EPIRA LAW

RA 9136
ELECTRIC POWER INDUSTRY
REFORM ACT OF 2001
 The Essence of these reforms is
giving stakeholders a CHOICE
Consumer Empowerment
Higher Efficiency
Open Access
Industry Accountability
Competition in Generation and Supply
Electricity Tariff Unbundling
 What does the law means?
Declaration of Policy (among others)
To ensure and accelerate the total electrification of the country;
To ensure the quality, reliability, security, and affordability of
the supply of electric power;
To ensure transparent and reasonable prices of electricity in a
regime of free and fair competition and full public accountability
to achieve greater operational and economic efficiency and
enhance the competitiveness of Philippine products in the global
market;
 What does the law means?
Declaration of Policy (among others)
To enhance the inflow of private capital and broaden the
ownership base of the power generation, transmission, and
distribution sectors;
To provide for an orderly and transparent privatization of the
assets and liabilities of the NPC (National Power Corporation);
To promote the utilization of indigenous and new and renewable
energy resources in generation in order to reduce dependence on
imported energy.
 What does the law means?
Scope:
This act shall provide a framework for restructuring of the
electric power industry, including the privatization of the
assets of NPC, the transition to the desired competitive
structure, and the definition of the responsibilities of
various government agencies and private entities.
 CHAPTER II
ORGANIZATION AND OPERATION
OF THE ELECTRIC POWER INDUSTRY

SEC. 5. Organization. The electric power industry shall be divided into four (4)
sectors, namely: generation, transmission, distribution and supply.
SEC. 6. Generation Sector. Generation of electric power, a business affected with
public interest, shall be competitive and open.
SEC. 7 Transmission Sector.- The transmission of electric power shall be regulated
common electricity carries business, subject to the ratemaking powers of the ERC.

 SEC. 8. Creation of the National Transmission Company.-

There is hereby created a National Transmission
Corporation, hereinafter referred to as TRANSCO, which
shall assume the electrical transmission function of the
National Power Corporation (NPC), and have the powers
and functions hereinafter granted

SEC. 30. Wholesale Electricity Spot Market. Within one

(1) year from the effectivity of this Act, the DOE shall
establish a wholesale electricity spot market composed of
the wholesale electricity spot market participants.

SEC. 36. Unbundling of Rates and Functions. Within six

(6) months from the effectivity of this Act, NPC shall file
with the ERC its revised rates.
 CHAPTER III

ROLE OF THE DEPARTMENT OF ENERGY

37. Powers and Functions of the DOE.- In

addition to its existing powers and functions,
the DOE is hereby mandated to supervise the
restructuring of the electricity industry. In
pursuance thereof, Section 5 of RA 7638
otherwise known as The Department of
Energy Act of 1992
 CHAPTER IV
REGULATION OF THE ELECTRIC POWER
INDUSTRY

SEC. 38. Creation of the Energy Regulatory

Commission. There is hereby created an independent,
quasi-judicial regulatory body to be named the Energy
Regulatory Commissions (ERC). For this purpose, the
existing Energy Regulatory Board (ERB) created under
Executive Order No. 172, as amended, is hereby
abolished.
 CHAPTER V

PRIVATIZATION OF THE ASSETS OF THE NATIONAL

POWER CORPORATION
SEC. 47. NPC Privatization. Except for the assets of SPUG, the generation assets,
real estate, and other disposable assets as well as IPP contracts of NPC shall be
privatized in accordance with this Act. Within six (6) months from the effectivity of this
Act, the PSALM Corp shall submit a plan for the endorsement by the Joint
Congressional Power Commission and the approval of the President of the Philippines,
on the total privatization of the generation assets, real estate, other disposable assets as
well as existing IPP contracts of NPC and thereafter, implement the same,
 CHAPTER VI

POWER SECTOR ASSETS AND LIABILITIES

MANAGEMENT
SEC. 49. Creation of Power Sector Assets and Liabilities Management
Corporation. There is hereby created a government-owned and -controlled
corporation to be known as the Power Sector Assets and Liabilities Management
Corporation, hereinafter referred to as the PSALM Corp., which shall take
ownership of all existing NPC generation assets, liabilities, IPP contracts, real estate
and all other disposable assets. All outstanding obligations of the NPC arising from
loans, issuances of bonds, securities and other instruments of indebtedness shall be
transferred to and assumed by the PSALM Corp. within one hundred eighty (180) days
from the approval of this Act.
 CHAPTER VII

PROMOTION OF RURAL ELECTRIFICATION

SEC. 57. Conversion of Electric Cooperatives. Electric

cooperatives are hereby given the option to convert into either
stock cooperative under the Cooperatives Development Act or
stock corporation under the Corporation Code. Nothing contained
in this Act shall deprive electric cooperatives of any privilege or
right granted to them under Presidential Decree No. 269,
as amended, and other existing laws.
Failed Assumptions and
Unfulfilled Promises
 Grave Issues with EPIRAs
Outcomes
1. Electricity Security
2. PSALM Haemorrhage
3. Consumer to Face even Higher
Rates
 1.Electricity Security

Three Aspects:
1. Short term
2. Medium term
3. Long term
 SHORT AND MEDIUM
SHORT TERM
Responding to power
interruptions
Stabilizing frequency and MEDIUM TERM
Proper maintenance of generation and transmission/distribution

voltage variations assets into the future to maintain appreciable levels of

dependable capacity.

Matching demand and

supply on a daily basis
 LONG TERM PLANS
Beyond two years planning
for investment in generation
capacity and network
expansion to meet projected
demand growth and to
replace plants and assets at
the end of life cycle.
 Long term plans feedback
DELAY OF IMPLEMENTATION
Power plants construction lead
time
2 to 5 years
Capitalization
Ranging US$1million to US$4
million per MW installed
capacity
 Long term plans feedback
Promptness on sale of
existing NPC/Psalm
assets but no new
capacity commitment
 Market Failure
TARGET
By June 2004
implementation of retail
competition
IPPs
2006 sale on stream
At least
7 years overshot deadline 70%
WESM
 Market Failure
NO PROVISION TO CAPACITY REQUIREMENT
DOE power planning has not adequately met by private
sector that is to put up new capacity.
Luzon experiencing diminishing reserves
Visayas experienced tightening of power supply
Mindanao experienced actual power shortages in 2010.
DOE Power Development Plan for
2009 -2030
2009 2014
Performance 2015-2030 Forecast

Forecast Actual Forecast

 2. PSALM Haemorrhage
History of Financial Management
2001 EPIRA NPC US$16.39
enacted Liabilities billion
2004 PSALM Absorbed Php 200 Thru national
assume NPC liabilities million govt
2010 NPC sold 91.73% of US$10.65
assets Total assets billion
December 2010 PSALM/NPC US$15.82 US$0.57
obligation billion
SHOULD BE US$5.74 More or less
billion
UNREASONAB OVERDRAFT US$10.08 Unliquidated
LE
2011 PSALM Secured loans Php 75 billion
 ANALYSIS
EPIRA achieved in 10 years was only to facilitate the
privatization of assets while, liabilities have remained at
almost the same levels as we started.
The conversion of NPCs long term debt in the past into
short term commercial loans and bonds meant higher
carrying cost than the original debt profile of NPC.
With assets depleted, PSALM is stuck with continued
refinancing and ever-ballooning liabilities.
 3. Consumers to Face even Higher
Rates
PSALM Collection of Universal Charge
Stranded debt
Stranded contract cost
With all assets sold and remaining receivable inadequate,
PSALM can only look to consumers to cover its US$16
billion operating losses
 Consumers to Face even Higher
Rates
PSALM Collection of ICERA
ICERA Incremental Currency Rate Adjustment and
Automatic Recovery of Monthly Fuel and Purchased Power
Costs
There are certain IPP contracts that are not eligible for
Universal charges recovery and this is the mechanism that
can be used for contract losses recoveries.
 Consumers to Face even Higher
Rates
PSALM Collection of FIT ALL

FIT ALL Feed in Tariff Allowance

This is a subsidy for new capacity using renewable energy
Consumers to Face even Higher
Rates
Power supply producers
share Reported data
In the 17th Status Report on EPIRA implementation, the ERC finds

Share that no generation company violated the market share limitations per
grid. However, no data is presented on cross ownership and bilateral
contracting where EPIRA imposes certain limitations.

San Miguel
San Miguel; 20% Lopez
Small others; 50% Aboitiz
Lopez; 17%
Small others
Aboitiz; 13%
 Consumers to Face even Higher
Rates
Emerging ownership structure of the industry.

It has become a field dominated by a few big players, where

anti-competitive behaviour such as dealing, dividing
territories, vertical and horizontal integration, and price
leading could hurt the consumers and public interest at
large.
 Critical Adjustments NOW!
FIRST:
We cannot wait for electricity insecurity to mature into another
severe power supply crisis.
It was a BIG MISTAKE for EPIRA to completely remove
governments role in power generation.
Reintroducing government in the generation sector will provide
the much needed mechanism to address market failures in
putting up new capacity and to counterbalance any anti-
competitive behaviour of the big private players.
 Critical Adjustments NOW!
We ALSO NEED to support the electric cooperative like
ZANECO in the context of emerging the dominance by big
players.
SECOND:
PSALM debts and losses should be recognized as a key policy
issue that cannot be left to PSALMs failing management.
To discuss and decide whether consumers can afford a full pass-on of
the PSALM debts and losses, and whatever other approaches are
available for the retiring the obligations of PSALM?
 Critical Adjustments NOW!
THIRD:
We need to evaluate the performance of ERC (Energy Regulatory
Commission) in the discharge of its regulatory functions.
Political appointments in the commission have compromised its
INDEPENDENCE and become a tool for unpopular price
increases at the worsening financial obligations of PSALM.
It is believed that the ERC capacity must be upgraded to enable to
adequately monitor the ongoing concentration of ownership in the
power sector.
 The government approach of only making
minor tweaks on EPIRA cannot continue.
We need bold and strategic action now to
truly ensure secure and affordable
electricity for Filipinos.
Special thanks to

DEVELOPMENT ROUNDTABLE SERIES
Rep. Lorenzo R. Taada III and
Atty. Nepomuceno Malaluan