It fails to confront the critical issues haunting the power sector, namely the disjointed planning and execution between generation and transmission. The absence of a market that promotes investments in the generation sector is a glaring oversight that the government must recognize.
These fundamental issues demand immediate attention and resolution before any amendments to the ERC’s powers are even considered. Ignoring these core challenges will only perpetuate the current inefficiencies and further disadvantage consumers.
ERC role reevaluation needed
The ERC’s role needs a drastic reevaluation. Given the trajectory EPIRA (Electric Power Industry Reform Act of 2001) has designed for the power sector, there should be less rather than more regulation. So, “strengthening” the ERC seems anachronistic to this objective of EPIRA.
For example, if the ERC decides to open access to all households and open the metering service to competition, it will have less work. So, what is the point of “strengthening’ the ERC if deregulation is the way to go? Instead, the government should adopt policies that will strengthen the generation market and make the ERC less relevant in this aspect of the power sector.
The consensus is clear: The ERC is a bane to the power sector. Whether one talks to generators, distribution companies, or consumers, the ERC tends to exacerbate problems rather than resolve them. So, the direction should be toward reducing the role of the ERC rather than strengthening it.
Gov't, not consumers, should cover subsidies
Second, it is morally unacceptable that consumers shoulder the costs of government policies promoting renewable energy, missionary electrification, and lifeline rates. The government should be responsible for providing these subsidies, not consumers, because the government drives these policies. If the government provides these subsidies, there is no reason for ERC to tackle these issues.
If consumers pay for these subsidies, resolving this becomes an issue for the ERC. Subsidies will mean increased consumer costs, putting the ERC in a bind. It is not the job of the ERC to determine government policies; it only has to adjudicate them as these policies apply to consumers. Worse, the ERC needs to be legally competent to decide on the validity of these policies.
Strengthening market mechanism, not the ERC
Third, the sector’s problem today is that there needs to be a mechanism to direct investments in the generation sector. This lack of a market mechanism is a very fundamental problem.
Strengthening the ERC will not address this issue. In fact, strengthening the role of the ERC will have the opposite effect: no generator wants to be under the ERC’s ambit.
Rather than strengthening the ERC, the government should find ways to strengthen the market mechanism, e.g., creating a forward power market and lessening the role of the ERC.
Addressing the proposed amendments will require a more extensive discussion, which I might address in future columns. However, three items stood out: a) competency requirement should include appointed commissioners; b) Commissioners should not be immune from suits; c) ERC should have a decreased scope for regulating the power sector.
A Merry Christmas and a Happy New Year to all!
A power industry expert with over 40 years in experience as chief executive officer in firms ranging from banking, power, and advisory services.
