session 3 adb philippines electricity reform
TRANSCRIPT
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POWER SECTOR RESTRUCTURINGLESSONS LEARNT FROM THE
PHILIPPINES EXPERIENCE
Anthony J JudeChair Energy Committee
Senior Advisor concurrent Practice Leader [Energy]
25 November 2013, Bangkok. Thailand
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OUTLINE OF PRESENTATION
Genesis of the Reform
- Why the power sector reform was needed?
Roadmap of the Reform
- Concept, sequence and timeframe
ADBs Supporting Role
- TA, project & program loans, guarantee
Assessment of the Reform
- What has been achieved so far?
Lessons Learned and Challenges
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Genesis of the Reform
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GENESIS OF THE REFORM 1)
In mid-1980s, the Government scrapped BataanNuclear Power Plant (620MW),
$2.3 billion, fully repaid in April 2007;
In early 1990s, Luzon experienced severe powershortages due to inadequate generation capacity NPC (No Power Corporation)!
Emergency power was granted by Congress.
Government contracted IPPs to resolve the powercrisis over 6,000 MW contracted with take-or-payprovision guaranteed by the Government.
Meralco also contracted 2,000 MW from IPPs.
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Pre-EPIRA Power Sector Structure
Vertically Integrated
IPPs are mostly contracted by
NPC
NPC owns portfolios of plants
Tariffs are regulated
Cross Subsidies embedded in
the rates
Customers
Large Industries andBulk Users
DUs/ECs
IPPs NPC Plants
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Roadmap of the Reform
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COMPONENTS OF POWER SECTORREFORM
Unbundling: generation, transmission, distribution, supply,metering services
Independent regulation (technical & price)
Removal of subsidies and cross subsidies
Privatization of generation (ownership, cross-ownershiprestriction)
Privatization of transmission (performance-basedregulation)
Privatization of distribution (performance based regulation)
Wholesale competition (independent market operator)
Retail competition/open access
Liquidation of stranded debt & costs of national powercompany
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PHILIPPINES VS INDONESIA
Indonesia Electricity Law 2009
Philippines EPIRA 2001
Unbundling
May be conducted in an integrated manner" orin one business type.
Unbundled generation; transmission
Distribution, supply
Open access
Transmission open access
Transmission and distribution open access
Crossownership
No mention No one group can own more than 30% ofthe installed capacity
Subsidies orCrosssubsidies
Electricity prices to take consumers' interest toaccount; Special tariffs for underprivilegedconsumers
All subsides removed, with exception oflifeline rate
Regulation
By Government or regional Government
Energy Regulatory Commission
PricingMethodology
Arranged by Government/or regionalGovernment based on national interests,consumers' interests, production costs.
competitive pricing for generation, andsupplies; performance based pricing fortransmission/distribution
Privatization
No
- privatization of government ownedgeneration assets and transmissionconcession
Wholesalecompetition
No clear rules, "healthy competition" based onGovernment regulation
wholesale spot market (price basedbidding gross pool)
Retailcompetition
No mention
Retail competition subject to 70% ofprivatization of generation capacity
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AGMO
GENCOs
NGCP
SUPPLIERS/AGGREGATORS
S
P
U
G
LEGEND
Enforcement Coordination ERC Reg. Ownership/ Policymaking Operation Supervision TransferControl
Competitive
ERC Regulated
PIOUs/ECs -CDA
INDUSTRYPARTICIPANTS
ECs
IMO
JCPC
TransCo
Electric Power Industry Structure
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Moving Towards A Competitive Power Market
26 December 2012
79.56 % of NPC GenCos in Luzon and Visayas
NGCP as the TransCo Concessionaire
76.85% transferred to IPP Administrators
Unbundling
Unbundling of NPC rates (26 Mar. 2002)
and Unbundling of DUs rates (June 2003).
Complied with.
Status of EPIRA Implementation
Inter-Grid, Sept. 2002; Intra-Grid, Oct.2005 and Inter-Class, Oct. 2005
Complied with.Removal of Cross Subsidies
Complied with.
OPEN ACCESS AND RETAIL COMPETITION
Luzon Commercial Operation on June 2006 Integration of Visayas Grid, 26 Dec. 2010
Establishment of WESM
Complied with.
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PHILIPPINES
Update on EPIRA Implementation
NPC
31%
PSALM
49%
First Gen11%
QPPL
3%
Others
6%
Pre-Privatization (2003)
As of March 2013
San Miguel19%
Aboitiz15%
First Gas13%
PSALM18%
AES4%
SEMCalaca
4%
GN
Power4%
QPPL3%
NPC8%
GBPC3%
SPC2%
Others7%
Installed Capacity Share Monitoring
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Update on EPIRA Implementation
Installed Capacity Share Monitoring
Aboititz Group17%
NPC51%
PSALM27%
Others5%
MIndanao
GBPC27%
SPC15%
Green Core
12%
Aboitiz6%
NPC2%
PSALM35%
Others
3%
Visayas
San Miguel26%
Aboitiz16%
First Gas15%
PSALM14%
AES5%
GN Power
5%
QPPL4%
SEMCalaca
5%NPC2%
Others8%
Luzon
As of March 2013
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ADBs Supporting Role
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ADB LOANS AND GUARANTEE
December 1998: ADB approved the Power
Sector Restructuring Program for $300 million,and a project loan of $40 million forestablishing WESM.
December 2002, ADB approved a partial creditguarantee (PCG) for US$500 million equivalent.
December 2006: ADB approved the PowerDevelopment Program for 450 million.
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ADB TECHNICAL ASSISTANCE
Electricity pricing and regulatory practice in a
competitive environment ($600,000), 1998
Consumer impact assessment of PSRP($720,000), 2000
Competition Policy for the Electricity Sector($990,000), 2001
Transition to Competitive Electricity Markets($800,000), 2002
Promoting Good Governance in theRestructured Power Sector ($800,000), 2003
Institutional Strengthening of ERC andPrivatization of NPC ($1,200,000), 2004
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Assessment of the Reform
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WHAT HAS BEEN ACHIEVED
Independent Energy Regulatory Commission
established All inter-grids, intra-grid, inter-class subsidies
removed (except lifeline rate)
WESM operational in Luzon and Visayas
23 power plants (3072 MW), i.e. 81% of NPC assetprivatized, $3 billion
Sual (1000 MW), Pagbilao (700MW), San Roque(345 MW), Bakun-Benguet (100 MW),
44% of IPP capacity; IPP Administrators appointed, $2.3 billion
TRANSCO Concession awarded, 3.95 billion
Stranded debt: Introduction of Universal Charges(P0.30/kWh for 25 years)
Interim Mindanao Electricity Market 26Sept13
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PRIVATIZATION OF GENCOS
Assets
Capacity(MW)
Winner
Bid Price($ million)
Unit Cost
($ million/MW)
Masinloc Coal 600 AES, USA 930 1.55
Calaca Coal 600 Semirara, PHI 361.7 0.60
Tiwi-MakbanGeothermal
747 Aboitiz, PHI 446.9 0.59
Limay Oil 620 San Miguel, PHI 13.5 0.02
Magat Hydro 360 Aboitiz, PHI 530 1.47
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WHAT HAS NOT BEEN ACHIEVED
Appointment of Independent market
Operator (IMO) Retail competition subject to 70% of
IPPAs
Weak distribution sector (electriccooperatives)
Lack of private sector investment fornew capacity?
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Retail Competition and Open Access
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POLICY FRAMEWORK34
Efficiency and Competition
Effective Governance andRegulation
Consumer Empowerment
and Protection
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Provides the Power of Choice tothe Electricity End-Users
Ensures proper environment is in
place
POLICY FRAMEWORK
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MARKET DESIGN
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RELEVANT RULES FOR CONTESTABLE
CUSTOMERS
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MANDATORY CONTESTABILITY AND CUSTOMERCHOICE
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DOE Department Circular No. DC 2012-05-0005
Consistent with EPIRA, RCOA should promote customer choice
The power of choice is conferred to Contestable Customers (CCs)subject to the rules and regulations
Power of Choice
CCs shall be allowed to choose where to source its supply ofelectricity
CCs may source electricity supply requirements from a Supplierduly licensed by ERC, a Local Supplier duly authorized by the ERC,or through the WESM
Customer Empowerment
*Slide Prepared by PEMC
QUALIFIED CONTESTABLE CUSTOMERS
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QUALIFIED CONTESTABLE CUSTOMERS
(CCS)
Section 31 EPIRA
DOE Department Circular No. DC 2012-05-0005
Provides that upon the initial implementation of RCOA, the ERC shall allowall electricity end-users with a monthly average peak demand of at leastone megawatt (1 MW) for the preceding twelve (12) months to be thecontestable market
Section 31 of EPIRA
Refers to the electricity end-users who have a choice of a supplier ofelectricity, as may be determined by the ERC in accordance with the EPIRA
Contestable Market
Refers to the electricity end-user who is part of the contestable market
Contestable Customer
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TIMELINES OF RCOA IMPLEMENTATION
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FIRST YEAR TIMELINE OF IMPLEMENTATION
Customer Switching Start (26 December 2013 onwards)
Regular CustomerSwitching
WESM Transactions forNewly Registered Customers
Continuing Registration andTraining
SOLR Service orDisconnection
Initial Commercial Operations (26 June 201325 December 2013)
WESM Transactions forRegistered Customers
Retail SupplyContracts
Registration of Non-Registered Customers
No CustomerSwitching
SOLR Service orDisconnection/Remain with DU
Transition Period (26 December 201225 June 2013)
Retail Supply ContractsMetering Installations
Registration and
Training
Trial Operations
Declaration of Open Access Date (26 December 2012)
ERC/DOE Joint Declaration of the Commencement
of RCOA
PEMC (as CRB) calls for registration
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*Slide Prepared by PEMC
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ERC TRANSITORY RULESRESOLUTION NO. 11, SERIES OF 2013 DATED 10 JUNE 2013
A CC that fails to enter into an RSC by June 25, 2013
shall be deemed to stay with its current DU until
December 25, 2013, or until such time that it isable to find a RES, provided that it informs DU of
such fact on or before June 25, 2013.
Continue to pay the regulated rates of the DU.
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GOVERNMENT INITIATIVES43
Conduct of Trainings and Information andEducation Campaigns (IECs)
RCOA Get-Together for CCs and RESs
Focus Group IECs
General Public IECs
Continuing Collaboration with ERC and PEMC
Monitoring and Evaluation for Needed Policy
Actions
Recent Developments
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RECENT DEVELOPMENTS 44
From 18 Respondent CCs
Contract duration ranges from 18 months to seven (7) years
Off-Peak Prices: approx. P3.2553 per kWh; Peak Prices: approx.
P6.4642 per kWh; others based on Load Factor
With Pre-Termination Charges and Replacement Power Provision
DOE Supplementary Policy
Allows prospective GenCos to contract with CCs provided
RES License is secured before effective date of the Supply
Contract with CCs; and
Allows Switching when Superior Offercomes; ERC to
define Superior Offer.
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19 licensed
Retail Electricity
Suppliers (RES),
27 SOLRProviders
and 18 Local RES
The Contestable Market(November 2012)
GridNo. of
Customers
Power
Demand
(MW)
Luzon 801 2,639
MERALCO 638 1,827
Visayas 96 759
VECO 39 225
UPDATES
Source: ERC
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REGISTRATION
Participant Expected2Total
Application
Received
RegisteredOn-Going
Completion of
Requirements
Retail ElectricitySuppliers
19 19 15 4
Local Retail Electricity
Suppliers
18 12 5 7
Retail Metering ServicesProviders
39 27 23 4
Contestable Customers 892 297 257 40
Suppliers of Last Resort 27 7 2 5
Total1 995 362 302 60
1As of 26 September 20132Based on ERCs RCOA website: www.buyyourelectricty.com
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LIST OF LICENSED RES
1. Cabanatuan ElectricCorporation.
2. Masinloc Power Partners Co.Ltd.
3. Aboitiz Energy Solutions,
Inc.4. Advent Energy, Inc.
5. Direct Power Services, Inc.
6. Ecozone Power
Management, Inc.7. Ferro Energy, Inc.
8. First Gen. Energy Solutions,Inc.
9. Global Energy SupplyCorporation
10. GN Power Ltd. Co.11. GNPower Mariveles Coal
Plant Ltd. Co.
12. Kratos RES, Inc.
13. Premier Energy Resources
Corp.
14. Prism Energy, Inc.
15. San Miguel ElectricCorporation
16. SEM-Calaca RES Corp.17. SN Aboitiz Power RES
18. Team Philippines EnergyCorp.
19. Trans-Asia Oil and EnergyDevelo ment Cor .
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LIST OF LOCAL RES
1. Angeles Electricity Corporation (AEC)
2. Manila Electric Company (MERALCO)3. Dagupan Electric Corporation (DECORP)
4. Visayan Electric Company (VECO)
5. Subic Enerzone Corporation (SEZ)
6. Bohol Light Company, Inc. (BLCI)
7. Tarlac Electric, Inc. (TEI)
8. San Fernando Electric Light & Power Co. (SFELAPCO)
9. Ilocos Norte Electric Cooperative, Inc. (INEC)
10. Nueva Ecija I Electric Cooperative, Inc. (NEECO I)
11. Cebu I Electric Cooperative, Inc. (CEBECO I)
12. Cebu III Electric Cooperative, Inc. (CEBECO III)
13. Batelec II Electric Cooperative, Inc. (BATELEC II)
14. Benguet Electric Cooperative, Inc. (BENECO)
15. Cebu II Electric Cooperative, Inc. (CEBECO II)
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Lessons Learnt and Challenges
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LESSONS LEARNT:
ISSUES, SEQUENCE AND TIMEFRAME
Issues: No mandatory bilateral contract
between NPC power plants and distribution
utilities investors have no PPA to finance
their purchase
Sequence: Should WESM be established
before privatization of NPC assets ? Market
power
Timeframe: EPIRAs implementation timeline
totally unrealistic
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POWER SECTOR REFORM IN THE
PHILIPPINES - A SUCCESS STORY?
Question: How to judge & measure if power sector reform issuccessful?
- Competitive electricity rate?- Sustainable power supply?
- Promoting renewable energy?
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2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J
Price,P
/MWh
Effective Buying Price Effective Selling Price Cumulative Ave. Buying Price
Effective Settlement Prices
2007 20082006
P4,497/MWh
2009
Market Results
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CHALLENGES AHEAD
Challenge No.1: Will electricity rate will be cheaper?
-
probably not but
Challenge No. 2: Will private sector accept merchant risk
and invest in new capacity?
yes with ADB support initially then the experienced investors will
continue
Challenge No.3: Will competitive markets promote
renewable energy?
- WESM will include renewable energy market based on
renewable energy law
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The most expensive power is the power we dont have
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THANK YOU