The Department of Energy (DoE) apparently wants the Energy Regulatory Commission (ERC) to allow power rate hikes without regulatory approval. It may not be a coincidence that the country’s most powerful energy officials are all associated with the country’s biggest power generator, Aboitiz Equity Ventures, which accounts for 22.5% of the national grid. Nor that Pres. Marcos Jr and Aboitiz Equity Ventures Chief Executive Officer (CEO) Sabin Aboitiz are close friends as are, apparently, even their children.
DoE secretary Raphael Lotilla is the former Director of Aboitiz Power Corporation, ERC chairman Monalisa Dimalanta is the former chief legal counsel and compliance officer of Aboitiz Power Corporation, and Power Sector Assets and Liabilities Management Corporation (PSALM) president and CEO Dennis Dela Serna is the former first vice president for regulatory affairs of Aboitiz Power Corporation.
The Marcos Jr administration’s proposal is to allow price increases summarily and without regulatory approval as long as these fall within a set benchmark or bracket. Congress has to amend the ERC charter for this to happen. At a Senate hearing on the 23-year-old Electric Power Industry Reform Act (EPIRA), the DoE complained about the time-consuming ERC process of hearing price petitions.
This proposal is yet another step backward away from protecting consumers and regulating profit-seeking firms providing essential electricity services. There is no scenario where a private profit-driven firm given the power to automatically adjust prices will not use this in its self-interest even at the expense of the public welfare.
The electricity sector is a natural monopoly that demands stringent regulatory oversight because it is so critical and affects every aspect of economic and domestic life. Unchecked price increases will disproportionately affect lower-income households and small businesses, exacerbating inequality and economic hardship.
The Philippines’ two decade-long experience under EPIRA is the best argument against undue private power and for stronger, not weaker, regulatory frameworks ensuring efficiency, reducing costs and improving equity. Millions of Filipinos and domestic industries still suffer from expensive, unstable and dirty power provided oligopolistically or with only a few power firms in control. This is even as the prospects of clean, reliable and affordable power remain uncertain.
The government is grossly mistaken to think streamlining for its own sake is always beneficial, especially when effective regulation of the sector actually demands greater capacity and interventions. It is particularly ironic that the ERC, which is by law precisely a quasi-judicial and quasi-legislative regulatory body with broad regulatory and monitoring functions, is apparently out to voluntarily emaciate its powers just so it does less work.
In this context, streamlining processes and removing regulatory checks is just empowering power firms to adjust prices more conveniently and according to their profit motive. It is absurd for the ERC to abdicate its responsibility for ensuring that price changes are aligned with actual increases in costs, real improvements in service quality, and any larger strategic development objectives.
The Philippines often looks favorably to Vietnam as a regional peer doing much better than us. Note that a key element of its success is the state’s direct participation in the power sector and its heavy-handed regulation including of the few private firms it allows in the sector. This has allowed the government to pursue social and economic objectives, including stable and affordable power prices for consumers and industries and broad access. Even investments in infrastructure and capacity expansion are carefully planned and executed to align with social needs and long-term developmental goals, rather than the narrow business plans of inevitably self-interested private firms.
In contrast, the Philippines under EPIRA is a cautionary tale of the hazards of power privatization of which this proposal of allowing automatic power price hikes is just another step in the wrong direction.
The sector is already such a market-dominated industry with a worsening tendency to regulatory capture as it is. Instead of giving private firms more power, the Philippines will actually benefit from more active involvement of various stakeholders, including consumer groups, in decision-making processes. Regulatory bodies like the ERC are needed as counterweights to market forces and checks on regulatory capture, ensuring that the electricity sector operates transparently, equitably and for the broader public welfare.