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Stratbase Albert Del Rosario lnstitute (ADRi) Energy Stakeholders Forum
Energy lnsights: The New Administration's Energy Plan
25 August 2016, Oakwood Premier Joy-Nostalg Center, Ortigas Center, Pasig City

Energy Legislative Priorities in the 17th Congress

Rep. Lord Allan Jay Q. Velasco
Chairman, Commlttee on Energy

There is a recurring theme of rolling blackouts in the country. This was experienced in
Visayas in 2010, Mindanao in the past few years, and now in Luzon. lt has been
observed that the lack of power supply or thinning power reserves for the past weeks
have been due to the forced outages of various generating plants in Luzon. The recent
spate of Yellow Alert Status declaration by the National Grid Corporation of the
Philippines (NGCP) prompted the DOE to assess whether there are enough measures
or standards for power generation companies to ensure that their power plants are
always in good condition and are able to meet their obligations to theii respective
customers.
Under Republic Act No. 9'136, otherwise known as the "Electric Power lndustry Reform
Aci of 2001" (EPIRA), section 2, paragraph (b), it is a declared state policy "to ensure
the quality, reliability, security and affordability of the supply of electric power."
Towards the goal of establishing an optimal power mix and also to ensure reliability of
our power reserves, the DOE has been coordinating with several groups particularly
the lnstitute of lntegrated Electrical Engineers and the USAID- to audit existing
electricity generation, transmission and disiribution facilities in the country and to
evaluate local power reserve requirements.

Our agencies are also studying energy requirements for economic growih trends, load
consumption profiles for energy consumers, local industry readiness, transmission
configurations, network development, emerging energy technologies including
availability o{ indigenous energy to ensure stable pricing and lessen dependence on
energy that is benchmarked on international market pricesAs we get a better picture of available and potential energy supply and the energy
requirements of the country, the DOE and the ERC are looking inio such mechanisms
like the provision of replacement power for contracted capacities and the creation of
technical audit teams to assess the operations and contracts of generation companies
and distribution utilities as well as strengthening the promotion of energy investments to
augment the supply of electricity in the country.

ln support of these executive, administrative and regulatory initiatives, we in the House

Committee on Energy intend to pursue the following measures:

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Short-Term Measures:
1. Reactivate the Joint Congressional Power Commission (JCpC)
Republic Act No. 9'136 or The Electric Power lndustry Reform Act (EplRA) enacted in
June 8, 2001, set into motion the restructuring of the Philippine Power lndustry and
prime among its objectives is to increase private sector participation in the industry and
to open certain sectors to competition.
During the 16th Congress, only the House panel of the JCPC had been active. I will
reach out to my co-chairman in the Senate and request that we convene the joint
Senate and House panels of the JCPC to fulfill our mandate under the EPIRA and
Republic Act 9513 or the Renewable Energy Act of 2008.
Under the EPIRA, the JCPC shall oversee key structural changes which have yet to be
carried out:
A) lmplementation of Open Access and Retail Competition
B) Formation of the lndependent Market Operator
C) Determination, fixing and approval of the universal charge for:
i. payment of stranded debts and stranded contract costs of NPC,
ii. equalization of taxes and royaliies and
iii. charge to account for all forms of cross-subsidies
D) Performance by NPC-SPUG of missionary function
E) Determining the weaknesses in EPIRA and recommending action
Under the Renewable Energy Act, the JCPC must oversee the formulation or
establishment of the ff:
A) The Feed-in Tariff (FiT) System
B) The Renewable Portfolio Standards (RPS)
C) The Renewable Energy Market (REM)
D) The Green Energy Option
E) Nelmetering for Renewable Energy

2. Ensure adequate, stable and reliable power through better monitoring and evaluation
of grid operations
While waiting for new power plants to be commissioned, it is imperative that we review
and evaluate Power Supply Agreements (PSAs), conduct an inventory of operating
power plants, their existing capacities and consider the old power plants' maintenance
schedules. lt is also necessary to have a genuine assessment ofthe need to rehabilitate
or mothball aging, less fuel-efficient and less reliable power plants. Reserve
capacities sometimes get precariously low especially during times when large power
plants go on preventive maintenance or experience forced outages.

Simultaneously, in preparation for the commissioning of new power plants, we have to

monitor and ensure the timely completion of NGCP Transmission Projects so that there
is enough transmission capacity for new power plants.
ln the meantime, we see the need to further expand the mobilization of self-generating
capacity of large end users through the lnterruptible Load Program (lLP). lt should be
noted that from an initial 1 15mw as of August 14, 2A14 (when The House Committee
On Energy initiatedan inquiry on the matter) the total registered and potential deloading capacity under the MERALCO lnterruptible Load Program increased to
976.44mw as of April 10, 2015. The implementation of the interruptible load program,
coupled with the implementation of the lnterim Pre-emptive Mitigating Measure or
secondary price cap in the Wholesale Eleckicity Spot Market (WESM) by the ERC, has
resulted in relatively competitive electricity market prices. We intend to build upon this
positive development further.

Medium-Term Measures:
'1)

Declare Power lflfrastructure Proiects As Proiects of National Siqnificance

ln line with the Duterte administration's thrust of streamlining the process of doing
business, a priority measure of the House Committee on Energy is to ensure timely '
completion of power projects for energy security and to minimize costs of getting new
power plants commissioned. During ihe Senate Hearing last Aug. 15 on the country's
Power Siluation, Energy Secretary Cusi mentioned that an investor in a power
generation business would have to secure 122 signatures before he can start operating
his power plant. We shall address petmitting issues and other bureaucratic impediments
so that new power projects come online as scheduled.
House bill no. 1222, entitled, "An Act Declaring Power lnfrastructure Projects As
Projects Of National Significance, Amending For The Purpose Ce(ain Provisions Of
R.A. 9136, Oiherwise Known As The Electric Power lndusiry Reform Act Of 2001 ,': had
been referred to the committee.
ln declaring power infrastructure projects io be of national significance and fast-tracking
the commissioning of new power plants, we hope io beef up power generaiion facilities
and increase our power supply to sufficiently meet the demands of the consumers.
2) Reduce ihe heavy tax burden on the power sector
It has been established in various studies that while electric rates in countries such as
lndonesia, Malaysia, and Thailand are heavily subsidized by iheir governments, raies in
the Philippines are heavily taxed. Across ihe entire power supply chain in the
Philippines, from royalty taxes on indigenous fuel for power generation (e.g.,
Malampaya natural gas, geothermal steam), to the value-added tax, the local franchise
tax, the Universal Charges of NPCIPSALM, and other government fees and charges'

power prices incorporate numerous state impositions that push up the final cost of
electric service to end-users.

Data from the Department of Energy showed that the royalty tax on Malampaya natural
gas has added at least PhpO.43/kWh to the bills of Luzon consumers. On top of the
royalty tax, these consumers were imposed a Value Added Tax (VAT) of PhpO.73lkWh
(2014 average) and bore a Universal Charge burden of about Php0.35/kWh. ln
February 2015, DUs were directed to collect a FIT-All (Renewable) of Php0.0406/kWh
from their customers and in May 2016, this became Php0.1240lkWh (an increase by
PhP0.0834/kWh). This is an additional line item to the bills of eleciricity customers.
These four items alone already translate to an addition of around Phpl .63/kwh on
electricity rates.
These taxes, being pass-through costs, are paid for by the customers and push up the
final cost of electric service to end-users. The Energy Tax is another such burden on
consumers. lt is our legislative priority to make our electric power rates more affordable
to create a conducive environment for manufacturing and commercial businesses, and
to ease the burden'on Filipino households.

3. Passaqe of an Enerqv Efficiencv & Conservation Bill

At present, five (5) bills * house bills no. 182, 812, 970, 1220 and 1527 related to
Energy Efficiency and Conservation -- are submitted for consideration with the House
Committee on Energy.

we should push for an Energy Efficiency & conservation Bill that seeks to improve the
government's data collection to establish baseline information on energy consumption
levels for large energy consuming entities, to better inform the setting of realistic and
economically achievable specific energy reduction targets. The bill should also clearly
set up how the data will be assembled and used to monitor progress towards energy
efficiency targets. only after establishing baseline data can government mandate high
energy consuming entities to undergo an energy audii, submit a plan and commit to a
timeframe to sta( reducing their energy consumption.
ln setting Minimum Energy Performance Standards (MEPS) for household appliances,
lighting products, motor vehicles and other energy-consuming equipment, nationwide
public consultation with all stakeholders should be conducted to obtain maximum buy-in
and participation. There is also a need lo set up the system for monitoring, verification
and enforcement to ensure full compliance with the MEPS.

4. Modernize our electric grid infrastructure through Smart Grid

Smart Grid is a key enabler towards achieving greater grid reliability, and cost savings
for our customers in the long term. Through smart grid, utilities will be able to deliver

power more consistently and can prevent overloads and outages as well as real-time
troubleshooting so that problems get fixed faster. Utilities will enable customers to
monitor and adjust their energy usage, even schedule their most energy intensive task
for times when energy is less expensive. Utilities will also be able to do a better job of
utilizing renewable energy sources as we move toward a cleaner tomorrow"
Because of the global trends and benefits to consumers, Smart Grid has become a
national imperative: We need to modernize our electric grid infrastructure by
formulating policies and providing incentives to promote adoption of smart grid
technologies to improve the way our transmission and distribution utilities manage our
network and deliver power to our customers.

Distribution utilities like MERALCO, VECO and DECORP are now installing more-andmore sensors and automated switches across their distribution network. Through this,
they are able to more effectively monitor, control and manage the health of their
networks and allow quick power restoration during outages - with less need to dispatch
field crews.
Through smart grid, implementing the lnterruptible Load Program (lLP) will become
easier as transmission network provider NGCP and distribution utilities would be able to
automatically control and switch off parts of customers' load during periods of peak
demand.
Prepaid electricity, is made possible through the deployment of advanced metering
infrastructure (AMl) which is one of the components of Smart Grid. Through this service,
customers can manage their electric consumption better and buy in smaller chunks to
meet their immediate need. The House Committee on Energy will look into ways and
means to make prepaid electricity service available all over the country.

5. Electrification of Missionary Areas or Rural Areas

The House Committee on Energy will work closely with the DOE and NEA in the
implementation of its Household Electrification Program (HEP) which is energization of
off-grid households utilizing renewable energy technologies such as solar home
systems.

li should be noted that NEA is already 47 years in existence. lt was created on August
4, 1969 by virtue of Republic Act 6038 that boldly declared as a national policy objective
the total electrification of the Philippines. As of March 2016, NEA reported that 1 1 .31
million connections out of 13.34 million potential connections were served by electric
cooperatives. Thus, the objective of total electrification of the Philippines remains to be
fulfilled, with the nation's electrification level remaining at 85% in terms of connections
served by the electric cooperatives.

Likewise, we will support the awarding of financial assistance to various electric

cooperatives under the DOE's Nationwide lntensification of Household Electrification
Program (NIHE) especially in far flung areas.
I note that the NEA is planning to put up a training facility in Marikina for electric
cooperatives. My Committee will explore ways of supporting this facility to upgrade the
capabilities of our cooperatives especially in making their distribution systems more
resilient to climate Change.
Rest assured that under my Chairmanship, the Committee on Energy will continue to
work proactively and collaboratively with our Senate counterpart, the execuiive
department and the industry participants and stakeholders as we exercise our
legislative and congressional oversight functions. We cannot overemphasize that power
development precedes economic development and reliable power supply ensures
sustained economic groMh. I appeal for your support as we forge our partnership to
resolve the nation's energy issues and concerns. With your support, we can realize
stable, sufficient and affordable power for our nation.

Thank you very much and more power to us all.