People's Domain

[Opinion] Captured by privatization

The year 2010 can be summed up as the most distressing year for electricity consumers. It can likewise be said that this is also the year that highlights a decade characterized by abuse to consumers by private power producers and distribution companies.

Yet as we approach a new decade, the prospects of reaching solutions to old problems confronting electricity consumers is grim. In fact, the upcoming decade will be a period wherein electricity consumers will embrace the full impact of government’s privatization initiatives of the power industry.

Looking back, it is in this decade that the necessary recipe to realize a privatized and deregulated power industry has been gradually established starting from the passage of the Electric Power Industry Reform Act (Epira) and its implementation. This piece of legislation which heavily favors privatization in the guise of open market competition has enabled private players to concretely establish ground on the generation, transmission, and distribution of electricity.

Many Filipinos may not have realized that only few families or same companies have become the controlling group in the country’s power sector. A quick look at the private sector players in the power industry will reveal that same families control one or two aspects of the electricity business; either as generator of electricity, as distributor, or even both with what we call “cross-ownership”. Five or even less number of players with a natural monopoly of generating and distributing electricity in a franchise area is Philippine government’s satisfactory compliance to the concept of open market competition.

Another feature of this legislation is the setting up of a regulatory body whose ideal task is to guard and ensure consumer’s interest is protected. However, actual experience in engagements with the country’s regulatory commission in relation to electricity rates increase petitions by power firms alone provides little hope that consumers will be adequately protected in the coming years. It has become automatic and ministerial for the regulatory commission to grant approval or authority to power firms to implement rates increases without a consumer’s groups opposing unreasonable declarations in applications.

Deliberately closing eyes to the reality that this country has weak consumer’s movement, our government has fed electricity consumers to the whims and exploitation of power players being a captured market. Electricity rates have gone up while regulatory mechanism to control unreasonable profit-making is undeniably more tolerating to the interest of power players. It has become necessary to the incapable and exploited consumers to participate in the process in order to hasten the impact of unreasonable rates increases. While many efforts were proven successful, this regulatory regime will never be sustainable as far as ensuring consumer’s protection is concerned.

If our government will maintain the privatized regime and not look for better alternatives, it is expected that the coming decade will be characterized by more electricity rates increases especially that a wave of new generating facilities are rising to answer increasing demand of electricity and with the implementation of performance-based regulation.

In my next column I will tackle the reasons why electricity is expensive and what factors will drive electricity rates to exorbitant levels. (Archived Opinion Article from tedaldwinong.wordpress.com – July 11, 2011)

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