Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 4847

INTRODUCED BY ANAKPAWIS PARTY-LIST REPRESENTATIVE
RAFAEL V. MARIANO

EXPLANATORY NOTE

June 8, 2011 marks the tenth (10%) year of Republic Act No. 9136 otherwise
known as “An Act Ordaining Reforms in the Electric Power Industry,
Amending for the Purpose Certain Laws and For Other Purposes” approved
by former President Gloria Macapagal-Arroyo. It was enacted into law due to
the strong lobbying and imposition of the multilateral financial agencies -
the Asian Development Bank (ADB) and World Bank on the Philippine
government. Power privatization was used as a crucial condition in the said
foreign multilateral agencies’ trade and financial agreements with the
government.

The enactment into law of Electric Power Industry Act of 2001 was a
condition for the release of the second tranche of the $900 million ADB
Power Sector Restructuring loan approved in 1998. The International
Monetary Fund (IMF), in the meantime, made the EPIRA’s approval as a
condition for the release of the $300 million rehabilitation loan in 1999.

Despite pro-privatization individuals and agencies’ assertions that
privatizing the power industry will be beneficial for the people and the
national economy, developments revealed that EPIRA is not only a dismal
failure at serving public interest, it even attacks the welfare of consumers
and the rest of the Filipino people.

In 1987, Executive Order No. 280 allowed the private sector to generate
electricity, and the Build-Operate-Transfer (BOT) iaw in infrastructure
projects, the government opened the floodgates for contracts with private
generation companies, now known as independent power producers or IPPs.
Full privatization culminated in the enactment into law of Republic Act No.
9136, or the Electric Power Industry Reform Act (EPIRA) on June 2001.
EPIRA mandated the full privatization of the electric power industry in the
Philippines following the ADB and World Bank unbundling model.


Ten (10) years after the passage of EPIRA, consumers remain at the mercy of
the local electricity monopolies, their independent power producers (IPPs},
and foreign independent power producers IPPs). Consumers are burdened
with excessive power rates and various anomalous charges automatically
passed on to end-users by IPPs through the National Power Corporations
{Napocor) and distributors like Meralco.

Based on an assessment by cause-oriented groups AGHAM, Bagong
Alyansang Makabayan, Advocates of Science and Technology for the People,
IBON Foundation and Power (People Opposed to Warrantless Electricity
Rates), ten (10) years after EPIRA's implementation, electricity rates have
doubled due to various pass on and recovery mechanisms,

Among the recovery mechanisms are Generation Rate Adjustment
Mechanism (GRAM), Automatic Adjustment of Generation Rates and System
Loss Rates (AGRA) and Incremental Currency Exchange Rate Adjustment
(ICERA). GRAM and ICERA replaced the Power Purchased Adjustment {PPA)
when rates were unbundled in 2003 while AGRA was automatically collected
monthly from consumers since 2004

EPIRA is also responsible for the skyrocketing power rates in the country. In
2001, the rate of power distributor Meralco was at P5.76 per kilowatt-hour
(kWh). In 2011, power rates are pegged at more than P10 per kilowatthour.
‘The generation charge of NAPOCOR also increased. In Luzon grid, power
rates increased from P2.39 per kWh in 2000 to P4.67 in 2011.

EPIRA concentrated the ownershi of the power industry to a few
corporations. Contrary to the government's claim that EPIRA will pave way
for a competetive industry, few private businesses have benefited well from
EPIRA.

Generation power plants across the country are owned and controlled by the
following companies - the Lopez -group with 21%; San Miguel Corporation
with 20%; and Aboitiz with 15%. Power Sector Assets and Liabilities
‘Management (PSALM) controls 19% while 11% is under NAPOCOR.

Distribution facilities are owned and monopolized by the same companies.
San Miguel Corporation controls 27% while the largest distribution utility —
Meralco, now owned by the Lopez and Pangilinan groups operates 6.6%.
Meralco's franchise covers 31 cities and 80 municipalities including Metro
Manila, Bulacan, Rizal, Cavite, some parts of Laguna, Quezon, Batangas, at
Pampanga with a total consumer population of 24.7 million.

The Aboitiz group controls seven (7) power distribution companies - Davao
Light and Power Co. Inc., Cotabato Light and Power Company, Visayan
Electric Co. (Veco), San Fernando Electric Light & Power Co. Inc., Subic
Enerzone Corp., Mactan Enerzone Corp., and Balamban Enerzone Carp.


Davao Light and Veco are the second and third largest distribution utilities
in the country.

Despite paying billions, National Power Corporation (NAPOCOR) remains
indebted, 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.

‘These debts known as stranded debts and stranded costs will be passed on
to consumers through universal charges. Additional charges may reach up
to P.86 per kilowatt-hour if the Energy Regulatory Comission (ERC)
approves the recovery of stranded debts and stranded costs.

Even with EPIRA, energy security is threatened while people are expected to
pay more for electricity in the coming years

In March 2010, Mindanao suffered a power supply crisis with a shortage of
700 megawatts that resulted to rotating brownouts up to 8 hours per day.
The government blamed the power shortage on El Nino phenomenon
because majority of Mindanac's electricity comes from hydropower. But the
main reason of the shortage is the lack of capacity to generate power in the
region. NAPOCOR remissed on its responsibility to ensure power generation.

The transfer of monopoly from the state to a few private corporations
exposed the pretense of EPIRA about fostering competition for the benefit of
consumers, Due to monopolies over generation and distribution, the so-
called unbundling of rates to make the electricity bill transparent has
become a meaningless exercise. Free competition through the wholesale
electricity spot market (WESM} is also a sham because of virtual
monopolies. More than half of total generating capacity is now controlled by
just three (3) private corporations and this share is expected to increase
upon the full privatization of the industry.

It is evident that the problem of exhorbitant electricity rates will never be
truly resolved by the neoliberal power reform being peddled by the
government and multilateral creditors. EPIRA only institutionalizes private
monopoly control and perpetrates foreign domination and exploitation of the
national economy and resources at the expense of consumers.

A new law that promotes national energy development and consumer
interest should be crafted

Immediate passage of this bill is earnestly requested.

Lhe


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

4847

HOUSE BILL NO.

RAFAEL V. MARIANO

AN ACT
REPEALING REPUBLIC ACT NO. 9136 OTHERWISE KNOWN AS “AN ACT
ORDAINING REFORMS IN THE POWER INDUSTRY, AMENDING FOR
THE PURPOSE CERTAIN LAWS AND FOR OTHER PURPOSES”

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1, Republic Act No. 9136 otherwise known as “An Act
Ordaining Reforms in the Electric Power Industry, Amending for the Purpose
Certain Laws and For Other Purposes" is hereby repealed.

SECTION 2. This Act shall take effect fifteen (15) days after its
complete publication in at least two {2) national newspapers of general
circulation.

Approved.