PAY' PROVISO, BLAMES CORY ADMIN
MANILA, APRIL 21, 2012 (TRIBUNE)
The camp of former President Fidel Ramos defended the much criticized
take or pay provisions in power supply contracts the government signed with
independent power producers (IPPs) was necessary as incentives to investors to
put up power plants during his term citing "unfavorable circumstances" that he
hinted as being caused by his predecessor, former President Cory Aquino.
Ramos spokesman Nick Lagustan wrote The Tribune saying that the rationale for
the "take or pay" provision is that "at the onset of the Ramos administration,
in addition to the crippling power crisis, it was confronted with a zero
economic growth rate, dysfunctional, telecommunications and transport sectors,
fragmented political environment, a growing fiscal deficit pushing up inflation
and interest rates to double-digit levels, and large public debt, all of which
discouraged private domestic and foreign investments."
Ramos assumed the presidency in 1992 succeeding Aquino, the mother of
the current President.
"It should be noted that it was mainly due to these unfavorable circumstances
that the "take or pay" provisions became necessary to give incentives to the
private sector to make the needed investments which the government was not in a
position to do at that time, to solve the power crisis at the soonest possible
time and eventually meet the projected inevitable rise in the demand for energy
– because of inevitable population growth," Lagustan said.
The take of pay provision is primarily responsible for the pile up of debts
of the state firm National Power Corp. (Napocor) and payment of IPP obligations
was tacked into monthly electricity bills through the so-called purchased power
adjustment (PPA).
Under the take or pay provision in the power contracts, the government was
obliged to pay IPPs on their contracted power supply whether or not electricity
was actually produced.
The letter also took a perceptible dig at the current administration. "Indeed
it is most unfortunate that after going through the debilitating power crisis in
early 1990's, from which valuable lessons should have been learned by subsequent
administrations, Mindanao is now faced with another serious power shortage,"
according to Lagustan.
Lagustan also claimed that the Electric Power Industry Reform Act (Epira)
which is a law now being assailed as having failed to achieve its goal of
reducing the cost of electricity and provide the nation with enough power supply
came about after a similar law proposed during the term of Ramos was "mangled
beyond recognition."
"An independent comparative study of the proposed Electric Power Industry
Code (EPIC) submitted by the Ramos Administration to the 10th Congress in late
1997 which prohibited "cross ownership" and the Electric Power Industry Reform
Act (EPIRA), finally approved by the 11th Congress on 08 June 2001, would
indicate that the intent and implementation framework of the original proposal
was significantly altered, even mangled beyond recognition, if you will, perhaps
for the purpose of protecting a few private interests, to the disadvantage of
consumers, Lagustan wrote.
Indeed, amendment to the EPIRA are badly needed and long overdue, to
eliminate cross-ownership, enhance competition, provide open-market access to
large consumers prevent abuse and collusion among related sectors, and transform
the Energy Regulatory Commission (ERC) into a more effective, autonomous
regulatory agency, he added.
Senator Aquilino Pimentel III (photo) also expressed strong
opposition to the plan of Aquino to privatize the remaining hydro-power plants
in Agus, Lanao del Sur and Pulangui, Bukidnon now owned by the cash-strapped
National Power Corp. (Napocor).
He cited strong public sentiment on the matter aired during the recent
Mindanao power summit which are based on fears of possible emergence of "cartel"
among its power producers and stir further increase in the already high cost of
electricity in the southern region.
"We must seriously look into these concerns. We must assure not only the
people of Mindanao, but the entire nation that the EPIRA Law spurs competition
within the power sector that will redound to a fairer and hopefully lower price
of electricity," Pimentel said.
"Defer privatization until we review the performance of the EPIRA law and
find out why the promises of benefits have not been fulfilled," he said.
Pimentel noted that among EPIRA's promises is the spurring of competition
within the power sector and the lowering of electricity rates.
He observed that the Manila Electric Company (Meralco) rates have increased
by more than 112 percent and National Power Corp. (Napocor) rates by more than
95 percent in the past 10 years.
A number of sectors in Mindanao, the senator said, have already aired their
concerns that the privatization may only lead to the formation of a cartel which
could control the price of electricity.
Also, Pimentel said, there had been reports on the issue of cross ownership
among those involved in power generation and transmission.
"If it is true that cross-ownership has created the conditions that allow the
control of electricity rates, then we must revise the EPIRA law or push for
legislation that will break this control. Being a vital input in production and
thereby a major determining factor in our country's economic performance, the
public must be assured that the power prices reflect the dictates of market
forces – not the dictates of a blind pursuit of profit," Pimentel said.
Still Aquino during the 17th World Electronics Forum and
Semiconductors Electronics Industries of the Philippines Inc. (SEEIP) general
membership meeting in Cebu said his administration has been "trying to
accelerate the process where there is an abundant supply (of power) that (can
create) competition once the wholesale electricity spot market (WESM) is in
place."
The President was reacting to a statement made by an SEEIP member who
lamented that the Energy Regulatory Commission (ERC) had recently approved an
increase of 69 centavos per kilowatt hour extension in power that would mean
additional annual costs of over $100 million for semi-conductor companies.
He pointed out that amendments to the law that created ERC are already being
studied by Congress after it has failed to "achieve the start of the WESM
process which is supposed to actually bring down the prices of electricity."
"We are cognizant of the fact that the price of electricity in this country
is a major deterrent to further investments and we are trying to accelerate the
process where the benefits under the EPIRA (Energy and Power Industry Reform
Act) will be realized the soonest so that we can have a more competitive
electricity rate structure in the country," he said.
Mr. Aquino emphasized that he, himself, was not satisfied at the pace of how
fast power has been generated.
"So we will accelerate the process," he said.
The President nevertheless assured the semi-conductor companies that he "will
be making the appropriate representations with the ERC to review (the power rate
adjustment)." Angie M. Rosales, Rocky G. Nazareno
Chief News Editor: Sol
Jose Vanzi
© Copyright, 2012 by PHILIPPINE HEADLINE
NEWS ONLINE
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PHILIPPINE HEADLINE NEWS
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