The Study for Verification on Achievement and Progress of the Energy Sector Reform of the Philippines

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The Study for Verification on Achievement and Progress of the Energy Sector Reform of the Philippines Department of Energy Government of the Philippines The Study for Verification on Achievement and Progress of the Energy Sector Reform of the Philippines Final Report December 2013 JAPAN INTERNATIONAL COOPERATION AGENCY THE INSTITUTE OF ENERGY ECONOMICS, JAPAN - i - - ii - Contents Executive Summary ............................................................................................ 1 Findings of the Study .................................................................................................................................. 1 Observations for Improvement .................................................................................................................... 3 Next Steps for the Electricity Sector Reform .............................................................................................. 6 Chapter 1 Outline of the Study ....................................................................... 9 1.1 Background of the Study .................................................................................................................... 9 1.2 Objectives of the Study .................................................................................................................... 10 1.3 Study Plan and Progress ................................................................................................................... 11 1.3.1 Background Paper ........................................................................................................................ 11 1.3.2 Policy Dialogue ............................................................................................................................ 11 Chapter 2 Power Situation in the Philippines and Comparison with Other Southeast Asian Countries ................................................................................ 13 2.1 Current status of the Power Sector ................................................................................................... 13 2.2 Economy and power consumption ................................................................................................... 14 2.3 Final consumption, structure and characteristics of power use ........................................................ 16 2.4 Power supply .................................................................................................................................... 19 2.5 Power development .......................................................................................................................... 21 2.6 Power generation and transmission/distribution efficiencies ........................................................... 22 2.7 Electricity prices and cost components in the Philippines ............................................................... 23 2.8 Why electricity prices are high in the Philippines ............................................................................ 25 2.7.1 Cost of power generation ............................................................................................................. 26 2.7.2 Costs of power transmission and distribution .............................................................................. 28 Chapter 3 Current Status of EPIRA Implementation ................................ 31 3.1 Privatization ..................................................................................................................................... 31 3.2 Electricity Rates ............................................................................................................................... 32 3.2.1 Generation cost ............................................................................................................................. 32 3.2.2 Transmission/wheeling Rates ....................................................................................................... 33 3.2.3 Rates for DUs and EUs ................................................................................................................ 33 3.2.4 Administration of Universal Charge (UC).................................................................................... 34 3.2.5 Assumption of Loans of Electric Cooperatives ............................................................................ 34 3.2.6 Mandatory Rate Reduction (MRR) .............................................................................................. 35 3.2.7 Lifeline Rate Subsidy Program .................................................................................................... 35 3.3 Competition .................................................................................................................................... 36 3.3.1 Wholesale Electricity Spot Market (WESM) Operations ............................................................. 36 3.3.2 Retail Competition and Open Access (RCOA) ............................................................................ 37 - iii - 3.3.3 Interim Mindanao Electricity Market (IMEM) ............................................................................ 37 3.3.4 Market Share Monitoring ............................................................................................................. 38 Chapter 4 Energy Status of Selected ASEAN Countries ............................ 41 4.1 Current Status of Economy and energy in Selected ASEAN Countries ......................................... 41 4.2 Current Status of Electric Power Sector in Selected ASEAN Countries ........................................ 43 4.3 Power Sector Reform in Progress .................................................................................................. 46 Chapter 5 Energy Policy Dialogue with ASEAN Countries ....................... 51 5.1 Presentation of Philippine Department of Energy .......................................................................... 51 5.2 High Level Sessions ....................................................................................................................... 53 5.2.1 Indonesia ...................................................................................................................................... 53 5.2.2 Thailand ........................................................................................................................................ 53 5.2.3 Vietnam ........................................................................................................................................ 55 5.3 Technical Sessions .......................................................................................................................... 56 5.3.1 Indonesia ...................................................................................................................................... 56 5.3.2 Thailand ........................................................................................................................................ 56 5.3.3 Vietnam ........................................................................................................................................ 57 5.4 Synthesis of Dialogue ..................................................................................................................... 58 Chapter 6 Energy Sector Dialogue in Japan and Related Activities ......... 61 6.1 Opening Remarks ........................................................................................................................... 61 6.2 Presentation of the DOE Secretary Carlos Jericho Petilla .............................................................. 62 6.3 Q&A for DOE Secretary Petilla’s Presentation .............................................................................. 64 Chapter 7 Findings on ASEAN Energy Sector Reform .............................. 67 7.1 Identified differences and Issues .................................................................................................... 67 7.2 Indonesia ........................................................................................................................................ 68 7.2.1 Feature of energy policy in Indonesia .......................................................................................... 68 7.2.2 Implication for Philippines ........................................................................................................... 70 7.3. Thailand ......................................................................................................................................... 71 7.3.1 Feature of energy policy in Thailand ............................................................................................ 71 7.3.2 Implication for the Philippine ....................................................................................................... 72 7.4 Vietnam .......................................................................................................................................... 72 7.4.1 Feature of energy policy in Vietnam ............................................................................................ 72 7.4.2 Implication for the Philippines ..................................................................................................... 74 Chapter 8 Concluding Remarks ................................................................. 75 8.1 Findings of the Study ..................................................................................................................... 75 8.1.1 Policy Dialogue
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