IBON

ISSN 0115-8007

Facts & Figures

SPECIAL RELEASE
VOL. 34, NO. 10 31 MAY 2011

10 Years of EPIRA:
No Respite from High Power Prices

I
n June 2011, the Electric Power Industry Reform Act (EPIRA), the law that
promised cheaper electricity rates through greater competition, turns a
decade old. The Philippines presently has the highest electricity tariffs in
Asia, having overtaken Japan in 2010. It has been 10 years indeed, and the
Filipino consumers are yet being plunged into a new generation of policies in
the power sector, which are bound to worsen their situation, especially that of
the poor households.

The Aquino administration is bent on going on with the divestment of

government-owned generation facilities, allowing more freedom for private
distribution utilities to pass on to consumers the risk of doing business. It
is promoting public-private partnerships (PPP) to expand private control in
the power sector by offering the generous deals to investors reminiscent of
the controversial and treasury-draining sweetheart deals under the Ramos
administration.
2 IBON Facts & Figures Special Release
 Status of Privatization
T he EPIRA or Republic Act (RA) 9136 was signed
into law on June 8, 2001 by then President Arroyo
with the promise of “bringing down electricity rates and
improving the delivery of power supply by encouraging
greater competition and efficiency in the electricity
industry.”1 At present, majority of generation facilities and
contracted capacities have been privatized, the transmission
sector is run by a foreign company while the distribution
sector, which was already liberalized prior to the EPIRA,
is dominated by a handful of private distribution utilities
(PDUs). Many electric cooperatives (ECs) are also being
taken over by the National Electrification Administration
(NEA) that may be a prelude to their privatization.
Generation and contracted capacities
Under the EPIRA, power generation is no longer considered
a public utility. The generation plants and contracted
capacities of the National Power Corporation (Napocor)
were transferred to the EPIRA-created Power Sector
Assets and Liabilities Management Corporation (PSALM)
that would be in charge of their disposal. By October
2010, 91.7% of Napocor generation assets in the Luzon
and Visayas grids were already privatized. Privatization
proceeds, or the supposed earnings of the government
from privatization, excluding proceeds from the sale of the
subtransmission assets, amounted to US$10.65 billion.2
There are only three more power generation packages that
the government has yet to sell – the Power Barges 101-104,
Agus-Pulangui Hydro Complex, and the Malaya Thermal
Plant. (See Table 1) Power Barges 101-103 are based in
Iloilo and Power Barge 104 is based in Davao. The Agus-
Pulangi Hydro Complex, which is vital in generating
power for Visayas and Mindanao, both do not have enough
generation facilities in-situ, is not included in the initial
privatization of plants owing to its importance in generating
electricity in Mindanao. But this prohibition lapses next year,
and President Aquino has already expressed his intention to
sell the hydro complex when the prohibition ends.3
Meanwhile, it may be recalled that the privatization of
two Napocor plants was stalled last year as the Supreme
Court issued a “status quo ante” order which halted for
an indefinite period the process of selling the Angat
Hydropower Plant to the wining bidder, K-Water, a wholly
owned utility by the Republic of South Korea. People’s
organizations criticized the sale of the plant because of its
implication to the water supply of Metro Manila.
Aside from Napocor-owned generation facilities, there are
also two decommissioned plants, Bataan and Sucat, which
have not yet been privatized. In August last year, PSALM
terminated the deal with the buyer of the decommissioned
Bataan Thermal Plant, Rubenori, Inc., because of its reported
non-compliance with the Asset Purchase Agreement.4
Meanwhile, many of the contracted capacities of Napocor
with independent power producers (IPPs) have already
been sold. The winning bidders of the contracted capacities
are: Therma Luzon Inc. (Aboitiz); San Miguel Energy
Corporation; Strategic Power Development Corporation (a
unit of San Miguel Energy Corporation); and Amlan Power
Holdings Corporation (a unit of Vivant Energy Corporation).
A total of 2,026.3 megawatts (MW) are scheduled for
privatization in the next two years, the largest capacity is
by the Caliraya-Botocan-Kalayaan power plants in Laguna,
owned by J-Power-Sumitomo consortium. (See Table 1)
Transmission and subtransmission
The franchise for the entire transmission system is now
in the hands of the National Grid Corporation of the
Philippines (NGCP), a consortium formed by State
Grid Corporation of China (40%), Calaca High Power
Corporation of the Coyiuto Group (30%), and Monte Oro
Grid Resources Corporation (30%) of Henry Sy, Jr, formerly
owned by the Arroyo ally Enrique Razon. In the 17th EPIRA
Report, the Department of Energy (DOE) notes that the
NGCP did not comply with some provisions of the franchise
contract, concession agreement, construction management
agreement, and the Philippine Grid Code. For example,
the NGCP violated the Philippine Grid Code when during
peak hours or when power consumption is at its highest,
one substation would have lower voltage than necessary.
Also, some transformers were found to be operating without
contingency. An inspection team also found failed power
equipment such as the explosion of Kibawe Power Circuit
Breaker 75KB4 and the failure of Aplaya 50MVA Power
Transformer, which were caused by operating without
maintenance – a violation of the franchise contract. The
concession agreement was also violated with the non-
operation and non-maintenance of the Iligan Diesel Power
Plant Switchyard.
Sub-transmission assets valued at Php7.6 billion in 2007
are still being divested by the National Transmission
Corporation (Transco). Under the EPIRA, Transco was
31 May 2011 3
Table 1. List of Remaining Plants/Assets for Privatization as of formed to take over the transmission and
October 2010 subtransmission assets of the Napocor until
Rated/Contracted these are privatized. When NGCP took
Asset Indicative Schedule
Capacity (MW) over Transco upon the aforementioned
I. Generating Assets sale, a residual unit was maintained to
Power Barges 101-104 128 Dec-10
sell subtransmission assets to distribution
utilities. By October 2010, Transco had
Agus-Pulangi Hydro 982.1 2011 already divested Php3.57 billion worth of
Malaya Thermal 630 2011 subtransmission assets to ECs and PDUs.
Subtotal 1740.1
II. Decommissioned Plants Spot market
Sucat Thermal 0 2011
To complement the full privatization of the
Bataan Thermal 0 2011 electric power sector, the proponents of the
Subtotal EPIRA pushed for a deregulated pricing
III. IPP mechanism through the operationalization
Naga 131.8 Oct-10 of the Wholesale Electricity Spot Market
(WESM). The WESM acts as the
Leyte 559 Nov-10
marketplace where bulk electricity is traded
CBK 728 2011 among suppliers and consumers such as
WMPC 100 2011 the generators, PDUs, ECs, bulk users, and
SPPC 50 2011 Transco. It is being managed by a market
Mindanao Coal 200 2011 operator, the Philippine Electricity Market
Corporation (PEMC), which was constituted
Mt. Apo 1 and 2 92.52 2011
by the DOE but is independent of the DOE.
Casecnan 165 2011 The WESM determines the spot price,
Subtotal 2026.32 which represents the actual price electricity
IV. Other Assets at a given time. As of October 2010, only
the Luzon WESM is in operation while in
Real Estate/Non-power
the Visayas, a trial operation program was
Total 3766 launched in July 2010.5
Source: PSALM

The Failed Promises

“To protect the public interest as it is affected by the rates
and services of electric utilities and other providers of
electric power”-EPIRA, Declaration of Policy
To the public, the EPIRA was touted as the answer to
their power woes, especially the high power rates that
were among the highest in Asia. Back then, there was
sufficient, even surplus installed capacity, but proponents of
privatization kept harping on the increasing demand, which

T he passage of the EPIRA was the conditionality

attached to the US$600-million loan from the Asian
Development Bank (ADB) and the Japan Bank for
International Cooperation (JBIC) in 1998. The loan was to
completely restructure the electric power industry under the
principles of liberalization, privatization and deregulation.
according to the law of capitalism would eventually drive
up prices. Increasing power rates were also presented to the
public as deterrence to much-needed foreign investments.
Napocor was also regarded as a “monopoly”, and
monopolies according to the proponents of privatization

4 IBON Facts & Figures Special Release

would have an unfair advantage over supply and pricing.
Competition must be introduced, they argued, so that
consumers would have options.
The principle behind the EPIRA is simply that deregulation,
privatization and liberalization of the electric power industry
would bring about competition and that competition would
bring down the prices of electricity. Consumers were
promised: “the quality, reliability, security and affordability
of the supply of electric power”, “transparent and reasonable
prices of electricity in a regime of free and fair competition”,
and the “total electrification of the country”. The government
through the EPIRA declared its policy to protect public
interest in terms of rates and services of power utilities and
to develop renewable energy.
The EPIRA upheld the collection of the much-criticized
Purchased Power Agreement (PPA) which was used as the
vehicle to let the public pay for the sweetheart deals of the
Ramos administration with the IPPs. But most importantly,
the EPIRA overhauled the electric power industry by
removing the control of Napocor in power generation and
privatizing transmission. It made the country the first in Asia
to subject its electric power industry to full privatization.
Continued monopolization
Contrary to the promise of breaking down monopolies in the
power sector and other economic sectors, the power sector
is now under a private monopoly as only a few companies
presently control the substantial share of the market. A
company or related group can own up to 30% of installed
generating capacity and 25% of the national installed
generating capacity and own DUs as well. Restriction on
cross-ownership only applies to ownership of generation
and transmission facilities.
In generation, only four corporations, Chart 1. Market Share of Generation Companies in the Philippines
San Miguel Power Corp, Aboitiz
Group, Lopez Group and the
SEM-Calaca
government privatization entity,
4%
PSALM, corner 75% of the market.
Aboitiz
San Miguel Power Corporation 14%
(SMPC) already captured 22% of
the generation market, barely two
years after diversifying in the power
industry from food and beverage.
The Lopez group, after divesting a
substantial share in Meralco, also
has acquired a higher share in power Lopez Group
generation, now cornering 18% 18%
while Aboitiz is now in control of 14
percent. (See Chart 1) Source: 17th EPIRA Report, DOE
5 IBON Facts & Figures Special Release
These big local corporations of elite families together
with their foreign partners are increasing their assets
and subsidiaries in power generation especially with the
opportunity ushered in by President Aquino’s PPP in
infrastructure. The Cojuangco, Lopez and Aboitiz families
are leading in terms of subsidiaries and assets. The SMPC
now has a total of 3,165 MW of generation capacity,
followed by the Lopezes with 2,832.4 MW and the power
transnational corporation (TNC) TeAM Energy (formerly
Mirant) with 2,175 MW. (See Table 2)
In the power distribution subsector, San Miguel also owns
43% of Meralco, the largest power distribution utility (DU)
in the country. The Aboitiz Group meanwhile fully owns the
Visayan Electric Company (VECO) and Davao Light and
Power Company, the 3rd and 4th biggest DUs in the country.
It also owns the San Fernando Electric Light and Power
Company, Cotabato Light and Power Company, Subic
Enerzone Corporation and other smaller PDUs. The Lopez
Group still holds operational control over Meralco because
of its partnership with PLDT. San Miguel and Aboitiz also
own the largest PDUs in the country in terms of the number
of customers and GWh sales: Meralco, VECO and Davao
Light and Power Company.
On the other hand, rural electric cooperatives (ECs) have
been continuously branded as inefficient because of their
mounting debts. PSALM disclosed that some 90 electric
cooperatives face disconnection from the grid because of
their debts. Some 82 ECs have total debt of Php16 billion.6
This may be a prelude to the temporary take-over of the
ECs by NEA because of their “non-viability” which would
eventually lead to privatization or taking over by private
DUs in the franchise areas of the ECs.
GBPC KEPCO-
MPPCL
1% SPC Others
4%
2% 6%
SMPC
22%
PSALM 21%
31 May 2011 5
 Table 2. Corporations Controlling the Power Generation Subsector
Subsidiaries in Power/Power Assets/ Filipino owners/ Foreign Owners/
Corporation Total Capacity
Contracted Capacity partners Partners
SMPC San Miguel Energy Corp. (Limay 3,165 MW Danding Cojuangco,
Combined-Cycle, San Roque hydro; Ramon Ang
contracted: Sual Coal, Ilijan Combined
Cycle)
Lopez Group (First Philippine First Gen Corporation (holding)- Bauang 2,832.4 MW Lopez BG Group(UK).)
Holdings Corporation (FPHC)) Power Corp., Pantabangan-Masiway
Hydro, Sta. Rita Combined Cycle, San
Lorenzo Combined Cycle, Bacon-Manito
Geothermal, Leyte Geothermal, Northern
Negros Geothermal, Southern Negros
Geothermal, Bukidnon Hydroelectric,
Mindanao Geothermal
Aboitiz Group (Aboitiz Equity Aboitiz Power, Hedcor Sibulan, AP Renew- 2,051 MW Aboitiz family SN Power AS
Ventures) ables, Inc. (Ambuklao-Binga Hydro, Bakun (Norway), Pacific
Hydro, Benguet Hydro, Magat Hydro, Hydro Limited
Makban Geothermal, Pagbilao, Tiwi Geo- (Australia)
thermal, Toledo Coal, Mactan Coal, Cebu
Coal, Mindanao Coal, Power Barge/Mobile
1 and 2 Thermal, Davao Hydro, Sibulan,
Bukidnon Hydro, Davao Thermal, Cotabato
Thermal, Zamboanga Thermal, General
Santos Thermal)
Kepco-SPC KEPCO Ilijan Corporation (KEILCO)/ 1,263 MW Salcon Power Corp Kepco Philippines
KEPCO Philippines Corporation (SPC) Corp (Korea)
(KEPHILCO) - Malaya, Ilijan, Naga, Cebu
CFBC
Team Energy Corp (Mirant) Sual, Pagbilao, Ilijan 2,175 MW Tokyo Electric
Power Company
and Marubeni Cor-
poration (Japan)
MPPCL Masinloc Power Partners Co. Ltd. 600 MW The AES Corpora-
tion (US)
SEM Calaca SEM-Calaca Power Corp 600 MW DMCI (Consunji)
and Coyiuto
Global Business Power Corpo- Toledo Power Company (TPC), Panay 610 MW Metrobank Group
ration (GBPC) Power Corporation (PPC), GBP (George Ty)
Power Resources, Inc and Toledo
Cebu International Trading Resources
Corporation (TCITRC)
Source: Company websites

For example, the Albay Electric Cooperative (ALECO) in Fair pricing

February 2011, ALECO was nearly disconnected from the
grid because of its unpaid debts to the PEMC, the operator
of the WESM. The local government-run EC decried the
spikes in the cost of electricity in the WESM as the main
cause for its increasing debt.7 Many private investors such as
the Aboitiz Group, which owns the Tiwi Geothermal Power
Plant in Albay and Meralco have expressed interest
in buying ALECO.
Out of 23 power generators which are members of the WESM,
the biggest six generators already capture 7,117 MW out of
11,652 MW registered generation. This is already equivalent to
61% of the entire generation of WESM members, an apparent
concentration which was a direct result of the ownership structure
in the generation subsector. This immediately raises the question
whether WESM prices are the true cost of power generation.

6 IBON Facts & Figures Special Release

WESM operators have their own share of price-rigging and
manipulation. When NPC and its IPPs compose the majority
of WESM members, it was accused of jacking up prices. In
the August to September 2006 trading cycle, Napocor and
PSALM were found to have colluded to manipulate prices
in WESM. WESM prices started at Php2.72/kWh but spiked
to Php4.853/kWh and even reached Php6.88 in the average
price during the said period.
The WESM is the pride of the proponents of the EPIRA,
since this would supposedly give wholesale electricity
consumers such as the ECs, PDUs and bulk users like Mirant
Pagbilao, Shell, etc. the power to choose their electricity
suppliers. According to EPIRA, by having a marketplace w
here electricity produced by power generating companies
are centrally coordinated and traded would lead to healthy
competition and with the principle of supply and demand,
consumers of electricity including the ultimate end-user
would get the “best price”. The basic assumption is that with
many suppliers, there would be competition that would drive
down prices and thus make consumers happy.
However, the basic problem is the premise itself. First,
electricity cannot be stored therefore there is no inventory
and has no effect on price movement inside the spot market.
Second, the WESM has also only a few generators as shown
by the present composition of members and their control of
electricity output. With this monopoly structure, there can be
no competition. Third, electricity is an inelastic commodity.
The demand is constant whether there is supply of electricity
or none. Thus, WESM as providing consumers the “choice”
is also not applicable.
Government deregulates
The ills of power privatization has been felt not just with
the implementation of EPIRA in 2001 but ever since the
government defaulted on power generation with the entry of
independent power producers (IPPs) during the early 1990s.
The EPIRA solidified the hold of private corporations in
generation with the government defaulting in the regulation
of the generation sector.
At the distribution level, the Energy Regulatory Commission
(ERC) is supposedly tasked to regulate PDUs, but it is by
and large merely an approving agency for electricity rates in
practice. And while it is the sole government body in charge
of regulation, the EPIRA has diluted the regulatory powers
of the government. The ERC has not been monitoring the
increase of electricity tariffs over the years to know whether
or not the mandate of the EPIRA of ensuring affordable rates
to the majority of the population is being achieved. Because
it has no regulatory functions over generation and supply,
rates are being taken as reflecting true cost while DU rates
are not at all subjected to social considerations.
Since 2003, the ERC under its mandate from the EPIRA
began implementing the performance-based regulation
(PBR) in place of the return-on-rate base (RORB)
mechanism for NGCP and some DUs. .Under the RORB,
franchise holders are allowed to recoup just and reasonable
cost, pegged at 12% rate of return by the Supreme Court,
incurred for operation and administration expenses related
to providing electricity service.8 Under the PBR, DUs
and NGCP are allowed a declared target revenue and
capitalization for the next five years which will be the basis
of the rates that they will collect from their customers. This
would be approved by the ERC. Power watchdogs such
as the National Association of Electricity Consumers for
Reforms, Inc. (Nasecore) have opposed the PBR on the
grounds that the planned capitalization of the franchise
holders that is the basis for the rates would not be raised by
the NGCP or DU but will be collected from the customers
themselves.9
The experience with this method of rate adjustment
is problematic at best and has shown its bias towards
business interests. The company would already be able to
collect the rates even if the planned projects do not push
through. For example, the concessionaires Manila Water
Inc. and Maynilad Water started to collect rates based on
the projected revenue that would be collected from the
following projects, even if they have not come to fruition
up to now: the Php732 million-Wawa Dam (collected since
2003), the Php5.4 billion-Angat Water Reliability (collected
since 2008), and Php45.3 billion-Laiban dam (collected
since 2008). 10 The PBR best demonstrates the basic flaw
of privatization, i.e. to prioritize private profits over public
service, as nowhere in the methodology is the capacity of
customers to pay or the affordability of power services are
taken into consideration.
Unaffordable electricity
Under the EPIRA, generation and supply are not anymore
considered as public utilities. Thus the setting of generation
and supply rates is virtually a free for all activity. Further,
under the EPIRA, the ERC is not explicitly mandated to
monitor historical electricity tariffs that would have been
instrumental in finding out whether the EPIRA has indeed
delivered its promises.
In 2010, the Philippines had the highest residential
electricity rates in Asia and had overtaken industrialized
Japan, according to the study of Australia-based
International Energy Consultants. (See Chart 2) In a
presentation of the Joint Foreign Chambers of Commerce,
the unpublished study says that the electricity tariffs in
the Philippines have reached US$ 18.1 cents per kilowatt-
hour (KWh) compared to US$ 8 cents in 2001.11 With the
exception of Japan and Singapore, residential customers in
31 May 2011 7
 Chart 2. Residential Retail Electricity Tariffs (2010)
20 in USc/kwh

15

10

0
Philippines Japan Singapore Thailand Malaysia Indonesia Vietnam
(Manila) (Tokyo) Source: International Energy Consultants
Source: Joints Foreign Chambers of Commerce

Thailand, Malaysia, South Korea, Taiwan and Indonesia EPIRA mandated “unbundling” or that the various charges
only pay the equivalent of the generation charge being must be reflected on the customer’s bill. The notorious
paid by Filipinos.12 PPA, which was the outcome of Napocor’s lopsided
contract with IPPs, along with other automatic recovery
Among the private DUs (PDUs), Meralco has the highest mechanisms such as the Generation Rate Adjustment
average effective residential rate at Php10.67 per KWh Mechanism (GRAM) and the Incremental Currency
and the second highest commercial rate at Php9.05 per Exchange Rate Adjustment (ICERA) were embedded in the
KWh. (See Table 3) Meralco is the largest PDU in the unbundled bill.13
country, owning the franchises which cover 29 cities
and 82 municipalities in Metro Manila, Rizal, Bulacan, With unbundling, the government, through the PSALM
Cavite, Laguna, Quezon, Batangas, and Pampanga. On the started collecting the universal charge (UC), a pass-on
other hand, the Aboitiz-owned Visayan Electric Company charge imposed on all electricity end-users.� The UC
(VECO) has the lowest industrial rates even as the includes missionary electrification, which means that
residential customers decry their unaffordable residential customers, most of which are households, are obliged to
rates. (See Table 3) This is not surprising though as the pay for providing electricity in areas not connected to the
Cebu-based Aboitizes have their businesses located within main grid. The UC also contains charges to customers for
the franchise area of VECO. watershed rehabilitation and management and subsidy to
indigenous or renewable resources. An examination of the
Average electricity rates of ECs from January 2005 to components of average rates shows that the tax component
December 2010 increased by 18% while average rates
Table 3. Average Effective Rates of Private Distribution
of PDUs in the same period increased by 15 percent.
Utilities, June 2010 (Php/kWh)
(See Chart 3) It is expected that when the stranded
cost will be collected by PSALM and the NGCP will PDU Residential Commercial Industrial Others
recoup the cost in buying the transmission assets, DECORP 7.66 7.40 6.72 8.40
consumers will again face another round of rate AEC 6.97 7.24 11.73 6.55
increases.
SFELAPCO 7.41 7.50 6.04 7.88
Consumers bear cost of private business IEEC 7.34 6.90 8.62 6.91
CELCOR 9.49 9.23 8.47 9.20
The EPIRA ensures that power generation, MERALCO 10.67 9.05 7.12 10.84
transmission, distribution and supply would be a VECO 7.35 7.55 5.78 6.58
risk-free business. And true enough, it has passed
BLCI 6.15 6.07 - 5.80
on the cost of doing business to the end-consumers.
The EPIRA legitimized the passing on of the cost CEPALCO 8.80 8.37 7.23 7.85
of currency fluctuations, fuel cost fluctuations DALIGHT 6.76 6.63 6.20 6.86
and contract obligations or the purchased power Note: Based on Monthly Operation report submitted by Private DUs
adjustment (PPA) to consumers, most of which are (AER=Revenue Over sale)
residential customers. It can be remembered that the
Source: 17th EPIRA Status Report

8 IBON Facts & Figures Special Release

 Average Rates of Electricity, All ECs in all Regions vis-a-vis
Private Distribution Utilities, 2005-2010, in Php per kwh

2005 2006 2007 2008 2009 2010

Month/Year

and the UC are among the components that increased the
highest. Among the billing components, the UC increased
the highest since 2003, or at the start of the unbundling of
electric bills. UC increased by more than 190% in the last
eight years for Meralco customers. (See Table 4)
Most importantly, the EPIRA passed on the stranded
contract costs and stranded debts of Napocor to consumers
through the UC. Stranded contract costs are those incurred
by Napocor from the excess cost of contracted electricity
from the IPPs over the actual selling price of electricity in
the market. Stranded debts of the NPC are also from other
onerous terms in its contract with IPPs in the 1990s such as
the take or pay and the fuel guarantee provisions. The UC
would even increase steeply once the ERC rules in favor of
PSALM finally allowing it to collect the cost of stranded
debts and stranded contract costs.
The EPIRA also allows the franchise tax, energy tax, and the
value-added tax (VAT) to be passed on to consumers instead
of being absorbed by the power utility. Thus, when this
billing component saw an increase of 475.66% since 2003, it
was the consumers who shouldered all the taxes that should
have been paid by the business entity. (See Table 4)
Who ends up happy?
The privatization of the power sector assured profits for
the private power utilities. While power rates continue to
be high and unbearable, power corporations are having
a heyday. From 2001 to 2009, top 25 revenue-making
corporations in generation, collection and distribution of
electricity saw their net income jump by 902% even as
there were two years that saw their profits dip. (See Chart
4) On average, the top 25 corporations in power registered

Table 4. Meralco Average Rates by Billing Component, in Php/KWh, 2003-2010

% inc/dec
2003 2004 2005 2006 2007 2008 2009 2010
(2003 to 2010)
Meralco Charges 1.13 1.11 1.08 1.06 0.98 0.97 1.15 1.44 27.80
NPC, IPPs, TRANSCO 4.67 4.79 6.07 6.26 6.34 6.01 5.78 6.62 41.68
Generation 3.27 3.46 4.68 4.78 4.78 4.43 4.36 5.19 58.70
Transmission 0.96 0.86 0.78 0.85 0.92 0.98 0.88 0.87 -9.15
System Loss Charge 0.45 0.47 0.61 0.63 0.63 0.6 0.54 0.55 23.27
Cross Subsidies -0.02 -0.02 -0.03 0 -0.01 0 0 0 -100.00
Universal Charges 0.03 0.04 0.04 0.04 0.04 0.04 0.06 0.09 190.18
Franchise Tax, Energy Tax and VAT 0.14 0.14 0.19 0.68 0.7 0.71 0.66 0.81 475.66
Total 5.95 6.05 7.36 8.04 8.05 7.73 7.65 8.9534 50.48
Source: Meralco Utility Economics Office

31 May 2011 9
 Chart 4. Net Income of Top 25 Corporations in Generation an increase in net income by
Collection and Distribution of Electricity, 2001-2009 224.6% in a span of 11 years.
200000
The burden of increasing
150000 electricity rates is also more
lopsidedly borne by residential
100000
In Php million

customers than the commercial

50000 and industrial customers with
the passage of the EPIRA. For
0
example, the increase in average
-50000 Meralco rates for residential
and commercial customers was
-100000 almost the same during pre-
Year
Source: Business World Top 1000 Corporations, various years EPIRA days. (See Charts 5 and
6) However, rates for residential
Chart 5. Average Meralco Rates, 1991-2000
customers in the EPIRA period
(pre-EPIRA, in Php per kwh) have increased more steeply
than those of commercial
6.0 and industrial customers.
5.0 From 2001-2010, residential
customers suffered an increase
In Php per kwh

4.0 in electricity rates of 80% as

against the increases of only
3.0
53% for commercial customers
2.0 Residential and 37% for industrial
Commercial customers.
1.0
Industrial
0.0
Even the lifeline subsidy rate
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
which is the only claim of
EPIRA to be subsidizing the
Year poor is weighing on the poor.
Those consuming 101-300
Chart 6. Average Meralco Rates, 2001-2010 KWh per month, or around 85%
(EPIRA period, in Php per kwh) of residential customers, are
12.0 hard-up themselves in paying
for their electricity consumption
10.0 but are paying the same amount
8.0 as with those consuming 301
In Php per kwh

KWh or more per month.�

6.0 The lifeline subsidy provision
Residential expires this June, but Congress
4.0
Commercial already extended the said
2.0 EPIRA provision last June 8.
Industrial
0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Meralco Utility Economics Office Year

10 IBON Facts & Figures Special Release

 PPPs in Power
“...ang sagot naman sa kakulangan natin sa pondo ay
mga makabago at malikhaing paraan para tugunan ang
mga pagkatagal-tagal nang problema... Ito ang magiging
solusyon: mga Public-Private Partnerships.” – President
Noynoy Aquino, SONA 2010
I n his first State of the Nation Address (SONA), President
Aquino pitched for PPPs in infrastructure as the
centerpiece of his economic plan. According to President
Aquino, because the government lacks funds to build
infrastructure, private investors would be tapped to build
roads, bridges, agricultural, health and tourism facilities and
even to take over existing structures.
Still privatization
The term PPP first appeared in World Bank publications in
late 80s and early 90s. It has come to mean a possible range
of relationships between government and private businesses
and investors in the fields of infrastructure and services. The
private partner is expected to bring in capital, efficiency and
expertise of corporate practices, because at the heart of the
concept of PPP is that government is inefficient in delivering
economic and social services.16
The concept of PPP is not new. The term PPP has been
used to gloss over the notorious term privatization in more
ways than one. The ADB, International Monetary Fund
(IMF), World Bank and other apologists of privatization
differentiate PPP from privatization yet advance it with the
same objective and framework and with a greater scope to
include education, health, housing and other social
services.
The influx of private investors in infrastructure started early
on with the passage of the Build-Operate-Transfer (BOT)
law during the time of President Noynoy Aquino’s mother,
Corazon Aquino. The BOT Law ushered in the first BOT
contracts with power IPPs, which had been investigated and
proven onerous and detrimental to consumers by none other
than the ERC.
Learning from experience?
According to the Aquino government and the private sector,
more power plants need to be built because the country
needs additional capacity in the coming years. This was
the same ‘rationale’ used for the EPIRA and subsequent
legislation or executive orders that allowed PPPs in the
power sector. Experience shows, however, that PPPs have
been precisely the cause of wildly increasing power rates in
the last two decades.
After the controversial IPP contracts and during the
implementation of the EPIRA, there were yet 42 PPPs in
power. (See Table 5) The World Bank’s public-private
partnership in infrastructure database shows that the Aboitiz
Group is the foremost beneficiary of PPPs, followed by the
Lopez Group, DM Consunji, Inc.(DMCI) and Suritimo and
J-Power of Japan.
Further private control
The power sector, unlike the health and education sectors,
has already been largely privatized through the EPIRA. At
this point, the stage is set for additional generation facilities
to be initiated by the private sector and guaranteed by the
government.
There are nine already completed PPPs in the power sector.
Many of these are contracts with IPPs that were signed
under the Ramos administration and riddled with anomalies
because of provisions that were disadvantageous to the
government. (See Table 6)
There are three ongoing PPPs in the power sector according
to the BOT Center (the government agency in charge of
BOTs and now renamed as the PPP Center). These are
the San Roque Multi-purpose Project, Caliraya-Botocan-
Kalayaan Project, and Mindanao Coal-Fired Thermal Power
Plant.
There are 28 PPPs identified by the Aquino government
which are slated for roll-out in 2011. Twenty seven of these
are private-initiated projects while one project is initiated by
the government. (See Table 7) The government distinguishes
power projects from the rest of the PPP projects, because
under the EPIRA the construction of new or the expansion of
existing power plants will no longer be participated in by the
public sector. Also, Napocor is not allowed anymore to enter
into off-take agreements or buy electricity other than what
the contracted capacity it has now, which is also scheduled
to be sold.
31 May 2011 11
Table 5. PPP Power Projects in the Philippines, 2001-2009
Investwment Payment Commitments to Investment Commitments Total Investment
Sponsor PPI Type
Year the Government* in Physical Assets* Commitments*
Aboitiz Equity Ventures 2003 Concession 0 7 7
Aboitiz Equity Ventures 2003 Greenfield project 0 0 0
Aboitiz Equity Ventures 2004 Divestiture 1.3 0 1.3
Aboitiz Equity Ventures 2007 Divestiture 530 0 530
Aboitiz Equity Ventures 2007 Greenfield project 0 355 355
Aboitiz Equity Ventures 2008 Divestiture 325 170 495
Aboitiz Equity Ventures 2008 Greenfield project 0 105 105
Aboitiz Equity Ventures 2009 Divestiture 477 0 477
Aboitiz Equity Ventures 2009 Greenfield project 0 472.89 472.89
AES Corporation 2008 Divestiture 930 127 1057
Bronze Oak Group 2004 Greenfield project 0 60 60
Cagayan Electric Power & Light Co. 2003 Greenfield project 0 5.3 5.3
Coastal Power Corporation 2006 Greenfield project 0 24.8 24.8
Coyiuto Group 2009 Concession 2248 640 2888
DM Consunji Inc. 2007 Divestiture 0 0 0
DM Consunji Inc. 2009 Divestiture 361 120 481
First Philippine Holdings Corporation 2006 Divestiture 513 0 513
(FPHC)
First Philippine Holdings Corporation 2007 Divestiture 1400 0 1400
(FPHC)
First Philippine Holdings Corporation 2009 Divestiture 220 0 220
(FPHC)
Formosa Plastics Group 2009 Greenfield project 0 450 450
ICS Renewables 2009 Divestiture 0.23 0 0.23
J-POWER 2001 Concession 70 460 530
J-POWER 2003 Concession 0 0 0
Lopez Group 2004 Divestiture 1.5 0 1.5
Metrobank Group 2009 Greenfield project 0 450 450
Mirant 2004 Greenfield project 0 11 11
Monte Oro Grid Resources Corp 2009 Concession 2248 640 2888
Northwind 2004 Greenfield project 0 38 38
Northwind 2007 Greenfield project 0 13 13
Others 2004 Divestiture 0.48 0 0.48
RAG Beteiligungs-Group 2003 Greenfield project 0 0 0
RAG Beteiligungs-Group 2007 Greenfield project 0 355 355
San Miguel Corporation (SMC) 2009 Divestiture 13.5 0 13.5
SN Power 2007 Divestiture 530 0 530
SN Power 2008 Divestiture 325 170 495
Sorsogon II Electric Cooperative 2004 Divestiture 0.41 0 0.41
SPC Power Corp 2009 Divestiture 6.86 0 6.86
Sta. Clara International Corp. 2004 Divestiture 1.42 0 1.42
State Grid Xin Yuan Company limited 2009 Concession 2248 640 2888
Suritomo 2001 Concession 70 460 530
Suritomo 2003 Concession 0 0 0
Zabaleta & Co. 2004 Greenfield project 0 60 60
*in current US$ millions
Source: World Bank and PPIAF, PPI Project Database. (http://ppi.worldbank.org) Date: 05/23/2011

12 IBON Facts & Figures Special Release

 Table 6. Ongoing and Completed PPPs in the power sector (BOT Center)
Estimated Project Cost
Project Name Proponent Scheme
in US$ Million
Ongoing
San Roque Multi-Purpose Project Marubeni/Kansai Electric Power Inc./ BOT 1,141.00
Sithe Energies, Inc. (Japan/USA)
Caliraya-Botocan-Kalayaan Project IMPSA (Argentina) BROT 450
Mindanao Coal-Fired Thermal Power Plant Harbin/State Investment (China) BOT 310
Completed
Subic, Zambales Diesel Power Plant I PRISMA Energy Phils. Corp ROM 4
Clark Air Base Diesel Plant Electrobus (Phils.) ROM 4.5
Calaca, Batangas Diesel Power Barges Far East Levingston (Singapore) BOO 78
North Harbor Diesel Power Barges Far East Levingston (Singapore) BOO 78
Navotas Diesel Power Barge 1 & 2 East Asia Power Corp. (Singapore) BOO 110
Engineering Island Power Badge Sabah Shipyard SDN.BHD (Malaysia) BOO 30
Navotas Gas Turbine 1-3 Hopewell Holdings Ltd. (Hongkong) BOT 40
Toledo Cebu Coal Thermal Plant Atlas Cons. Mining & Devt. Corp. ECA 35
Pinamucan, Batangas Diesel Power Plant PRISMA Energy Phils. Corp. BOT 120
Source: BOT Center

Total estimated project costs for all identified power projects
in the next year or so is Php248.546 billion. There are many
proposed projects which would still use coal, the dirtiest
fuel and expensive bunker fuel. Energy Development
Corporation of the Lopez Group leads in the line-up of
project proponents. (See Table 7)
Still driven by debt
International financial institutions particularly the World
Bank and the ADB are the ones at the forefront of the drive
for PPPs in power and other sectors. These institutions are
very active in these projects because it is a lucrative venture
for lending, it facilitates TNCs in power and infrastructure
and it is also a vehicle to dictate further neoliberal policies
that are best facilitated by a privatized power sector. With
the power sector privatized, advocates of privatization
say that the cost of business would be cheaper and the
privatization of other sectors would be easier to implement.
design process of the project.17 In the power sector, the
World Bank has loaned the Philippine government US$1.46
billion since the 1960s.
The ADB meanwhile has also been active in the power
sector. Since the 1970s, the ADB has provided financing
worth US$2.9 billion loans and around US$15 million in
technical assistance mostly on conventional energy sources
such as coal, hydropower and oil. The ADB provided 21
loans to Napocor worth US$1.6 billion for power generation
and transmission projects, private sector loans (such as to
Hopewell, Meralco, Masinloc Power Partners Ltd., and
Mirant), technical assistance grants worth US$15 million,
and policy-based loans for power sector privatization. For
example, the US$450-million Power Sector Development
Program loan is meant to accelerate the implementation
of the EPIRA. Aside from the said amount, an additional
US$400 million is being proposed to extend the
implementation of the program in the coming years.

The World Bank is helping establish the business and

regulatory environment for PPPs through its Public-Private
Partnership in Infrastructure (PPPI) program, among others,
which provides “systematic training and skills enhancement
leading to the development of a cadre of capable and
knowledgeable public sector professionals adequately
equipped to deal with complex public-private partnerships
transactions.” The PPPI program also gives technical
assistance to country clients on specific issues during the

31 May 2011 13
Table 7. PPP Projects in Power
Project Proponent
Northwind Pamplona Project Northeast Wind Systems
Corporation
Northwind Aparri Project Northwind Group of Com-
panies.
Multi-Fuel Biomass Power Plant Green Power Pangasinan
Philippines, Inc.
Burgos Wind Power Project Energy Development
Corporation
Multi-Fuel Biomass Power Plant Green Power Nueva Ecija
Philippines Inc.
Tanawon Geothermal Project Energy Development
Corporation.
Coal-fired Power Plant Redondo Peninsula Energy
Incorporated
Coal-fired Power Plant Trans Asia Oil and Energy De-
velopment Corporation (TAOil)
Kalayaan Pumped Storage Power J Power and Sumitomo
Plant III (CBK Expansion) Corporation
Mauban Wind Farm Project Quezon Power Philippines
Rangas Geothermal Project Energy Development
Corporation (EDC)
Balintingon River Multi-Purpose National Irrigation Admin-
Project istration
Quezon Power Expansion Quezon Power Philippines
Project
Manito-Kayabon Geothermal Energy Development
Project Corporation (EDC)
Mindoro Biomass Power Project Global Power Mindoro
Philippines, Inc
Pagbilao Expansion Project Team Energy Corporation
Pagudpud Wind Power Project Energy Development
Corporation (EDC)
Villasiga Hydropower Project SUNWEST Water & Electric
Company v
Negros Biomass Power Project Global Green Power PLC
Samar Biomass Power Project Global Green Power PLC
Dauin Geothermal Project Energy Development
Corporation
Southern Leyte Geothermal Energy Development
Project (Formerly Cabalian Corporation (EDC)
Geothermal)
Bunker-Fired Power Plant Mindanao Energy Systems,
Incorporated (MINERGY)
Southern Mindanao Coal-Fired Conal Holdings Corporation
Power Station
Tagoloan Hydropower First Gen Mindanao Hydro
Power Corporation
Bukidnon Biomass Power Green Power Bukidnon
Project Philippines, Incorporated
Davao Biomass Power Project Green Power Davao Philip-
pines, Incorporated
Camiguin Island Wind Power Energy Development
Project Corporation
Source: PPP Brochure
14 IBON Facts & Figures Special Release
Components Location Project Cost
30 MW Pamplona, Cagayan Valley PHP 3,375 Million (US$ 75
Million)
40 MW Aparri, Cagayan Valley PHP 4,500 Million (US$ 100
Million)
2 x 17.5 MW Pangasinan PHP 2,205 Million (US$ 49
Million)
40 MW wind power plant in Burgos, Ilocos Norte PHP 11,610 Million (US$ 258
Saoit and 46 MW in Nagsurot Million)
2 x 17.5 MW biomass power San Leonardo, Nueva Ecija PHP 2,205 Million (US$ 49
project Million)
40 MW steamfield and geother- Bacman Geothermal Field, PHP 9,000 Million (US$ 200
mal power plant with 0.8 kilome- Sorsogon. Million)
ter 230kV transmission line
2 x 150 MW coal-fired power Naglatore, Cawag, Subic PHP 24,300 Million (US$
plant 540 Million)
1 x 135 MW coal-fired power Bato West, Calaca, PHP 21,870 Million (US$
Batangas 486 Million)
360 MW hydro power plant Lumban, Laguna PHP 32,400 Million (US$
720 Million)
12 MW wind power plant PHP 1,350 Million (US$ 30
Million)
40 MW steamfield and geother- Bacman Geothermal Field, PHP 9,000 Million (US$ 200
mal power plant Bacon, Sorsogon Million)
30 MW hydro power plant General Tinio, Nueva Ecija PHP 2,700 Million (US$ 60
Million)
500 MW additional capacity in Mauban, Quezon PHP 40,500 Million (US$
the coal-fired power plant 900 Million)
integrated 40 MW steamfield Bacman Geothermal Field,
and geothermal power plant Bacon, Sorsogon
17.5 MW biomass power plant Mindoro PHP 1,575 Million (US$ 35
Million)
400 MW additional capacity in Pagbilao, Quezon PHP 32,400 Million (US$
the coal plant 720 Million)
40 MW wind power plant Pagudpud, Ilocos Norte PHP 4,500 Million (US$ 100
Million)
8 MW hydro power plant Sibalom, Antique PHP 720 Million (US$ 16
Million)
17.5 MW biomass power plants PHP 562.50 Million (US$
12.50 Million)
17.5 MW biomass power plant Samar PHP 1,575 Million (US$ 35 Million)
40 MW steamfield and geother- Dauin, Negros Oriental PHP 9,000 Million (US$ 200
mal power plant Million)
40 MW steamfield and geother- Southern Leyte PHP 9,000 Million (US$ 200
mal power plant Million)
20 MW bunker fired power Bukidnon PHP 900 Million (US$ 20
plant Million)
200 MW coal power plant Maasim, Sarangani PHP 6,120 Million (US$ 360
Million)
68 MW hydro power plant Bukidnon PhP 6,120 Million (US$ 136
Million)
35 MW biomass power plant Bukidnon PHP 1,496.25 Million (US$
33.25 Million)
17.5 MW biomass power plant Davao City PHP 1,496.25 Million (US$
33.25 Million)
5 MW wind power project Camiguin PHP 562.50 Million (US$
12.50 Million)
 Towards Nationalization
H igher power rates (and the highest in a region where
the Philippines lags behind economically) are the
most obvious manifestation of the failure of the EPIRA.
The people also have to bear the costs of privatization
and lopsided contracts with the private sector. The fault
obviously does not lie in the delay in the implementation
of privatization, as what proponents of privatization claim.
The failure lies in the framework itself, which has regarded
electricity as a commodity that fetches a price and sold by
the private corporation rather than a public utility for all
that is provided by the government. Privatization of power
through PPPs, along with the privatization of other public
utilities such as water services and transportation and social
services such as health and education, has completely
disregarded the aspirations for genuine economic and social
development, in favor of private profits.
No amount of so-called social protection mechanism to
cushion the poorest of the poor from the otherwise harsh
impact of PPPs can reverse the fact that the people are
yet to experience the worst from privatization and that
government is defaulting on its responsibility of providing
cheap electricity to all households and industry. The rise of
Notes and References:
(Endnotes)
1 Department of Energy, <http://www.doe.gov.ph/faq%27s/epira.
htm>
2
Department of Energy, et al. 17th EPIRA Report, October 2010.
3
Beltran, Jill. “Palace remains firm on sale of Agus, Pulangi
plants in Mindanao,” Sunstar. March 27, 2011. <http://www.
sunstar.com.ph/manila/local-news/2011/03/27/palace-remains-
firm-sale-agus-pulangi-plants-mindanao-147190>
4
Department of Energy, et al. op.cit. p.6
5
Department of Energy, et al. op cit. p.16
6
“82 power coops, big users face disconnection”, Malaya
Business Insight. February 18, 2011. < http://www.malaya.com.
ph/feb18/busi6.html>
7
Arguelles, Mar S. “WESM sparks power crisis in Albay,”
Bicol Mail Online. July 8, 2010. <http://www.bicolmail.com/
issue/2010/jul8/xwes.html>
8
A presentation by Nasecore on VECO and PBR, Muntinlupa
Power Forum, undated.
monopolies in such a strategic and key sector as power is
to the detriment of national industrialization. By inviting
PPPs in power, the Aquino government has placed the entire
economy at the mercy of the private power corporations,
with households and small and medium enterprises suffering
the most.
Any government therefore that claims to be upright and
concerned with ending poverty must aspire for a democratic
economy that gives premium to national industrialization,
people’s participation, and state responsibility to promote
the welfare of the majority. The Aquino government may
start where any government is expected to do best i.e. to
remain to be in control of basic, key and strategic industries
and sectors that are needed to propel this country to national
industrialization and human development. Such control is
best achieved through nationalization, but the PPP offensive
runs counter to this basic first step. The problem with
privatization is that has not only failed as a development
paradigm, but the government that follows it faithfully
naturally fails with it.
Glenis Teresa C. Balangue
9
Ibid.
10
Alvarez, Kathrina. “Congress probe on water rate hike sought.”
Sunstar, February 2, 2011. <http://www.sunstar.com.ph/manila/
business/congress-probe-water-rate-hike-sought>
11
Asian Development Bank,
12
Philippines has most expensive electricity in Asia.” Manila Bulletin,
February 23, 2011. < http://www.mb.com.ph/node/305841/philippine>
13
Tapang, Giovanni, Ramirez, Ramon and Kim Gargar. “Ever
increasing rates from the EPIRA: A closer look at the electric power
industry in the Philippines, February 5, 2005. <http://www.bulatlat.
com/news/4-52/4-52-epira.html>
14
Power Sector Assets and Liabilities Management Office (PSALM)
website. Administration of Universal Charge, < http://www.psalm.gov.
ph/liabilities/admi%20uni%20char.html>
15
Tapang, et al. op. cit. p.7
16
IBON Foundation. PPP: Private Gains, Public Costs. IBON Facts and
Figures, September 15 and 30, 2010.
17
IBON Foundation. Op cit. p.4
31 May 2011 15
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16 IBON Facts & Figures Special Release