Philippines - People's Groups Mount Legal Struggle to Stop Disastrous Power Privatization

Philippine Experience on Power Privatization

Overview
1987 – government first opened power generation to the private sector. Then President Aquino said that government needs the private sector to invest in the power sector to avert a possible power crisis in the late 1980s until early 1990s.

1991-1995 – the Philippines had experienced a crippling power crisis. Thus, the Philippine Legislature granted then President Ramos special powers to enter into contracts with privately-owned (and mostly foreign-controlled) independent power producers. To entice the private sector investors, the Ramos administration granted them handsome guarantees for their profits, fuel needs, equity guarantees, and foreign exchange guarantees.

2001 – the Philippine Legislature finally enacted the Electric Power Industry Reform Act (EPIRA), which prescribes the following:

a. Restructuring of the power industry
b. Privatization of the State-owned National Power Corporation by selling its assets and liquidating its liabilities
c. Introduction of free market reforms and competition policy in the power industry.

The Freedom from Debt Coalition was able to successfully delay the enactment of the privatization law, and exposed that the law was a loan conditionality by the international financing institutions. Further, the Coalition was able to expose several shortcomings of the law.

With the eventual passage of the law, FDC is now entering into a new phase of struggle in opposing the privatization of the Philippine power industry.

Among the issues closely related with the passage of the EPIRA, and in which FDC has campaigned against are the following:

High Electricity Rates
- Philippine electricity rates remain to be one of the highest in Asia (second to Japan). This is attributed to the guarantees that government has extended to Independent Power Producers (IPPs) during the early 1990s. These costs of these guarantees are being passed on to consumers.

- One such guarantee is the government’s obligation to take a contracted amount of energy from these IPPs, whether or not such energy is needed. The government is also obligated to pay for the contracted energy, whether or not it is actually produced and whether or not it is actually consumed.

- Aside from these guarantees, power utilities have been passing on to consumers several charges that should not be paid for by consumers in the first place. Just recently, the Philippine Supreme Court disallowed Manila Electric Company (the largest electricity distribution utility in the country) to collect it payments for income tax from consumers, which it has been collecting since 1994. The utility was ordered to refund some P30 billion (US$54 million) to consumers.

- FDC has actively campaigned for the lowering of electricity rates. FDC has challenged several electricity rates increase petitions filed by NPC and Private Distribution Utilities to the Energy Regulatory Commission.

Independent Power Producers (IPPs)
- The clamor to lower down electricity prices forced the Philippine Legislature to insert a provision in EPIRA for the review and possible renegotiation of these IPP contracts.

- FDC conducted a citizens’ review process parallel to the government’s. The Citizens’ IPP Review Commission exposed issues that the government review process ignored like the social, procedural, and environmental implications of these contracts

- FDC has been demanding for the government to publicly disclose the results of the review process and the results of the renegotiations. Government has allowed FDC to view the renegotiated contracts, on the condition that the Coalition first sign a confidentiality agreement.

Privatization of the Transmission Sector
- One of the highlights of the EPIRA is the privatization of the transmission sector, a natural monopoly.

- FDC has decided to renew its calls to oppose the privatization of the transmission sector. Being a natural monopoly prone to predatory pricing by profit-driven private concessionaires, the public is better served if the transmission sector remains public.

Alternatives

Before the passage of EPIRA, FDC has already exposed the shortcomings of the law in addressing the issues that plagued the Philippine power industry. Worst, it has strengthened these shortcomings by institutionalizing the very issues that consumers and the public opposed, like higher electricity tariffs, continued payments to onerous IPP contracts, and others.

Thus, FDC is in the lead of calling for the repeal of the power privatization law. Through a combination of lobby and mass actions, FDC has continued to push for the passage of a pro-people power reform law – a law that gives more power to the people, not to private business.
[Source: Freedom from Debt Coalition]