The lament borders on cliché – the Philippines has among the highest electricity costs in the region. There are many factors behind this, but there’s no doubt that among the most urgent is the need for power sector reforms. Pres. Ferdinand Marcos Jr talked about amending the Electric Power Industry Reform Act (EPIRA) of 2001in his state of the nation address (SONA) last year. Amendments were among the Legislative-Executive Development Advisory Council’s (LEDAC) priority bills for the 19th Congress.
Changes have been proposed, but none are as extensive as they should be. This means they are unlikely to be effective in making electricity cheaper, more reliable, and more sustainable. This is because the current approach to amending EPIRA is fundamentally constrained by remaining private sector-driven rather than moving toward state-led development and public control of electricity.
The proposed amendments largely just tweak the existing privatized framework while keeping private profits, market liberalization, and the oligopolistic structure of the power sector intact. They are oblivious to how privatized power is the root cause of high electricity prices, market manipulation, and inadequate infrastructure investment.
Reassert public interest
A much more productive direction is the strategic reclaiming of the power sector in the public interest. This will enable the government to fully address the structural failures of EPIRA and take more decisive steps toward energy sovereignty and public interest-driven electricity provision.
Measures towards this can be taken progressively. Immediate short-term measures are needed as interim safeguards while the foundations for eventual nationalization are taken. Greater transparency, public oversight, and anti-oligopoly measures are urgent to immediately prevent regulatory capture.
Full disclosure of government deals with the private sector would be a big leap forward. The government can help the public keep track of interlocking directorships or ownership among generation, distribution, and transmission firms. Citizens and media would for instance also benefit from having real-time access to power supply agreements and transmission contracts.
These would help enforce, for instance, stricter power sector ownership than currently under EPIRA, such as: no single company or conglomerate controlling more than 20% of installed generating capacity; a maximum 15% ownership limit between generation, transmission, and distribution; and preventing vertical integration. Under EPIRA, no company or related group can own, operate or control more than 25% of the national installed generating capacity or more than 30% of installed generating capacity of a grid. Distribution utilities cannot own, operate, or control power generation facilities; likewise, generation companies cannot own distribution utilities. Yet despite these restrictions, the generation and distribution sectors are dominated by the Pangilinan, Gokongwei, Aboitiz, and San Miguel groups.
The biggest generation companies are the Aboitiz Equity Ventures, San Miguel Corporation and First Gen Corporation. Meralco PowerGen (MGen), a wholly-owned subsidiary of Meralco, has also become a major generation company. The leading distribution utility in the country, meanwhile, is Manuel Pangilinan and John Gokongwei’s Meralco, followed by the Visayas Electric Cooperative and Davao Light Power Cooperative, which are both Aboitiz-owned. San Miguel Corporation is also an active distributor through partnerships with distribution utilities, retail electricity supply licenses, and direct customer connections with commercial and industrial establishments.
Stop revolving doors
The current government leadership of the power sector also points to how important it is to limit revolving door appointments. Private sector energy executives should be prevented from being appointed to key regulatory positions like the Department of Energy (DOE) secretary, Energy Regulatory Commission (ERC) commissioners and others for at least 5-10 years after leaving private sector roles. Likewise, former government energy regulators should be prohibited from working for private energy firms for a similar cooling-off period.
This would prevent a situation such as today where the energy secretary is a former Director of Aboitiz Power Corporation, the ERC chair is former chief legal counsel and compliance officer of Aboitiz Power Corporation, and the Power Sector Assets and Liabilities Management (PSALM) Corporation president is former first vice-president for regulatory affairs of Aboitiz Power Corporation.
The power sector is also so strategic and complex that a separate power sector competition commission, separate from the Philippine Competition Commission (PCC) is warranted to monitor market abuse, price-fixing, and cartels in the power sector. A congressional oversight committee with real representation and meaningful participation by consumer groups, labor unions and independent experts is also a potentially useful check to abusive private sector profit-seeking.
Return power to the public
Public ownership can be steadily expanded towards eventual full nationalization and restructuring the power sector towards a non-profit, public-interest and national development model as exists, for instance in Vietnam. State-owned Vietnam Electricity (EVN) accounts for the majority of generation capacity and holds a monopoly on transmission and distribution to ensure low-cost state-regulated power.
The government can start investing in generation capacity with joint ventures and state enterprises like a revitalized National Power Corporation (Napocor) in targeted areas such as renewables where greater capacity is strategically important yet private sector presence is still weak. It can also gradually take over key power plants, increase stakes in the private National Grid Corporation of the Philippines (NGCP), and transfer operational control of the power grid to the government’s National Transmission Corporation (TransCo) as important steps toward a state-controlled and publicly-driven energy sector.
The Philippines really has to move in the direction of gradually replacing private sector dominance. Public ownership is essential for the government to have real control over the long-term direction of the power sector, lower costs, and ensure universal access to electricity, instead of being overly influenced by private sector profit-seeking and decisions. The dominance of Aboitiz, San Miguel, First Gen, Ayala, and other corporate giants cannot remain unchallenged.
Without this kind of policy direction, even the increased regulation in some proposed EPIRA amendments could be manipulated to favor giant power industry players, especially those closely aligned with the current administration. The historical and ongoing influence of oligarchic interests in the power sector is well-established, and the risks of regulatory capture and policy distortion are thus high.
