’08 a make-or-break year for EPIRA

This year is crucial for power producers and consumers alike as the Electric Power Industry Reform Act (EPIRA) could finally be fully implemented. "This is the EPIRA’s make or break year," Philippine Electricity Market Corp. (PEMC) President Lasse A. Holopainen told a Philippine Press Council forum last Friday. The wholesale electricity spot market, administered by PEMC, was created in June 2006 as one of the required reforms. Top power distributor Manila Electric Co. (Meralco) said it has transformed its business in preparation for open access. "For us, the schedule for contestability, starting for consumers with consumption of one megawatt and up, is July 2009," Meralco Vice-President Redentor L. Marquez said. The EPIRA primarily envisions the establishment of open access, a regime that gives customers a choice of power supply provider. To be able to declare open access, the ERC must certify that five conditions have been met: - establishment and commercial operation of a wholesale electricity spot market; - approval of unbundled charges; - removal of the cross-subsidies across customer categories; - the sale of 70% of National Power Corp.’s (Napocor) capacity in Luzon and the Visayas; and - the transfer of 70% of Napocor capacity covered by independent power producer (IPP) contracts to IPP administrators. Only the first three requirements have been met so far. "We see light at the end of this tunnel, it’s just a short [distance] away ... the PSALM (Power Sector Assets and Liabilities Management Corp.) has said it can reach the last two targets ... by September," Energy Regulatory Commission (ERC) Chairman Rodolfo B. Albano, Jr. said. ERC public information director Franciso S. Villa, Jr. said the commission expects an application for open access within the year. The ERC is beholden to act and issue a provisional authority, if possible, within 30-75 days. The same rules would be exercised over a potential application for "interim open access," a scheme which would allow high load factor consumers to participate in a free market system under a special arrangement. Former Energy secretary Vincent S. Perez, who now heads consultancy firm Merritt Partners, was tasked in January to broker a deal among concerned parties. The terms of reference, still unavailable to the press, was signed last February 4 by representatives from the industry, generation, and generation sector. Instead of amending the EPIRA, Mr. Perez said excluding Napocor from a temporary, perhaps better called "trial", scheme offers enough competition. The ERC, in setting aside decommissioned plants from base capacity, has already increased the privatization level to 52%, up from the 43% originally announced. For the moment, the ERC is awaiting the appropriate application before it can declare the first open access regime in the region. "In open access, we have a ’contestable market’ ... and the ERC will be the sole arbitrator between the consumer and the producer. We can set the rates but that’s it. The consumers will have choose which service to avail [of]," Mr. Albano said. — MKCC, BusinessWorld