The Law Of All Progress

EPIRA @ 25

(First of two parts)

Last month, I was invited to take part in a mission organized by the Asian Development Bank (ADB) in Kyrgyzstan and Tajikistan. These two countries in Central Asia are undertaking reforms in their respective power sectors for which the ADB is providing some technical assistance on governance and regulation, particularly in enhancing measures that will promote transparency in power procurement and regulatory review processes. As a resource person, I was tasked to support the inception mission and consultation meetings by providing lessons from our own energy reform journey in the Philippines.

It was quite enlightening to learn directly from key stakeholders about the power situation in both countries — very different from ours yet tracking similar pathways to a certain extent. While the Philippines today still ranks among countries with high electricity rates, Kyrgyzstan is recognized as having one of the lowest electricity rates in the world at $0.01 per kilowatt-hour (kWh) in 2025 (according to the World Population Review). On the other hand, similar to the Philippines in the 1970s and early ’80s when our supply was mainly coming from hydro and geothermal power generation plants operated by the National Power Corp. (NPC), the power systems in both Kyrgyzstan and Tajikistan are dominated by renewable energy (RE), with around 90% generation coming from hydropower generation facilities built and operated by the state-owned power companies under a vertically integrated system. Likewise, with the burden of financing power system expansion to meet growing demand becoming too onerous for government to bear, Kyrgyzstan and Tajikistan are now pursuing sectoral reforms to increase private sector participation in the power industry.

The mission and the task required me to reflect more deeply at our own journey in the Philippines and, in the process, was led to a renewed understanding and appreciation of how far we have come and what singular opportunities for genuine reforms we have missed sorely along the way.

It was also quite timely that this chance came as we mark a milestone since the Electric Power Industry Reform Act (EPIRA) was passed in June 2001.

Has EPIRA achieved its purposes? What have we learned 25 years into the implementation of this key reform legislation?

PRIVATIZATION-FOCUSED REFORMS YIELD INVESTOR-LEANING OUTCOMES
EPIRA’s mandate of restructuring the Philippine power industry was designed as the foundation for the two pillars of sectoral reforms: privatization and deregulation.

What is evident in the last two decades is the dominance of efforts that leaned heavily on privatization — the sale of the generation assets of the NPC, the awarding of concession over the expansion, operation, and maintenance of the grid or transmission system, the prohibition on the NPC to incur new obligations to purchase power or build new power generation facilities, and the adoption of various programs that would entice the private sector to finance any and all investments in the power industry. The bias is quite understandable given that the law’s enactment was intended primarily to address the inability of the Government to continue servicing the debts of and funding the operations of the NPC. Thus, the goal was to stop the bleeding on the government-side and realize the financial gains for government in the form of proceeds from the sale of the generation assets and awarding of the transmission concession.

In other words, as painful as it may be to accept, the short-term benefit of EPIRA was, by design, not in favor of consumers — it was to relieve government of the burden of subsidizing the NPC.

EPIRA’s effect, at least for the first few years of implementation, was inescapably an increase in electricity rates because: a.) the private sector — as buyers of the NPC’s generation assets and operator of the NPCs grid assets — will need to recover costs and realize profits, and, b.) the disaggregation of services and unbundling of rates corresponding to each stage of the value chain eliminated the space for subsidies across the chain, which meant profits would need to be realized independently by investors at each stage of the process.

Note that during the pre-EPIRA period when the NPC was still the single buyer of electricity from independent power producers (IPPs), electricity rates were already (artificially) low: the NPC was operating and supplying power to distribution utilities (DUs) at a loss and, therefore, consumers were paying rates below the true cost of power. It would not be rational then to expect electricity rates to go even lower once the NPC was taken out of the equation and replaced by private generation companies which are profit-maximizing in nature. That is also why it can be misleading to compare electricity rates pre-EPIRA and under EPIRA as a metric for success of the law’s implementation.

What about the consumers then? How do we reconcile this with the policy also declared in EPIRA that the State shall “ensure the quality, reliability, security and affordability of the supply of electric power” (Section 2[b])? What is the path towards affordability envisioned in the law?

ROAD PAVED WITH COMPETITION, ACCOUNTABILITY INTENTIONS
EPIRA’s ambitions of providing consumers with affordable or, at least, reasonably priced electricity relies heavily on a “regime of free and fair competition and full public accountability” resulting in “transparent and reasonable prices of electricity” (Section 2[c]), and the protection of public interest “as it is affected by the rates and services of public utilities and other providers of electric power” (Section 2[f]).

The foundation of this design is not an unrestrained, rudderless, or even hyperactive private sector investment, but a well-functioning and strong governance infrastructure that is able to: a.) effectively prepare and execute plans over a long-term horizon under dynamic conditions, b.) systematically maintain a level playing field with firm and fair enforcement of rules, and, c.) prudently exercise its authority to intervene and introduce changes in regulations as the industry and public interest require. The window for building these conditions and shoring up the capacity of our institutions to deliver on these daunting tasks would have been the first few years under EPIRA when electricity prices were still low (predominantly based on the NPC tariffs) and the new rules of engagement between private and public stakeholders in the industry were being defined.

I fear this window closed without having achieved these conditions and so today we all continue to pay the price of being thrust into a regime of inchoate competition with uneven maturity and ability among stakeholders and institutions.

Surely, efforts were made to align results with intentions. The offices were established and the rules were issued as required by EPIRA, yet only after much delay and quite far from meeting expectations.

While the private sector was quick to adapt and was poised to seize the new opportunities that arose from the restructured and deregulated power industry, the public sector suffered from what usually ails government — slow institutional capacity build-up, insufficient agency budget due to priorities competing for already limited fiscal space, and reform programs that would get disrupted, influenced, or dictated upon by changes in the political space.

As a result, today, we have a very strong private sector driving a public service industry, with government stakeholders left playing catch up with industry developments and scrambling to develop fit-for-purpose governance mechanisms to effectively stand at the helm and perform their respective mandates.

We see this clearly in two fundamental elements which ultimately decide the future of a power industry in a regime that is private sector-driven and no longer vertically integrated: the preparation and execution of long-term development plans and the procurement of power supply. We will cover these in detail in the next column.

(To be continued.)

Monalisa C. Dimalanta is a senior partner at Puyat Jacinto & Santos Law (PJS Law). She was the chairperson and CEO of the Energy Regulatory Commission from 2022 to 2025, and chairperson of the National Renewable Energy Board from 2019 to 2021.