Privatization Objectives

The Philippine power industry, which has just emerged from a virtually crippling energy crisis, continues to face major challenges that it will have to hurdle if it is to provide consumers a reliable and secure electricity supply at affordable prices. The privatization of the sector is seen as an appropriate response to these challenges. The strategy is also expected to attract substantial investments in the energy sector to fend off a looming power crisis.

The privatization of the assets of the National Power Corporation is anticipated to raise this needed capital. For one thing, the new owners of the privatized assets will have to undertake improvements in their assets to ensure that they remain competitive and viable. For another, the government will be able to use the proceeds from the sold assets to settle the debts of National Power, thereby helping reduce the country’s consolidated public sector deficit.

Seen as the key to dismantling the dominance of a few industry players that have dictated electricity prices for so many years, the privatization of the generation assets is programmed to promote competition in the sector.  Republic Act No. 9136, the Electric Power Industry Reform Act (EPIRA), limits the ownership of generation assets by a single owner to only 30% of the generating capacity within a single grid.  This means that in any single grid, there can be at least four different owners of generation assets to allow competition.  The privatization of the generation assets, majority of which are owned by National Power, will help bolster competition as specified in the EPIRA. This will also usher in a new regime where retail competition will prevail to enable electricity consumers to enjoy the benefits of a restructured electricity industry. 

In summary, the objectives of power privatization are:

• Total electrification of the country
• Reliable, secure and affordable power supply
• Transparent and reasonable electricity prices
• Inflow of private capital
• Broader ownership base
• Fair and non-discriminatory treatment of public and private sector entities
• Protection of public interest as it is affected by rates and services of electric utilities
• Socially and environmentally compatible energy sources and infrastructure
• Utilization of indigenous and new and renewable energy resources
• Orderly and transparent privatization of the assets and liabilities of National Power
• Competitive operation of the electricity market and consumer protection
• Efficient use of energy and other modalities of demand side management

Ultimately, the privatization of the Philippine power industry will significantly contribute to ending the inherently inefficient monopoly system for generating and selling electricity by providing consumers the “choice of power” and the “power of choice.”