption of Mindanao’s biggest hydropower complex from being privatized as mandated by the Electric Power Industry Reform Act of 2001 (Epira) is largely to blame for the worsening power supply problem on the island.

The continued presence of the government through the 982-megawatt Agus-Pulangi hydropower complex in Mindanao has kept electricity rates on the island so low—at P2.93 per kilowatt-hour at present—that it has deterred investors from investing and putting up the critical power infrastructure, said Energy Secretary Jose Rene D. Almendras at a recent briefing with Inquirer reporters, columnists and editors.

Almendras clarified that the intention of the Epira was good and correct.

“In Australia and all over the world, [this model] is working. Our problem was it took us too long—the implementation of the Epira was delayed. Also, there were bodies that were created that were supposed to be independent oversight bodies, which became politicized,” he said.

“Was the law faulty? No, it was correct. It’s just that the way we implemented it could have been a lot better,” he said.

It did not help, too, that the previous Arroyo administration did not allow the state generator, National Power Corp. (Napocor), to raise electricity rates in Mindanao to reflect the true cost of electricity—one of the reasons why the agency incurred billions of dollars in debt, as it had to subsidize and operate at a loss, according to Almendras.

Price challenge

“It is difficult for any investor to put up a nonhydropower plant. They are scared to do so, because who will buy from them if their generation will cost more than the power generated from hydro plants? There is a price challenge in Mindanao,” he said.

Without the much-needed investments, Mindanao continues to rely heavily on the hydropower plants, which provide over half of the island’s electricity requirements. The power generated from base-load facilities—or power plants that can provide continuous stable supply such as coal or geothermal—accounted for only 37.31 percent of the island’s total power generation.

This made Mindanao’s power supply vulnerable to drought, climate change or any drastic change in weather patterns.

The Epira (Republic Act No. 9136) was aimed at securing the country’s power supply and reducing the cost of electricity. It was intended to free the government from the burden of funding capital-intensive power projects, and allow instead the private sector to put up these crucial projects.

Thus, the law directed the government to privatize or sell its power-generation assets and the capacities it contracted with the independent power producers (IPPs). But for the first 10 years of the Epira’s enforcement, Mindanao’s Agus-Pulangi hydropower complex was exempted from its coverage.

The Epira provided that the ownership of the Agus and Pulangi power complexes was to be transferred to the Power Sector Assets and Liabilities Management Corp. (PSALM), the state agency that was created to handle the privatization of Napocor’s assets, and that both would continue to be operated by Napocor.

The privatization of the Agus and Pulangi complexes was to be left to the discretion of PSALM in consultation with Congress, the law provided.

Unresolved

The decision on whether or not the complex should be offered to the private sector remains unresolved as the Joint Congressional Power Commission (JCPC) has yet to issue a directive.

Early this year, Almendras urged the JCPC to issue within 2012 its decision on the sale of the Agus-Pulangi complex so that the Deparment of Energy “can finally move on.”

He said that whether or not the JCPC decides to privatize the facilities, the DOE has proposals that could ensure the increase in the productivity of the biggest hydropower complex in Mindanao.

“People are saying that it was wrong to privatize [the state-owned power assets]. But if you look at the capacities of the privately owned facilities, they’re already close to their installed capacities,” Almendras said.

To date, PSALM has been able to sell power plants that can generate a total of 4,102.33 MW, equivalent to 79.56 percent privatization level. The agency was also able to appoint IPP administrators for its contracted capacities, representing 76.85 percent privatization level.

Deteriorating

By contrast, the Agus-Pulangi complex has continued to deteriorate, with its facilities now generating only 646 MW, compared with an installed capacity of 982 MW.

“I’m not saying it’s good to privatize everything. I think there should be some portion of generation that the government can keep for security purposes,” Almendras said.