epira_dmmmsu.pptx
TRANSCRIPT
Understanding RA9136 or “The Electric Power Industry Reform Act”
Electric Power Industry Management Bureau
DEPARTMENT OF ENERGY
Don Mariano Marcos Memorial State University
San Fernando City, La Union
03 December 2015
Outline of Presentation
• History of the Philippine Electricity Industry
• The EPIRA Regime• Salient Features and Implementation• Policy Initiatives and Other Measures
3
How important electricity is in your life?
How the Power System Works
5
Development of the Power Industry
• state ownership and monopolies • most of the state-owned companies experienced
financial difficulties• Financial/crisis affected most economies ability to
sustain investments• Technological innovations in the 1980s have changed
the traditional vertically integrated monopoly approach• Most countries adopted market approach to power
supply and introduce competition and unbundling of the industry, with Chile and United Kingdom as pioneer economies
6
• In 1894, La Electricista was the first electric company to provide electricity in Manila
• Constructed a central power plant on Calle San Sebastian now Hidalgo St., in Quiapo, Manila
• Generated electricity using 10 of 60-Kilowatt AC steam generators
• In 1903 it had about 3,000 electric light consumers
History of the Philippine Electricity Industry
LATE 19TH CENTURY
7
• Manila Electric Railroad and Light Company was established
• a 50-year franchise was granted for the construction, maintenance and operation of an electric railway and a light heat power system from Manila to Pasig
• Franchises for electricity distribution were given to private and municipal or city government-owned utilities and cooperatives
History of the Philippine Electricity Industry
1903
8
• NPC was created to develop the country’s potentials for power generation
• as a non-stock government corporation
• NPC was restructured to a fully government-owned stock corporation
• NPC Charter was amended and was granted an authorized capital stock of P 50 billion
History of the Philippine Electricity Industry
1936 - COMMONWEALTH ACT 120
1960 - REPUBLIC ACT 2641
1971 - REPUBLIC ACT 6395
9
History of the Philippine Electricity Industry
• Generation and transmission of power through the nationwide transmission grid was vertically integrated, centrally controlled and managed, and wholly-owned by the NPC
1972 – PD 40
Pre-EPIRA Power Sector Structure
NPC Vertically Integrated Owns portfolios of
plants Contracted IPPs to
meet demand Tariffs are regulated Cross Subsidies
embedded in the rates
Customers
Large Industries and Bulk Users
DUs/ECs
IPPs NPC Plants
11
• power supply shortages in the country started to become evident due to absence of investments in new base load power plants
• the 620-megawatt Bataan Nuclear Power Plant that was expected to operate commercially was mothballed for political and safety reasons.
• power supply considerably lagged population growth, causing a full-blown power crisis in the late 1980s and early 1990s
History of the Philippine Electricity Industry
1980 - 1990
12
History of the Philippine Electricity Industry
1980-1990• Executive Order 215 was issued in 1987 and
provided incentives for the private investors to enter the generation sector
• Luzon grid had 41 days of brownouts for a total yearly duration of 429 hours while in 1990, there were 103 days of brownouts for an annual duration of 1,273 hours
• 1990, the government passed Republic Act 6957, the first build-operate-transfer law in Asia
13
History of the Philippine Electricity Industry
1980-1990• 1997, IPP generation increased to 46.3
percent of total generation or about 35 IPPs. • The private sector completed around 11,000
MW of installed capacity on a BOT/BOO• ROL/ROM was adopted to ensure efficient
operation of power plants• The government assumed risk thru take-or-
pay
• The risks affected NPC’s ability to sustain additional capacity and financial obligations
• Asian crisis and political instability in the country in the late 90s resulted to excess power supply which was increasingly costly for NPC incurring a loss of $5.9 billion in 1999 ballooning to $9.9 billion in 2000
The Need for Reform
The Electric Power Industry Reform Act of 2001 (EPIRA) Regime
• Mandates the over-all restructuring of the Philippine Electricity Sector
• Calls for the privatization of National Power Corporation
RA 9136 was passed into law on 08 June 2001 and became effective on 26 June 2001
• Total Electrification• Supply Reliability• Competition and Transparency• Private Sector Investment
o Generationo Transmission (through Concession)o Distributiono Supply
• Strong and Independent Regulatory Bodyo Promote Competitiono Consumer Protection
• Customer Choice and Demand Side Management
EPIRA Objectives
Unbundling of electricity rates and services for greater transparency and accountability
Opening up of high voltage transmission lines for easy access of distributors and large consumersOpening up of distribution lines for contestable consumers
Privatization of NPC Generating Assets
The Restructured Power Sector
Competitive generation
End-Users• Contestable• Captive
Competitive Retail Supply
Regulated Transmission and
Distribution
Establishment of WESM
EPIRA Governing and Implementing Bodies
NEA
Prepare ECs to operate in a competitive market;
Review and upgrade regulatory policies to enhance viability of electric cooperatives
DOE
Supervise the restructuring of the industry
Establish the Wholesale Electricity Spot Market (WESM)
Energy Policy and Long-Term Planning
Consumer EducationJoint Congressional Power Commission
(JCPC)
Legislative oversight. Composed of 7 members
from HOR and 7 from Senate
ERC
Independent, quasi-judicial regulatory body
Promote competition Ensure customer choice Penalize abuse of market
PSALM
Management of NPC assets and liabilities and transmission company pending privatization
Manage NPC Privatization process
Assume NPC debt and IPP Contracts
Administer Universal Charge
TRANSCO
Assume the transmission function of NPC
Act as the System Operator of the nationwide electrical transmission and sub-transmission system, transferred to it by NPC
Fit-All Fund Administration
NPC
Continue to generate and sell electricity from undisposed generating assets and IPP contracts of PSALM;
Perform Missionary Electrification
EPIRA Governing and Implementing Bodies
PEMC
Market Operator
Central Registration Body (CRB)
Salient Features of the EPIRA
Section 36: Unbundling of Functions and Rates
Salient Features of the EPIRA
Section 36: Unbundling of Functions and Rates
Generation/ Transmission
GenCos/IPPAs
Transmission
• Ownership• Administration • Operation
• Maintenance
• Ownership• Operation• Maintenance
Salient Features of the EPIRA
Generation Sector: A business affected with public interest shall be competitive and open.
Generation Companies Operate facilities used in the
generation of electricity
secure from the ERC a certificate of compliance
Secure health, safety and environmental clearances from appropriate government agencies under existing law
Comply with cross-ownership provisions
Comply with the PGC, WESM Rules and other relevant issuances
Transmission Sector: A regulated common electricity carrier business subject to ratemaking powers of ERC.
National Grid Corporation of the Philippines (NGCP)
Under concession act as the System Operator of the nationwide electrical transmission and sub-transmission system
Provide open and non-discriminatory access to its transmission system.
Ensure and maintain reliability adequacy, security, stability and integrity of the grid.
Preparation of the Transmission Development Plan Exercise the power of eminent domain
Distribution Sector: A regulated common carrier business requiring national franchise
Private DUs - 19 Provide non-discriminatory access to its distribution services system
impose and collect distribution wheeling charges and connection fees as approved by the ERC
supply electricity in the least cost manner to its captive market
prepare and submit to the DOE their annual Distribution Development Plan (DDP)
exercise the power of eminent domain
Electric Cooperatives – 120
LGU/Multi-purpose – 8
Supply Sector:A business affected with public interest, electricity rates are competitive and not regulated by the ERC.
Suppliers Engage in retail supply of electricity
with Contestable Customers
Secure Supplier’s license from the ERC
Demonstrate and comply with technical capability, financial capability, and creditworthiness requirements for Suppliers
Comply with rules and regulations on abuse of market power, cartelization, and other anti-competitive or discriminatory behavior
identify and segregate the components of its supplier’s charge
Unbundling of Functions and Rates
What are you paying for???
Salient Features of the EPIRA
Unbundling of Functions and Rates
What are you paying for???
Generation Charge
Transmission Charge
DSM ChargesSystem Loss
ChargeSubsidiesGovernment TaxesUniversal ChargesFIT-All
Generation Charge
Transmission Charge
Distribution Charge
Section 36:
Unbundling of NPC Rates(26 Mar. 2002)
Unbundling of DUs rates (June 2003)
Salient Features of the EPIRA
Generation Charge
refers to the cost of power generated and sold to the distribution utility (DU) by the NPC as well as the IPPs.
Components of Unbundled Electricity Bill
Transmission Charge
refers to the regulated cost or charges for the use of a transmission system, which may include the availment of Ancillary Service.
Components of Unbundled Electricity Bill
Components of Unbundled Electricity Bill
Metering Charge
is the cost of metering, which includes meter reading, operating and maintaining power metering facilities.Supply Charge
includes the cost of rendering service to customers, such as billing, collection, customer assistance, and related services.
Distribution Charge
is the regulated cost of building, operating and maintaining the distribution system, which delivers power from high-voltage transmission grids to commercial and industrial establishments and to residential end-users.
System Loss Charge
Represents recovery of the cost of power lost due to technical and non-technical losses currently pegged at 8.5% for private distribution utilities (PDUs) and 13.5% for electric cooperatives (Ecs).
Components of Unbundled Electricity Bill
Lifeline Discount /Subsidy
• refers to the subsidized rate given to marginalized/low-income captive market end-users who cannot afford to pay at full cost
• Coverage varies per DU• Non-lifeline citizens pay for the
subsidy
Components of Unbundled Electricity Bill
20kWh=5%19 kWh=10%18 kWh=20%17 kWh=30%16 kWh=40%
0-15 kWh=50%
Senior Citizen DiscountThis is a socialized pricing mechanism for senior citizens provided under RA 8884 providing discounts to Senior Citizens consuming 100 kWh/month. 50% to Senior Citizens Center and 5% to Senior Citizens electricity bill.
KIM
Value Added Tax
This is a consumption tax imposed on the sale of electricity and related services through all the stages of generation, transmission, distribution and sale of electricity to the final consumer.
RE-sourced electricity are exempted from paying VAT
Local Franchise Tax
This is levied by provinces and cities for businesses enjoying a franchise, and paid to such local government units, in accordance with the provisions of Sections 15 and 137 of the Local Government Code.
Components of Unbundled Electricity
Bill
It is a non-bypassable charge, which shall be collected from all end-users on a monthly basis by the distribution utilities.
Universal Charges
Components of Unbundled Electricity Bill
Missionary Electrification Charge
Refers to the cost associated with the provision of basic electricity service in unviable area, with the ultimate aim of bringing the operations in these areas to viability levels. (Php0.1561/kWh)
Environmental Charge
The Environmental Charge of Php0.0025 per kWh is a charge to be used for the rehabilitation and management of watershed areas.Stranded Contract Cost of
NPC, under Section 32 of the EPIRA, refers to the excess of the contracted cost of electricity under eligible IPP contracts of NPC over the actual selling price of the contracted energy output of such contracts in the market. (Php0.1938/kWh)
NPC
Types of UC:
Components of Unbundled Electricity Bill
No UC:
• Stranded Debts of NPC• Equalization of Taxes and
Royalties
FIT-All (Renewable)
The FIT-All is a uniform charge imposed on all On-Grid electricity consumers who are supplied with electricity through the distribution or transmission network. It is essential to the implementation of the FIT System as established under Section 7 of Republic Act No. 9513, otherwise known as the Renewable Energy Act of 2008 (RE Law). (Php0.0406/kWh)
Section 5 and 7 Republic Act 9513 or Renewable Energy Law
Components of Unbundled Electricity Bill
• Mandated Rate Reduction– Section 72, Rule 19 A reduction in NPC rates equivalent to P0.30 per
kWh granted to residential customers
• Loan Condonation– Section 60, Rule 31 Mandates PSALM to assume all financial obligations
of ECs to NEA and other government agencies incurred for financing rural electrification program
ERC shall ensure a commensurate reduction in the rates of ECs resulting from savings due to removal of amortization payments of loans
Salient Features of the EPIRA
WESM Establishment
Luzon26 June
2006
Visayas26 Dec.
2010
Mindanao?
Salient Features of the EPIRA
Privatization
GenCos
IPP Contracts
High Voltage Transmission
Generation93.53
%
IPP Administrators
Concessionaire
Successor GenCos
76.85%
42
Salient Features of the EPIRA
Section 31 Retail Competition and Open Access
• Opening up of retail electricity supply to competition
• Allowing “Contestable Market” to choose their Supplier
• May reach household level based on ERC evaluation
• Commercial operation in Luzon and Visayas last 26 June 2013
Salient Features of the EPIRA
Section 2 (a): Total Electrification• Rural Electrification - DUs• Missionary Electrification - NPC SPUG• Waived areas – Qualified Third Party
Salient Features of the EPIRA
Cross-Ownership/Anti-competitive Provisions• TransCo prohibition to own generating
assets• Installed generating capacity limitation
for Generation Companies– 30% in a grid– 25% in national grid
• Contracting limitation between DU and affiliated GenCo
• Divestments
Salient Features of the EPIRA
Market Share Limitations
First Gen11%
QPPL3% Others
6%
PSALM49%
NPC31%
Pre-privatization
As of March 2015
San Migu
el18%
Aboitiz
16%
First Gas14%
PSALM
16%AES 4%
SEM Calac
a3%
GN Powe
r3%
QPPL3%
NPC6%
GBPC4%
Others12%
PHILIPPINES
Salient Features of the EPIRA
Basic Documents of EPIRA
51
Pursue Market for Competition, e.g. RCOA Intensify Monitoring and Governance of the Electricity Market
• Abuse of Market Power • Anti-Competitive Behaviour• Close monitoring of Market Share/Cross Ownership• Further develop metrics for competition
Supervision, governance and reforms for Electric Cooperatives Conduct of IEC for better understanding, appreciation and
consumer empowerment
Policy Initiatives and Other Measures
52
DOE-Supported Websites
End of EPIRA Background
DEPARTMENT OF ENERGY
Presented by theElectric Power Industry Management Bureau (EPIMB)
“Public Information Campaign on the Implementation of EPIRA”
03 December 2015