"The Electric Power Industry Reform Act (EIRA) was approved in June 2001. To enforce the act, many critical interventions are necessary. The act proposes privatization of the sector and a major strengthening of transmission, subtransmission, and distribution systems, which are weak at present," ADB said in a report called Asian Development Outlook (ADO) which was released yesterday.
In line with this, the ADB said the Energy Regulatory Commission (ERC) should carefully review the unbundling rate applications of the distribution utilities, particularly the petition of power giant Manila Electric Co. (Meralco).
According to ADB, the decision of ERC is crucial to the economy and will have great social impact since this will affect a significant number of the country’s population.
All power distribution companies, including Meralco, are mandated to submit to ERC an unbundled rate petition that will itemize their respective generation, transmission and distribution costs.
In an interview with reporters, ADB country director of the Philippine Thomas Crouch said it is appropriate for ERC to grant the Meralco rate petition since this will affect the company’s delivery of services to the consumers.
ADB, one of the largest multilateral creditors of the Philippine government and the National Power Corp. (Napocor), said "restructuring of the sector is expected ultimately to lower electricity costs, and put them on a par with those in neighboring countries. However, limited progress was made in the planned sale of the state-owned assets of the main power retailer in the country."
ADB may be referring to the decision of the government to defer some of the major transmission projects funded by the multilateral creditor.
Major loans of ADB to Napocor, like that of the $300-million Leyte-Mindanao Interconnection project, were put on hold by the Power Sector Assets and Liabilities Management Corp. (PSALM).
PSALM president Edgardo Del Fonso said the move to defer the implementation of such loans from ADB would allow them to review their strategy since it should be determined which agency or company should pay for the loans once the project is carried out.
"The Leyte-Mindanao project should be reconsidered. It should be determined who will do it, whether the concessionaire or PSALM. If we implement the project there would be some sticky issues that we need to thresh out," Del Fonso said.
But the PSALM chief said the Leyte-Mindanao project will still be included in the Transmission Development Plan (TDP) of the National Transmission Co. (Transco).
A ranking Napocor official told The STAR that the deferment of the Leyte-Mindanao project will cause higher electricity cost to be passed on to consumers.
"The private company or concessionaire will have to secure loans from commercial sources for its transmission development projects. I suppose the ADB will not allow it to have the same loan granted to Napocor like that of the Leyte-Mindanao Interconnection project. The existing transmission projects will funds from multilateral creditors should be continued," the official said.