20 Year of EPIRA: Reflection on Electricity Privatization in the Philippines and Lessons for Indonesia

The book titled EPIRA 20 Years After: Reflections on Privatization of Power Sector in the Philippines  is an indepth investigation that traced back the development of electricity sector in the Philippines for the last two decades since the enactment of the Electric Power Industry Reform Act (EPIRA) in 2001. Authored by writers from the Center for Power Issues and Initiatives (CPII), this work offers a comprehensive analysis on the impacts of power sector privatization in the Philippines, a country that has been facing a massive challenges in providing affordable and equal access to energy for its people.

Since the very first page, the book captures the readers’ attention by providing a enticing introduction from Frances Therese C. Lo and Marie Shroter. In their short opening, they highlight the policy and social perspectives of EPIRA that was expected to be the solution for many problems and challenges in the power sector. Frances Lo writes that privatization is seen as the “panacea” that would fix all beaurocratic problems and corruption in the public sector. However, in fact, privatization does not keep its promises, and more often than not, provatization creates new gaps, particularly in the power sector that is an essential part of everyday lives and economic development.

The History and Objectives of EPIRA

To fully understand the book, it is very important to grasp the context of the EPIRA’s birth. The book starts its journey by discribing the Philippines’ power sector situation prior to 2001, that was mainly controlled by state-owned companies such as the National Power Corporation (NPC). Although NPC succeeded in building significant power generation infrastructures, problems such as inefficiencies, beaurocracy, and corruption were difficult to address. In addition, NPC’s mountain of debt caused by the Power Purchase Agreements (PPA) with the Independent Power Producers during the 1990s, have encouraged the government to restructurize the power sector through EPIRA.

The authors of the book highlight that EPIRA’s intitial objectives were to promote competition, invite private investements, and ensure that the electricity price is affordable for the consumers. It was hoped that a more competitive power sector would prompt efficiencies and stimulate innovations, and in turn, would lower the production and distribution cost of electricity. On the other hand, EPIRA was also expected to be able to lower state’s debt caused by gigantic power generation projects and fossil fuel dependence.

However, as emphasized by the authors, those promises are not delivered.  With a sharp and data-based analysis, the book elaborates the ways in which the Philippines’ power market is increasingly concentrated in the hands of a few conglomerates, that oftentime exploit regulation gaps to accumulate wealth.

Privatization Failed to Lower the Price

One of the central themes in this book is EPIRA’s failure to deliver the promise of privatization, namely to provide affordable electricity for the people. Maitet Dionoko provides a relevant analysis on the electricity price trend since 2001. Dionoko shows in detail that after twenty years of EPIRA’s implementation, the electricity price is still expensive, even more expensive, and currently is one of the most expensive in South East Asia.

Dionoko also highlights the contributing factors to the expensive electricity price, including bilateral contracts between generation companies and distribution utilities that created non-competitive market condition. Under these bilateral contracts, big distribution utilities such as Meralco could impose higher electricity price to their consumers due to no existing significant alternatives in the market. This is contradictory to the claimed EPIRA’s initial objective, to create a healthy competition and lower the price.

This book also notes that the high cost electricity have a significant social impact, particularly on Filipino poor households. In this context, the writers use data and case studies to show how low income households oftentime must reduce their spending on other basic needs such as food and eduction to afford the electricity bill. Dionoko firmly states that instead of providing bigger access to energy, electricity privatization worsen the social injustice in the country.

Another interesting thing discussed by James Matthew Miraflor is the ownership concentration and capital accumulation in the Philippines’s power sector post-EPIRA. Miraflor describes clearly how privatized power sector is increasingly owned by a handful families that leads to an oligopolistic state. For example, he writes that there are 11 families that control 75% of generation capacities all over the country, a fact that is quiet shocking and provokes readers to think about the implications of this wealth concentration.

In his research, Miraflor investigates giant corporates such as Meralco, Aboitiz Power, SMC Global Power, and Ayala Corporation, that each has a considerable control in the power sector. He also exposes the close relationship between political power and economi power in the sector. Miraflor argues that many corporation owners have a close realtionship with politians or even a part of the Philippines political elites, that facilitates them to gain lucrative consessions and contracts in the power sector.

Miraflor argues that instead of creating a healthy competition, EPIRA strengthens the existing oligopoly. Ownership concentration does not only create economic injustice, but also aggravates social inequality and hampers the universal access to energy. This book suggest that a proper solution is to strengthen the regulation and improve the involvement of public in the management of power sector, both through electricity cooperatives or renationalization of transmission.

Privatization of Transmission and Problems of Energy Sovereignty

Another important aspect explained in detail in this book is that privatization of transmission through the National Grid Corporation of the Philippines (NGCP). Ted Aldwin E. Ong, who wrote a chapter of the book, proposes a strong argument that privatization of transmission aggravates the price injustice, and also created a problem in relation to national energy sovereignty. Privatization of NGCP involved foreign investors, including a Chinese government-owned company, that according to Ong, poses a threat to national security.

Ong also criticizes that the regulation on NGCP is very weak, so that this company could run a profitable business without having a supervision from the authority. He also highlights that privatization of transmission caused delay of investment in new infrastructures, that also contributes to the brownout in several regions. In other words, instead of increasing the quality and realiability of electricity provision, privatization of transmission worsened the quality of public services.

This chapter explores the tendency of NGCP that more focuses on financial gain rather than expanding energy access to remoted areas dan to what is called as the missionary areas. This situation give more prominence to the fact that a privatized power sector, commercial interest is oftentime more prioritized than public interest.

A Just Energy Transition as an Alternative

The author of the last chapter proposes a concept of just energy transition as a solution to different problems caused by EPIRA. Just energy transition is a proses of transition from fossil energy to new renewable energy that considers social, economic, and environmental aspects, that there is one left behind in the process. The author emphasizes on the importance of policy reform that does not only focus on privatization, but also considers its social impacts.

The author also proposes electricity cooperatives as a worthy alternative. In this system, communities own a share and control in the energy distribution business, that the profit will be returned to the communities, does not only go to a handful of capital owners. In other words, electricity cooperatives could be an effective tool to materialize a more just and sustainable access to energy for all the people, particularly for people who have been marginalized under the system that prioritizes profit.

Lessons for Indonesia

Indah Budiarti from the Public Services International (PSI) highlights that EPIRA in the Philippines is an important lesson for Indonesia, particularly in formulating its future steps in its electricity policies. “EPIRA shows that privatization could only aggravate the inequlity of access to energy and strengthen the oligopoly. This is very relevant to Indonesia that currently is facing a similar challenges in relation to privatization and liberalization of energy sector,” she said.

Accroding to Indah, trade unions in Indonesia, including SP PLN, continue to work hard to protect PT PLN as a state-owned company that is responsible to provide electricity for all Indonesian people.

“We learn from the Philippines’ experience that handing over strategic sectors such as electricity to the hands of the privates could have adverse impacts on the people. Therefore, trade unions’ effort currently focuses on advocacy, so that PLN remains a strong and efficient public company, and to ensure that electricity is affordable for all the people,” she adds.

On the other hand, Indah emphasizes the importance of involving trade union in the process of decision making related to energy policies. “Trade unions have strategic roles in ensuring that energy sector policies are not profit oriented. Those policies must also take account the social justice aspect and peoples’ basic right over energy,” For Indah, protecting PLN from privatization is a part of the wider struggle to materialize a just energy transition, where every single person in the country, not only those who have economic power, have an access to energy.

EPIRA 20 Year in Bahasa Indonesia, click here