INSIDER VIEW: Want to solve power shortages? Reboot EPIRA now.

The Department of Energy (DOE) recently announced a five-month moratorium on renewable energy applications because the "nation has more than enough contracts to hit clean energy goal.” This news implies that we have more than enough electricity.

This DOE pronouncement sounds paradoxical based on the recent yellow and red alerts of NGCP.

What's going on?

It's hard not to suspect that the DOE is grappling with a backlog of service contract applications, compounded by the fact that many past service contracts have never been implemented.

This raises the question: with so many potential renewable energy (RE) projects, why do we still face regular shortages?

The first apparent reason may be that these RE projects will not address our baseload shortage because they are intermittent energy sources.

The second probable reason is that this backlog also hinders the transmission services that National Grid Corporation of the Philippines (NGCP) can and should provide.

However, the problem is more fundamental: We must reboot the Electric Power Industry Reform Act of 2001 (EPIRA).

As I mentioned in a previous article, these are some of the basic "reboots" we need:

• Change the methodology of determining the cost of equity from the Capital Asset Pricing Model (CAPM) to some other method more reflective of Philippine realities; 
• Allowing competition in the transmission and distribution businesses; democratizing power through distributed energy resources (DERs) at the community level;
• Removing all thresholds in the open access provision of the EPIRA; 
• Reorganizing the Energy Regulatory Commission; 
• Treat electric cooperatives as independent utilities;  
• Creating a Forward Electricity Market 
• Adopt a portfolio of fixed and floating power purchase contracts for captive customers to re-allocate the risks being borne by consumers;  

All these, among others, point to market and regulatory failures.

There is a market failure in that there are no economic incentives for generation investments, especially for captive customers.

On the one hand, we want a deregulated generation market, but on the other hand, we want the Energy Regulatory Commission (ERC) to intervene purportedly to protect the consumers.

ERC's involvement makes matters worse. The market failure is exacerbated by what I believe is a regulatory failure. The problem just got exponentially worse.

I do not have to prove that these failures exist. We have high power rates and shortages.

Investors want to avoid the Competitive Selection Process (CSP) imposed by the DOE and ERC.

The interference of the ERC in the provisions of private power purchase contracts is a disincentive. One gets the impression that the government wants to make investments in the generation market extremely difficult to prove that it is "looking after" the consumers.

The effect is the opposite.

Consumers are complaining that ERC is ignoring them. Power utilities are complaining that approvals for their capacity expansion plans or rate applications are delayed, thereby affecting their viability. Everyone is suffering from these market and regulatory failures.

The solution to this problem is so complex that maybe the only thing we can do is reboot the entire EPIRA, and we must do that now.