(DP 2002-08) Electricity Reform in the Philippines and the Prospects of Competition

Abstract

The electric power industry reform act in the Philippines has for its main objective the introduction of competition and effective regulation to reduce costs of electric power at retail. Background of high electricity costs is linked to the politics of energy and the structural problems that have arisen in the management of the electricity sector. The features of the reform law are explained. The law relies on international experience in the design of competition and regulation in the electricity sector. The law seeks to introduce a competitive industry structure in the energy generation field but recognizes monopoly regulation in relation to the ownership of transmission and franchising of local area electricity distribution. Issues related to competition, regulation, and privatization are discussed. Although the new industrial framework could lead to cost reductions through competition, some issues connected with cross-ownership of power generating companies that is at the expense of consumers. The next stage of privatization if realized promises to help strengthen fiscal performance.

Key words: Electricity industry, utilities regulation, competition in regulated industries, privatization, Philippine economy