MANILA, 11 June — Business confidence continues to improve in the Philippines after President Gloria Macapagal Arroyo signed into law Friday the Omnibus Power Reform Bill earlier approved by both houses of Congress. The new law — Republic Act 9136 — is expected to hasten the restructuring of the country’s power sector and the privatization of the National Power Corporation (Napocor).
Industry leaders said the swift signing into law of the Omnibus Power Reform Bill shows that Congress is supportive of the president’s economic programs. This gives a strong message to the international community that the government is seriously pursuing its reform agenda, they said.
In signing RA 9136, President Arroyo said this is not a panacea that solves all the country’s energy problems. She said it is the beginning of the solution but there is so much more that needs to be done. Without referring to detractors, she said the alternative of not having the new law would have been worse. The president urged the citizens’ support and urged them to remain vigilant in order to attain the intended purpose of the law, which is lower power rates for consumers.
“This development has a big impact on business, especially if the privatization of Napocor is immediately carried out. This would bolster the business community’s confidence in government, and will enhance the country’s investment climate,” a business leader said.
Consumers are expected to immediately benefit from the new law, which mandates that a 30-centavo per kilowatt-hour reduction takes effect 15 days after the signing of the power reform bill.
The rate cut, however, is expected to result in 3.7 billion pesos in foregone revenues for Napocor by the end of the year. This is expected to complicate the privatization of the state-owned power company.
This early, the president has ordered a government interagency body to start drafting the implementing rules and regulations (IIR) of the new law. The IIR is needed to clarify vague provisions of the law, including the time frame for the implementation of the pertinent provisions of RA 9136.
The immediate drafting of the IIR will also pave the way for government’s review of a number of power supply contracts that Napocor entered into with independent power producers. A study commissioned by the Senate last year found out that the government is losing $9 billion annually from these independent power producers because government has been paying for minimum power capacity even without the optimum use of generated power.
This contentious issue affects both foreign and local investors, who agreed to invest capital at the height of the power shortage in the country a few years back when industry needed more electricity than Napocor could generate.
The National Economic and Development Authority, however, assured investors earlier that Napocor would not rescind its contracts with independent power producers but will instead try to find a win-win solution for the parties involved.
Former Energy Secretary Jose Isidro Camacho, who was transferred to the Department of Finance, said that although it took seven years and two Congresses to pass the power reform bill, its signing into a new law is just a big first step. “The implementation part is a bigger challenge,” he said.
Meanwhile, the Department of Energy said it will conduct a pre-marketing of all Napocor assets to prospective bidders before these are put on the auction block. Energy officials said this will be done in the next few months, before the approval of RA 9136’s implementing rules and regulations. The Energy Department wants to conduct a pre-marketing of Napocor’s assets with prospective buyers to fine-tune the privatization plan, sources said.
They said the move will help determine market interest and the attractiveness of Napocor assets to prospective investors. Credit Suisse-First Boston, the agency commissioned by the government to come out with a privatization plan for Napocor, estimated that sale of Napocor assets would generate some $4.5 billion for the national government. However, this is not enough to cover the power company’s $6.7 billion in total liabilities.
