Power Failure: 10 years of the EPIRA

Posted: June 8, 2011 in Economy

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News Release

June 8, 2011

Groups’ report slam EPIRA on its 10th anniversary

Power rates have doubled and the government remains in debt. And there’s no relief in sight for consumers.

This was the conclusion by various groups that conducted a study of the 10 years of the implementation of the Electric Power Industry Reform Act or EPIRA. The law, which was signed on June 8, 2001 by then President Gloria Macapagal Arroyo, promised lower rates for consumers and less financial burdens on the government after state-owned power plants are privatized.

The People Opposed to Warrantless Electricity Rates, Bagong Alyansang Makabayan (Bayan), AGHAM and Ibon Foundation conducted a joint research and presented their findings to legislators today at the Batansang Pambansa. The forum entitled “Power Failure: 10 years of the EPIRA” called for drastic action on the part of government to lower power rates.

Among the salient findings of the study are:

  1. Power rates have doubled since EPIRA was implemented. MERALCO rates have increased by more than 112 percent while NAPOCOR rates have jumped by more than 95 percent in the past 10 years.
  2. More than half of the total generation capacity, the entire transmission system and a large part of distribution, are now controlled by a few large companies. After privatization, only three groups control 52%of generation capacity – San Miguel Corporation (SMC), Aboitiz, and Lopez.
  3. NAPOCOR remains indebted despite paying billions of debts over the past 10 years. From 2001 to 2010, NAPOCOR shelled out $18 billion to service its financial obligations. Yet, from $16.4 billion in 2001, NAPOCOR’s debts remained high at $15.8 billion as of 2010.
  4.  Energy security is threatened while people are expected to pay more for electricity in the coming years. The power situation in Mindanao remained precarious while additional charges to recover NAPOCOR’s stranded debts and stranded contract costs are looming

“For all intents and purposes, the EPIRA has failed in its promise to lower rates. This objective will not be met in the future since more rate increases loom as the government tries to pass on Napocor’s debts to the consuming public,” said POWER and AGHAM convenor Dr. Giovanni Tapang.

“The power industry is a profit driven industry influenced by private monopolies, a premise that is contradictory to lower power rates. The government has taken a hands-off approach to the problem,” he added.

“Big Three”

In its study, the think-tank Ibon Foundation said that the EPIRA has given rise to the “Big Three” of the power industry which has enormous influence over prices. The Cojuangco-owned San Miguel Power Corporation (SMPC) has, at 3,165 MW, the largest generating capacity after just two years in the power business. The Lopez group, with foreign  company BGL as partner, has 2,832 MW generation capacity followed by the Aboitiz group, with SN Power AS (Norway) and Pacific Hydro Limited (Australia), has 2,051 MW.

Ibon also noted that corporate profits in the power sector have generally been on the rise in the last decade – the top 25 revenue-making corporations in electricity generation, collection and distribution saw their profits jump ten-fold between 2001 and 2009 (even as their profits dipped in 2003, 2007 and 2008 years).

Unending debt cycle

Meanwhile in its study on Napocor’s debts after privatization, Bayan says that the EPIRA hardly made a dent on the debt burden of the state-owned power firm. In 2001, Napocor’s debt stood at $16.39

Billion or some P834.29 billion. From 2001-2010, Government shelled out $18 billion to settle the obligations of Napocor. But despite this huge payments, Napocor’s current debt as of 2010 stands at $15.82 billion. The reason for this is that Napocor acquired new debts of $12 billion over the last ten years.

“We cannot say that we are in a better situation now than we were 10 years ago. There is definitely a need to reexamine the EPIRA and move for its repeal. A new law that promotes national energy development and consumer interest should be crafted,” said Bayan secretary general Renato M. Reyes, Jr.

“Everything, including energy security, has been turned over to the hands of private business. Rates are expected to for years to come as government tries to recover debts and stranded contract costs. The ghosts of the past continue to haunt us as we pay the debts arising from onerous IPP contracts entered into by the Ramos administration,” he added.

Bayan proposes a stop to the further sale of government’s power assets and a recall of pending rate hike petitions intended to pay for Napocor’s debt. The group also sought an audit of the Napocor and PSALM to determine its financial position after 10 years of the EPIRA. Bayan also called on Congress to examine the conditions for cross-ownerships and rise of private monopolies in the power sector.  ###

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