What is the ELECTRIC POWER INDUSTRY REFORM ACT of 2001 (R.A. 9136)?

On June 8, 2001, President Gloria Macapagal-Arroyo signed into law Republic Act 9136, or the Electric Power Industry Reform Act of 2001 (EPIRA). The said enactment was the culmination of more than seven years of public hearings and floor deliberations on various versions of the said measure in Congress. Among other benefits, RA 9136 is designed to bring down electricity rates and to improve the delivery of power supply to end-users by encouraging greater competition and efficiency in the electricity industry. The essence of these reforms is giving stakeholders a CHOICE.

Consumer Empowerment. This can be achieved by giving consumers the power to choose their source of electricity from among a host of generators and suppliers of electricity.

Higher Efficiency. Consumers will be assured of adequate and reliable power supply at lower rates.

Open Access. There will be open access to transmission and distribution network/ facilities so that the benefits of competition in the generation/supply sector could really trickle down to the consumers.

Industry Accountability. There will be higher levels of environmental, health and safety standards. Non-complying companies will be subject to appropriate fines and penalties. There will be higher levels of environmental, health and safety standards. Non-complying companies will be subject to appropriate fines and penalties.

Competition in Generation and Supply. There will be competition between and among generating companies where prices will be market-driven and competitive. There will be long-term contracts and a spot market where the trading of electricity between buyers and sellers will be undertaken. There will be competition between and among generating companies where prices will be market-driven and competitive. There will be long-term contracts and a spot market where the trading of electricity between buyers and sellers will be undertaken.

Electricity Tariff Unbundling. This includes the itemization and the segregation of various components of electricity tariffs to make the rates more transparent. With rates unbundled, customers will be able to know how much they would be paying for generation, transmission, distribution and other benefits or charges.

These reforms are aimed at making sure our country will have reliable and competitively priced electricity. The strategy is to put an end to monopolies that breed inefficiency, encourage the entry of many more industry players, and generate competition that will benefit consumers in terms of better rates and services

In other countries, a restructured and competitive power sector has provided consumers with lower power rates. We look around us and find that the same pattern can be seen in local industries that have been de-monopolized and deregulated like telecommunications and inter-island shipping

The privatization or sale of NPC’s generating power plants to several companies will trigger competition, on the generation side. In addition, its privatization will allow government to shift the burden of ensuring continuous financing for the construction, operation and maintenance of hugely capital-intensive power generating plants to the private sector.

Now that RA 9136 is in place, what reforms will be instituted in the power industry?

Two major reforms are embodied in RA 9136, namely, the restructuring of the electricity supply industry and the privatization of the National Power Corporation (NPC). The restructuring of the electricity industry calls for the separation of the different components of the power sector namely, generation, transmission, distribution and supply (please see diagram on page 2). On the other hand, the privatization of the National Power Corporation (NPC) involves the sale of the state-owned power firm’s generation and transmission assets (e.g., power plants and transmission facilities) to private investors. These two reforms are aimed at encouraging greater competition and at attracting more private-sector investments in the power industry. A more competitive power industry will in turn result in lower power rates and a more efficient delivery of electricity supply to end-users.

With restructuring, will the power industry be fully deregulated? How can government ensure that consumers will be protected from undue and frequent increases in power rates?

No, only generation and supply will be deregulated. Distribution and transmission will continue to be regulated by the Energy Regulatory Commission (ERC). Under RA 9136, government will create an independent, quasi-judicial regulatory body called the Energy Regulatory Commission (ERC) to replace the Energy Regulatory Board. The Commission will be made up of a Chairman and four Commissioners, all of whom will be appointed by the President of the Philippines. The ERC will be tasked to promote competition in the power sector, encourage market development and ensure customer choice. Compared to its predecessor, the ERC will have stronger and broader powers in the sense that it will be authorized not only to correct but to prevent and penalize anti-competitive practices. It will also be given certain rate-setting functions.

Are there any safeguards in the law to prevent certain business groups or blocs from dominating the restructured power industry?

To promote true competition and prevent monopolistic practices, RA 9136 provides for explicit caps or limits on the volume of electricity that a distribution utility can buy from an affiliated company that is engaged in power generation. Likewise, the law also provides that "no company or related group can own, operate or control more than 30 percent of the installed capacity of a grid and/or 25 percent of the national installed generating capacity".

How sure are we that power rates will indeed go down? Are there any pro-poor provisions in RA 9136?

Under RA 9136, NPC is mandated to reduce its rates for residential consumers by 30 centavos per kilowatt-hour immediately upon the effectivity of the said law. It also provides for a subsidized "lifeline" rate for marginalized or low-income electricity consumers. This will ensure that such consumers will not have to contend with higher power rates even when the cross-subsidies on electricity tariffs are removed with the restructuring of the power sector. Finally, the bill mandates NPC to carry on with its missionary function of providing electricity to non-viable, far-flung areas in the countryside even after its privatization.

How will the privatization of NPC be carried out?

Under RA 9136, NPC’s generation and transmission facilities, real estate properties and other disposable assets, as well as its existing power supply contracts with independent power producers (IPPs), shall be privatized. The exact manner and mode by which these assets will be sold will be determined by the Power Sector Assets and Liabilities Management (PSALM) Corporation, a government-owned and –controlled corporation that will take over the ownership of all of NPC’s assets. PSALM will also be tasked to manage the orderly sale, disposition and privatization of NPC, with the objective of liquidating all of NPC’s financial obligations and stranded contract costs in an optimal manner.

How can government ensure that the proceeds from the sale of NPC assets will be optimized?

A set of criteria in the grouping of NPC assets will be considered. These criteria include financial viability, efficiency of operations, and management and operational synergy. Furthermore, all assets of NPC shall be sold in a open and transparent manner through public bidding.

Will NPC power plants that run on hydro and steam be privatized also?

Initially, NPC’s Agus and Pulangui hydroelectric power complexes, both located in Mindanao, shall be excluded from the privatization program. Its privatization will be left to the discretion of the PSALM Corp., in consultation with Congress. RA 9136 further specifies that the two hydro plants may not be privatized earlier than 10 years from the effectivity of the said law.

As for NPC’s geothermal facilities (e.g., Tiwi-Makban, Leyte A and B (Tongonan), Palinpinon and Mt. Apo), RA 9136 states that the steamfield assets and the power plants of each of the said complexes shall not be sold separately. Rather, they shall be combined and each complex will be sold as one package through a public bidding.

What Some Stakeholders Say………..

NESTLY PACLIBAR
Laundry Store Manager
Kidapawan City

The power crisis in Mindanao should not only be considered a priority problem of the Aquino administration, but also of the provincial government of North Cotabato and the City of Kidapawan especially that this is the home of the biggest geothermal power plant in Mindanao. This power problem should be blamed on them for their negligence in not pushing the proposed direct lines from Mt. Apo Geothermal Plant. If they are strict in what was stated in the Memorandum of Agreement to have a separate power line; we will not suffer much with the power crisis today. I don’t believe that the existing structures for power distribution are not enough to supply energy to Mindanao.  As a native of Kidapawan City, what I can suggest is to face this problem squarely. Let us be true to ourselves; that increase in power rates is the solution to the power crisis in Mindanao.

MARY JEAN DOCTOR
Saleslady
Kidapawan City

President Benigno Aquino-III should immediately look for a solution to address the power crisis in Mindanao. It is because Mindanaoans are now experiencing the domino effects due to this problem. In North Cotabato, almost 50% of businesses are dependent on power supplies, and are now closing after experiencing losses to their respective businesses. I do believe that the monopoly of energy is the root cause of the power crisis in Mindanao, because I am of the belief that multi-million business tycoons involved in power distribution still want to have big profits, thus sacrificing the power consumers. I am also of the belief that if the government in North Cotabato and Kidapawan City have joined hands in pushing that the province will have a separate line from Mt. Apo Geothermal Power plant, we will not experience this power problem. While it is true that North Cotabato and Kidapawan City are the hosts of geothermal plant, yet not a single current is given to these places. Unless we will buy power supply from the multi-million company that owned and controlled the geothermal plant in the province, we might be spared from very long hours of power brownouts. Let us face the reality that there is a need for us to pay more for electricity in order to address this problem.

ALMARIO GALLARDO
Habal-habal driver
Makilala, North Cotabato

Let us not blame President Benigno Aquino-III for the power crisis in Mindanao. As ordinary habal-habal driver I should say Cotabato Electric Cooperative (Cotelco) is also partly to be blamed for this problem. Cotelco should already anticipate that the demands for power supply is increasing especially that the consumers are also increasing in numbers. If they have looked for a remedy before the power crisis hit the area, we will not suffer much. The crisis in energy also affects us habal-habal drivers especially when we buy gasoline for our motorcycles. There are times that you need to look for a gasoline station that owns a generator in order to refuel. With the increasing business establishments and residential places, existing structures for power distributions are not enough to sustain the demands for energy in North Cotabato. The solution, an increase in power rates, is necessary to be spared from long brownouts. My recommendation is for North Cotabato be given a separate line from the geothermal power plant in Mt. Apo.

KIMBERLY NUNIEGA
Beautician 
President Roxas

Immediate dyud dapat ang aksiyon sa president aning krisis sa kuryente nato dinhi sa Mindanao. Kay ngano man?  Dako na kaayo ang lugi sa among negosyo. Wa na’y income ang among mga parlor kay sige na lang ta ug brownout nganhi sa probinsiya. Kulang dyud ta ug supply sa kuryente. Mabasol aning tanan ang atong mga lokal nga opisyal. Unsa man ila gihimo karon. Nganong karon lamang sila nag sige ug pangita ug solusyon nga nagka worst naman ang krisis sa kuryente. Unta sa una  pa, nang lihok na atong mga opisyal aron mahatagan ug solusyon ang problema. Samtang wa pa mag antos tawon me na mga beautician kay wan a dyud me income. Unsaon na lang namo ni aron mabuhi. Dili dyud sakto ang atong structures sa power distributions. Kay kung sakto pa na wan a unta ta brownout eh naunsa ba. Ug kung magpataas pud ug bayronon sa kuryente, uyon nalang pud me aron wala na tay brownout ug makapanginabuhi sab meng mga bayot oi. Ang akong hangyo lang sa mga opisyal nato pangita pud mo ug solusyon aron mahatagan dayon solusyon ang atong suliran.  Malooy tawon mo namo nga naga salig sa kuryente aron lang mabuhi.

HERMA DADUROS
Housewife
Mlang, North Cotabato

Let us stop blaming each other; instead let us joins hands in looking for immediate solutions to the power crisis in our place. The president has already spoken; there is a need to privatize the Agus and Pulangi Hydro-power plant in order to enjoy uninterrupted power supply in Mindanao. All of us should be blamed for the crisis in energy. As ordinary citizen and as s consumer let us face the reality, andyan na yan eh tanggapin na natin. Wala naming mangyayari kung patuloy tayong magreklamo; ang kailangan solusyon po sa problema hindi dagdag problema sa walang humpay na reklamo. For our government, take a stand on this problem. Kung kailangan sampahan ng kaso ang mga concern agencies sampahan ninyo. Huwag sana tayong usad pagong sa paglala ng krisis sa enerhiya. Wala rin tayong magagawa kahit pa marami tayong mga power distributions kung kontrolado naman ng mga dambuhalang negosyante ang kuryente. My recommendation is to let the House of Representatives amend the EPIRA law para mawalan ng control ang mga mayayaman at gahamang mga namamahala sa industriya ng kuryente.