Competition to spur investments on power

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Thursday, September 4, 2014


GENERAL SANTOS CITY - To attain a significant improvement in the cost and reliability of power, there is a need for a strong competitive pressure to increase power supply and attain energy efficiencies, an executive of Aboitiz Power Corp. said.

Manuel M. Orig, Aboitiz Power Corp. first vice president for Mindanao Affairs, who led the plenary on the Review of Epira and its Impact on Energy Efficiency during the 23rd Mindanao Business Conference at the KCC Convention and Events Center on Tuesday, said in the case of the power industry, the one that is driving a strong competitive pressure is the current implementation of the Electric Power Industry Reform Act (Epira).

In the light of the Asean Economic Community in 2015, a significant factor that will impact on the competitiveness of Philippine-made products is both the cost and reliability of power supply.

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Orig said competition will increase the volume of power supply available in the market, helping the country ensure energy efficiency.

He said based on their evaluation on the implementation of Epira, it has somehow transitioned the power industry to the desired competitive structure.

"We measured the results of the implementation of Epira in Luzon because this is where Epira has been substantially implemented since it was enacted into law. Therefore, it is in Luzon where we can make a fair and objective evaluation of the impact of Epira to the power industry," Orig said.

He said the privatization of some of the assets of the National Power Corporation (NPC) led to competition and spurred of investments in the industry.

For instance in 2000, 90 percent of power generation came from NPC while 10 percent only came from other power producers. Then, in 2012, 74 percent of the power was being supplied by private power generators while only 26 percent is from NPC.

However, despite the increase in investments in power, Orig pointed out that there are still issues that have yet to be addressed which include special interest groups running against national interest, local government unit (LGU) permits, delays in transmission lines, and lack of off-take contracts.

Orig also said the Epira has empowered customer choice through the Retail Competition and Open Access (RCOA).

But, he pointed out that this aspect of Epira is yet to be realized.

He said the implementation of the open access was in three phases: the first will be for those with power requirements of more than 1 megawatt (MW) was supposed to be in 2004, second for those whose requirement is 750 kilowatts (kw) to 1 MW in 2006, and the third is supposed to be in 2007.

Orig said due to delays, the first phase was implemented in 2013 but up until now the 2nd and 3rd phase have not yet been implemented.

He said the implementation of open access is crucial to spur investment and competition, as RCOA creates a market for generators that is not controlled by distribution utilities and reduces the market power of utilities which eliminates the need for cross ownership.

"Epira is working," he said.

Orig said this is evident since the power industry today is more competitive; competition has driven down generation charges; there is an appetite by the private sector to continue to invest in the industry.

He pointed out the need for more supply that will be able to handle the demand, lower the prices, and improve system reliability; continuity in laws, policies, and regulations are required to encourage investments; and accelerate open access implementation since it is crucial to spur investment and completion.

"We strongly believe that the facts and figures we have presented point to the fact that Epira is creating the competitive pressure that makes it imperative for investors to increase power supply, to grow their market share and forcing them to attain energy efficiencies to be viable," Orig said.

"These are exactly the conditions needed from the power sector to support the requirements of Philippine businesses to become competitive in an integrated Asean market," he said.

Published in the Sun.Star Davao newspaper on September 05, 2014.

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