quarterly performance report year 2 q4 (july …

QUARTERLY PERFORMANCE REPORT

YEAR 2 Q4 (July – September 2016)

AID-492-G-15-00002

26 October 2016

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Table of Contents

TABLE OF CONTENTS ....................................................................................................................... 2

ACRONYMS ........................................................................................................................................... 3

EXECUTIVE SUMMARY ..................................................................................................................... 4

I. PROGRAM DESCRIPTION AND OBJECTIVES .................................................................... 6

II. SNAPSHOT OF ACTIVITIES ..................................................................................................... 7

III. PROGRAM COMPONENTS ....................................................................................................... 9

1. RESEARCH COMPONENT .......................................................................................................................... 9 2. POLICY DEVELOPMENT COMPONENT .................................................................................................. 14 3. CAPACITY BUILDING COMPONENT ...................................................................................................... 17 4. COMMUNICATIONS COMPONENT ......................................................................................................... 22 5. CROSS-CUTTING .................................................................................................................................... 25

IV. PROGRAM MANAGEMENT ................................................................................................... 28

1. WORK PLAN FOR FISCAL YEAR 3 ........................................................................................................ 28 2. HUMAN RESOURCE ................................................................................................................................ 28

ANNEXES ............................................................................................................................................. 32

Annex 1 Performance Indicator Tracking Table (as of 30 September 2016) Annex 2 Photo documentation of EPDP FY2 Quarter 4 activities Annex 3 EPDP-International Food Policy Research Institute workshop program and

discussion note on the research collaboration Annex 4 Minutes of the meeting with US Energy Agencies Annex 5 Exchange of letters between Congressman Lord Allan Velasco and

Dr. Orville Solon (Dean of University of the Philippines - School of Economics) and EPDP’s technical comments

Annex 6 Technical advisory note on the increase in biodiesel blend mandate Annex 7 Terminal report on the Training Course on Forecasting Annex 8 Terminal report on the Executive Course on Competition and Regulation in

the Philippine Power Sector and session highlights Annex 9 EPDP users and visitors between 11 May 2016 to 27 September 2016 Annex 10 EPDP Newsletter Vol. 2 No.1 Annex 11 Evaluations of the lectures

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Acronyms ADRi Alberto Del Rosario Research Institute AGMO Autonomous Group Market Operator CSP Competitive Selection Process DOE Department of Energy DTI Department of Trade and Industry DU Distribution Utilities EPDP Energy Policy and Development Program EPIRA Electric Power Industry Reform Act ERC Energy Regulatory Commission GAD Gender and Development GPH Government of the Philippines IFPRI International Food Policy Research Institute IMO Independent Market Operator ManCom Management Committee Meralco Manila Electric Company NBB National Biofuels Board NEA National Electrification Administration NEDA National Economic and Development Authority NGCP National Grid Corporation of the Philippines NPC National Power Corporation PCC Philippine Competition Commission PEMC Philippine Electricity Market Corporation PITT Performance Indicator Tracking Table PSA Philippine Statistics Authority PSC Program Steering Committee SDAA Senior Deputy Assistant Administrator TAN Technical Advisory Note TDP Transmission Development Plan TOR Terms of Reference UPSE University of the Philippines - School of Economics UPSS University of the Philippines – School of Statistics USAID United States Agency for International Development VAT Value added tax WESM Wholesale Electricity Spot Market

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Executive Summary

The transition in the Philippine Administration after the May 2016 National Elections created the need to build relationships with the new set of senior Philippine Government (GPH) officials while keeping the Program’s existing commitments. With most of the first round of research studies completed and the increasing recognition of EPDP, the Program is in good stead to engage with the new senior officials in the National Economic and Development Authority (NEDA) and the Department of Energy (DOE). The Program also maximized the remaining activities in FY2 to reach out and collaborate with new and existing partners.

Recognizing the unique opportunity to influence the new Administration’s policy agenda in the energy sector, EPDP shared the initial set of three-pager policy briefs and the technical advisory notes with the new Secretaries of the NEDA and the DOE. Beyond NEDA and DOE, the opportunity to directly engage both Houses of Congress has also opened up. In response to the House Committee on Energy’s request, which the University of the Philippines - School of Economics (UPSE) forwarded to EPDP, the Program provided comments on House Bill No. 2298 - “An Act Amending Paragraph (J) Section 47 of Republic Act 9136 or the Electric Power Industry Reform Act of 2001.” In aid of the legislative agenda, the Senate Committee of Energy and Economic Affairs also invited EPDP to discuss EPDP’s research studies.

In addition, EPDP progressed the research collaboration with the International Food Policy Research Institute (IFPRI) and the second round of its research papers to generate pieces of evidence that could support the ongoing policy discussions around many contentious and pressing energy issues.

EPDP’s capacity building activities became venues to engage with new and existing GPH officials and staff and other stakeholders. The Executive Course was represented by both the executive and legislative branches of Government. It initiated candid and constructive discussion on competition and regulation as well as areas of perceived political and technical tensions. Building on the previous intensive training courses, the Training Course on Forecasting further deepened the knowledge and skills of technical staff from eight (8) agencies on Eviews, a widely-used econometrics software for forecasting. The lecture series also continue to serve as an open venue for various stakeholders to interact around specific issues, and to disseminate EPDP’s research work.

Prompted by the EPDP lecture on “The Value Added Tax and Red Tape: What Contributes More to Electricity Tariffs in the Philippines,” a columnist wrote an opinion piece on the topic in Business World Online dated 15 September 2016. This study was among EPDP’s first set of research studies. UNTV’s Serbisyong Kasangbahay also interviewed Dr. Majah Ravago, EPDP Program Director, about environmentally-sound energy development as well as the country’s growth.

In preparation for FY3, EPDP submitted its proposed FY3 Work Plan, taking into account the significantly reduced level of budget and human resources in the coming year. It reflects the recalibrated set of activities and prioritizes the list of unprogrammed activities. It also contained the updated Performance Monitoring and Evaluation Plan

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(PMEP), the Performance Indicator Reference Sheet (PIRS), and Gender Action Plan. These updated documents capture the additional indicators and the changes assessed necessary to increase their usefulness and make them more attuned to the current Program context.

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I. Program Description and Objectives

The Energy Policy and Development Program (EPDP) is a project launched in November 2014 that aims to strengthen the capacity of the Philippine government to formulate coherent and evidence-based policies and strategies for sustainable, reliable, and efficient use of energy resources and technologies. It supports the national government, in particular the National Economic and Development Authority (NEDA) and the Department of Energy (DOE), in policy analysis and formulation for the energy sector. EPDP is being implemented by the UPecon Foundation and is funded by the United States Agency for International Development (USAID). EPDP’s approach to attaining its objective involves the following key initiatives (as depicted in Figure 1) that also represent EPDP’s four components: provide the technical foundation for policy development, capacity building, and

communications interventions through an energy research program. This entails setting up (i) an energy research program unit to support a mix of policy and operational research on energy and (ii) a data management and analysis unit to lay the groundwork for analysis of energy issues, as well as monitoring and evaluating the impact of energy policies. EPDP’s energy research program acts as the foundational pillar for the other components – i.e., the technical basis for policy development, capacity building, and communication interventions;

provide policy development advisory, initially to the National Economic and Development Authority (NEDA) and Department of Energy (DOE)–EPDP’s core clients–including their attached agencies1 but can be expanded to include legislators, if there is demand;

support capacity building activities for NEDA and DOE and their attached agencies, as well as other stakeholders, such as national government agencies, legislators, and private sector – including support for a pool of energy specialists and practitioners;

support communications activities to share energy-related research and activities with stakeholders in the energy sector.

1 Energy Regulatory Commission (ERC), National Power Corporation (NPC), National Electricity Administration (NEA), and Philippine Statistical Authority (PSA)

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This report covers EPDP’s performance in Quarter 4 (July – September 2016) of Fiscal Year 2 (FY 2). Section II is a snapshot of key activities in quarter four (Q4). Section III details program component and other cross-cutting activities and achievements. Section IV tackles program management activities and finances. The Annexes provide the supporting documents for this report, including the updated Performance Indicator Tracking Table (PITT) as Annex 1.

II. Snapshot of Activities

Table 1 chronologically lists the activities of EPDP in Q4, which are further elaborated in the succeeding sections. Annex 2 contains the photo-documentation of these activities.

Table 1. EPDP Activities in FY2-Q4 (July– September 2016) Dates Activities

5 July Core Management Committee (ManCom) Meeting

11-13 July Mid-level Training Course on Forecasting

14 July Presentation of the study Filipino 2040 - Energy: Power Security and Competitiveness during the 38th Annual Scientific Meeting by the National Academy of Science and Technology (NAST)

18-20 July

Meeting with Ms. Gloria Steele, USAID Senior Deputy Assistant Administrator (SDAA)-Asia Bureau

EPDP-International Food Policy Research Institute Workshop

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Dates Activities Meeting with USAID, U.S. Department of Energy, U.S. State Department, and U.S. Energy Association

26 July Expanded ManCom Meeting

2 August Meeting with NEDA Deputy Director General (DDG) Rosemarie Edillon on the Executive Course

Meeting with Manila Electric Company (Meralco)

5 August Presentation of the Filipino 2040 study at De La Salle University

Interview on EPDP with UNTV’s Serbisyong Kasangbahay

Core ManCom Meeting

8 August Meeting with the Socioeconomic and Planning Secretary and NEDA Director General Ernesto Pernia

12 August Meeting with DOE Secretary Alfonso Cusi

Presentation of the technical advisory note (TAN) on Biodiesel to NEDA DDG Edillon; Agriculture, Natural Resources and Environment Staff (ANRES); and Infrastructure (INFRA) Staff

17 August Coordination Meeting with USAID and Building Low Emission Alternatives to Develop Economic Resilience and Sustainability Project (B-LEADERS)

24 August Expanded ManCom Meeting

25 August EPDP Lecture Series Session 6 - Philippine Energy Planning Part 2: Transmission Development Plan and Distribution Development Plan by Mr. Rodel Limbaga, DOE, and Engr. Redi Allan Remoroza, National Grid Corporation of the Philippines (NGCP)

Participation in the Stratbase Albert Del Rosario Institute (ADRi) Energy Stakeholders’ Forum

31 August – 2 September

EPDP Session at the Philippine Statistical Authority, Inc. (PSAI) Annual Conference in Bicol

2 September Core ManCom Meeting

6 September Participation in the Philippine Energy Outlook Forum of DOE

7 September EPDP Fellow’s Meeting with Meralco on Filipino 2040

8 September EPDP Lecture Series Session 7 - The Value Added Tax and Cost of Doing Business: What Contributes More to Electricity Tariffs in the Philippines by Dr. Ramon Clarete, EPDP Fellow

14 September Expanded ManCom Meeting

16 September Executive Course on Competition and Regulation on the Philippine Power Sector

19 September Educational Visit to MakBan Geothermal Plant

21 September EPDP Lecture Series Session 8 - The Role of Power Prices in Structural Transformation: Evidence from the Philippines by

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Dates Activities Dr. Arlan Brucal, EPDP Fellow, and Mr. Jan Carlo Punongbayan, EPDP Researcher

26 September Quest: A Research Workshop, UP School of Statistics

28 September Meeting with Meralco and International Energy Consultant on International Electricity Rate Comparison Study

III. Program Components

1. Research Component

The fourth quarter saw the completion of the first round of research studies and the commencement of the second round of research focused on the identified priority topics. The EPDP-IFPRI research workshop also took place in Washington, D.C., which formally set off the research collaboration between the two organizations. During the Washington visit, EPDP also organized a meeting with Ms. Gloria Steele, USAID Senior Deputy Assistant Administrator, and several representatives from USAID, U.S. Department of Energy, U.S. State Department, and U.S. Energy Association. As part of research dissemination, EPDP likewise accepted invitations to present the Filipino 2040 energy chapter. The engagement report on Filipino 2040 was also submitted to USAID and NEDA. EPDP also participated in the Philippine Statistical Authority Annual Conference.

A. Research Studies

i. First Round of Research Studies

Delivered outputs: technical papers and policy briefs

Three (3) additional EPDP-initiated research studies were completed, bringing the number of completed studies to ten (10). The peer reviews were completed for two (2) of the papers while still ongoing for one (1). These ten (10) studies constitute the first round of EPDP research studies, which were based from the research agenda drawn up in Fiscal Year 1. The peer review process, which has been put in place to ensure high quality studies, involves circulating the technical papers to EPDP fellows and select energy scholars to solicit comments and recommendations. These papers are progressively being released as working papers in the EPDP website to also elicit comments from the public. The link to the papers is http://www.upecon.org.ph/epdp/resource-center/library/epdp-products/working-papers/ Three (3) policy briefs summarizing the research studies and recommendations have also been released. The policy briefs are concise

http://www.upecon.org.ph/epdp/resource-center/library/epdp-products/working-papers/

http://www.upecon.org.ph/epdp/resource-center/library/epdp-products/working-papers/

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version of the studies for the consumption of the policy-makers. These will be used to engage policy-makers and help inform policy options and decisions. Meanwhile, three (3) studies are ongoing. These are expected to be completed early in FY3. Table 2 below shows the status of the first round of research studies.

Table 2. Status of First Round of EPDP Research Studies

RESEARCH AUTHOR/S PEER REVIEWED

WORKING PAPER

RELEASED

POLICY BRIEF

RELEASED

Completed First Round of EPDP Studies

1. The Market Testing of Power Supply Agreements: Rationale and Design Evolution in the Philippines

Raul Fabella

2. An Error Correction Model for Forecasting Philippine Aggregate Electricity Consumption

Rolando Danao Geoffrey Ducanes

3. Lighting up the Last Mile: The Costs and Benefits of Extending Electricity to the Rural Poor

Ujjayant Chakravorty Kyle Emerick Majah-Leah Ravago

4. Assessment of the Philippine Power Sector Policy Landscape

Ruperto Alonzo

5. The Value Added Tax and Cost of Doing Business: What Contributes More to Electricity Tariffs in the Philippines

Ramon Clarete

6. The Role of Power Prices in Structural Transformation: Evidence from the Philippines

Majah-Leah Ravago JC Punongbayan Arlan Brucal James Roumasset

7. The Public Economics of Electricity Policy with Philippine Applications

Majah-Leah Ravago James Roumasset

Ongoing

Completed NEDA-Requested Research

8. Filipino 2040 Energy: Power Security and Competitiveness*

Majah-Leah Ravago Raul Fabella Ruperto Alonzo Rolando Danao Dennis Mapa

9. Filipino 2040: Environmental Resources, Shocks, and National Well-Being*

James Roumasset Majah-Leah Ravago Karl Jandoc Clarissa Arellano

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RESEARCH AUTHOR/S PEER REVIEWED

WORKING PAPER

RELEASED

POLICY BRIEF

RELEASED

10. An Economic and Environmental Analysis of the Impact of Higher-Blended Biodiesel on the Philippine Coconut Industry*

Ruperto Alonzo Ongoing review for

release

11. Impact Study of Higher-Blended Biodiesel on the Coconut Industry

Roehlano Briones Rex Demafelis

Ongoing

12. Macro-Micro Level Linkage of Energy and Poverty: Evidence of Benefits for the Poor

Dennis Mapa Majah-Leah Ravago Manuel Albis Michael del Mundo

13. The Economics and Politics of Power Plant Approvals in the Philippines

Laarni Escresa

14. Gender, Energy, and Weather Shocks

Connie Dacuycuy

* A research study requested by NEDA that was subsequently incorporated in FY1 EPDP research.

ii. Second Round of Research Studies

Delivered outputs: concept notes

The fourth quarter marked the official start of the second round of research. In light of the budget cut, research topics were assessed according to priority. The prioritization is anchored on EPDP’s objective of helping to bring the cost of power down. Table 3 below shows the nine (9) research studies identified for the second round. The new batch of studies will mainly tackle various aspects of electricity prices. Other research topics include optimal fuel mix, interconnection of energy-water-food sectors, electric cooperatives, and missionary electrification.

Table 3. Topics for the Second Round of Research

RESEARCH TOPIC RESEARCH FELLOWS CONCEPT NOTE

1. Towards an Economic Model of an Integrated Power System

Karl Jandoc Majah-Leah Ravago James Roumasset

2. Power Rates in the Philippines: Causes and Implications

Majah-Leah Ravago Arlan Brucal James Roumasset

3. Optimal Energy Mix for Power Generation in the Philippines

Romeo Balanquit, Sarah Daway

4. Evaluative Study on the Services of Electric Cooperatives

Raul Fabella

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RESEARCH TOPIC RESEARCH FELLOWS CONCEPT NOTE

5. Forecasting Philippine Sectoral Electricity Demand

Rolando Danao Geoffrey Ducanes

6. Impacts of Electricity Prices on Philippine Economy/ Labor Market

Ujjayant Chakravorty Kyle Emerick Majah-Leah Ravago

7. The Impact of Energy Prices on Consumption in the Philippines

Renato Reside

8. Missionary Electrification Ruperto Alonzo

9. Are Energy Conservation “Nudges” Effective? Evidence from a Randomized Residential Field Experiment in the Philippines

Majah-Leah Ravago Arlan Brucal

B. EPDP-IFPRI Research Workshop

Delivered output: collaboration with a U.S.-based research institute

On 19-20 July 2016, the EPDP-IFPRI Research Workshop took place at IFPRI’s headquarters in Washington, D.C., United States of America (U.S.A.). The two-day workshop entitled “Energy, Water, Food and Competition Policies” was an initial step to establish the research collaboration. It focused on the interlinkages of the energy, water and food sectors and tackled different country cases and models. The EPDP delegates provided the current situation in the Philippines through the following presentations:

i. Energy-Water-Food Policy Issues in the Philippines: Managing Water

Storage by Dr. Majah-Leah Ravago and Dr. James Roumasset

ii. An Assessment of the Philippine Power Sector Policy Landscape by Prof. Ruperto Alonzo iii. Understanding Increasing Power Demands in the Philippines by Dr. Geoffrey Ducanes

The details and timeline of the research collaboration were also discussed. Playing on each other’s strengths, IFPRI will focus on the modeling, while EPDP will validate the model on the ground given its local knowledge. A stakeholder consultation will be organized before developing the model to engage NEDA and DOE early in the process. This will be crucial in enhancing the research uptake. The Philippine Competition Commission (PCC) was also identified as another primary partner.

The research collaboration aims to develop an integrated modeling framework to assess trade-offs across the energy-water-food sectors in the country. The intention is to strategically integrate this in the economy-wide model of NEDA. The envisioned outputs of the collaboration are: (i) a research study on the energy-food-water sectors in the Philippines, and (ii) capacity building for government (DOE and NEDA) and students on the models used in the study.

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IFPRI is a US-based international research center providing research-based policy solutions. Annex 3 contains the workshop program and a discussion note on the research collaboration.

C. External Meetings during the Washington, D.C. Trip

i. Meeting with Ms. Gloria Steele, USAID SDAA, 18 July 2016

On 18 July 2016, EPDP led by Program Director Dr. Majah-Leah Ravago, met with Ms. Gloria Steele, SDAA. They were joined by Dr. Arsenio Balisacan, PCC Chairperson, and Dr. Mark Rosegrant, IFPRI Division Director, and James Roumasset, EPDP Program Advisor. The EPDP team shared with Ms. Steele the program’s accomplishments and plans. The research collaboration with IFPRI was also discussed with the aim of securing potential funding from USAID. In response, Ms. Steele suggested for the development of a concept note with an Asia regional scope that will build on the Philippine project to increase chances of additional funding. Possible countries to include are Myanmar and Vietnam. ii. Meeting with U.S. Energy Agencies

Delivered output: minutes of the meeting

On 20 July 2016, the EPDP team had a meeting with USAID, U.S. Department of Energy, U.S. State Department, and U.S. Energy Association. This was organized by Dr. Jayne Somers, USAID Energy Advisor of the Asia Bureau. The meeting was an opportunity to get insights from other energy experts regarding the current energy landscape in the Philippines. The discussion centered on market designs. Opportunities for EPDP to have on-ground trips at U.S. electric cooperatives through the assistance of the U.S. Energy Association (USEA) were also mentioned. Annex 4 reflects the minutes of the meeting.

D. Presentations of Filipino 2040 Energy: Power Security and

Competitiveness

Delivered outputs: research dissemination/presentations of select

EPDP research studies

EPDP Program Director, Dr. Majah-Leah Ravago, presented the study entitled “Filipino 2040 Energy: Power Security and Competitiveness” at the 38th Annual Scientific Meeting of the National Academy of Science and Technology, Philippines on 14 July 2016 at the Manila Hotel. The annual meeting is considered as the most prestigious Philippine scientific conference. Dr. Ravago was also invited to present the same research study in the Undergraduate Colloquium at the De La Salle University on 5 August 2016.

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The said study is one of the thematic chapters included in NEDA’s AmBisyon Natin 2040 visioning project. She co-authored the study with EPDP Fellows, Dr. Raul Fabella, Prof. Ruperto Alonzo, Dr. Rolando Danao, and Dr. Dennis Mapa. During the quarter, EPDP also submitted to the USAID and the NEDA a copy of the engagement report on Filipino 2040. The said report provides comprehensive documentation of all activities from conception to completion of the two technical papers that EPDP contributed to the Ambisyon Natin 2040. The report includes details of meetings and presentations and likewise consolidates comments gathered from different stakeholders.

E. National Conference: Philippine Statistical Association, Inc. (PSAI)

2016 Annual Conference, 31 August – 2 September 2016

Delivered outputs: research dissemination/presentations of select EPDP

research studies

EPDP organized a session at the PSAI 2016 Annual Conference with the theme “Role of Statistics in Monitoring Progress of Social Protection,” held in The Avenue Plaza Hotel, Naga City last 31 August to 2 September 2016. The occasion was another venue for EPDP to disseminate results and generate further discussions and comments on two EPDP papers, namely, the “Links Between Energy and Poverty: Evidence of Benefits for the Poor” and “The Value Added Tax and Cost of Doing Business: What Contributes More to Electricity Tariffs in the Philippines.” These were respectively presented by EPDP fellows Dr. Dennis Mapa and Dr. Ramon Clarete.

2. Policy Development Component

As the new Administration establishes its foothold, EPDP focused its efforts in building relationships through engagement with the new set of senior officials especially in NEDA and DOE. For the Policy Component, this meant using the existing areas of policy engagements as a stepping board to engage the new GPH officials. Apart from the government, EPDP also continued its dialogues with energy stakeholders in the private sector.

A. Technical Assistance to NEDA, DOE, and the House of Representatives

i. Technical Comments on House Bill No. 2298 “An Act Amending Paragraph (J) Section 47 of Republic Act 9136 or the Electric Power Industry Reform Act of 2001” Delivered output: technical advisory/comments

On 13 September, EPDP through Dr. Orville Solon, UPSE Dean and UPecon Chairperson, received a request from Congressman Lord Allan Q. Velasco, Chairperson of the House Committee on Energy, for technical inputs on House Bill No. 2298 – “An Act Amending Paragraph (J) Section 47 of Republic Act 9136 or the Electric Power Industry Reform Act of 2001.” Dr. Solon, in a letter

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dated 26 September 2016, forwarded EPDP’s technical comments to Congressman Velasco.

Annex 5 are the exchange of letters between Congressman Velasco and Dr. Solon and EPDP’s technical comments.

ii. Impact of Higher-Blended Biodiesel on the Philippine Coconut Industry

Delivered outputs: terms of reference (TOR); inception report; technical paper; policy paper; TAN; and engagement report

In response to NEDA’s request on December 2015, stemming from a request of DOE to NEDA to quantify the economic benefits of expanding the biofuels program, EPDP commissioned a study on the impact of higher-blended biodiesel on the Philippine coconut industry. Under the Biofuels Act of 2006, the biofuel blend mandate is expected to increase upon the recommendation of the National Biofuels Board (NBB) to the DOE.

The study entitled, “Economic and Environmental Analysis of the Impact of Higher-Blended Biodiesel on the Philippine Coconut Industry” was completed by the two external consultants engaged by EPDP in FY2. The technical paper went through a peer review process to validate its technical soundness and to expound aspects needed for apt policy decision-making of key GPH officials. EPDP issued a TAN to NEDA and DOE Secretaries and other members of the EPDP Program Steering Committee (PSC) recommending the postponement of the increase in biodiesel blend from two percent (2%) to five percent (5%), at least in the short run. This recommendation is primarily due to relative world price trends in coconut oil and crude oil plus the bleak scenario for domestic coconut production. The issued TAN addressed the issues of the commissioned study, which were not sufficiently responded to by the external consultants. From the TAN, the working paper and policy brief are developed by Prof. Ruperto Alonzo, EPDP Fellow. An engagement report, documenting EPDP’s support, was also submitted to USAID and NEDA. Annex 6 is EPDP’s TAN on the increase in biodiesel blend mandate from two-percent (2%) to five-percent (5%).

iii. DOE’s Survey on the Governance Structure of Wholesale Electricity Markets

Delivered outputs: accomplished questionnaire on wholesale electricity markets in US, Europe, Asia, and South America; analysis of advantages and disadvantages of different kinds of governance structures in wholesale electricity markets; technical advisory note (ongoing)

To determine the suitable governance structure of an Independent Market Operator (IMO) in accordance with the Electric Power Industry Reform Act (EPIRA), DOE sent request letters to foreign Embassies in the Philippines to

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secure responses from relevant entities in their countries on a questionnaire about the structure of wholesale electricity markets. To offer DOE an analysis on the governance structure of an IMO for the wholesale electricity spot market (WESM), EPDP complemented this with an online research on various governance structures of wholesale electricity markets in the United States, Europe, Asia and South America. In addition, it started the analysis of the advantages and disadvantages of different types of governance structures. This will be subsequently conveyed to the new GPH officials in a form of a TAN to inform new GPH officials on policies related to the creation of an IMO. Under the EPIRA, WESM operations must be turned over to an IMO 12 months after its operations. Since WESM started operations in 2006, it is still being operated by the designated Autonomous Group Market Operator (AGMO) namely, the Philippine Electricity Market Corporation (PEMC). iv. Executive Course on Competition and Regulation in the Philippine Power

Sector Ongoing output: TAN

EPDP has started working on a TAN, targeted to the new NEDA and DOE Secretaries, which will provide recommendations in relation to the pressing issues and concerns in the transmission sector. This was prompted by the discussion among 37 energy officials during the Executive Course organized by EPDP on 16 September 2016. The training course dealt with theories of competition and regulation and their applications in the Philippines power sector. v. DOE and the Competitive Selection Process (CSP)

In view of the transition in administration, EPDP has sought reconfirmation from the relevant government partners (initially through a meeting with the ERC Commissioner) on the policy direction in relation to the independent entity tasked to administer and manage the power supply auction. The next PSC meeting in Q1 of FY3 will be another venue to determine whether this is among the GPH priorities. EPDP was previously requested to draft the terms of reference for an independent entity tasked to administer and manage the power supply auction as mandated under DOE Circular 2015-060008. The circular also mandated (i) the Competitive Selection Process (CSP) for all demand of all distribution utilities (DUs) not yet covered by long-term contracts; and (ii) the aggregation of the demand of small DUs into bid-attractive volumes. This circular was among the government’s attempts to enhance market competition in the electricity sector in order to bring down the cost of electricity.

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However, setting up the independent entity has been effectively put in abeyance after the issuance of DOE-Energy Regulatory Commission (ERC) Joint Resolution 1 (making ERC responsible for issuing regulations for the CSP implementation); ERC Resolution 13 (laying down the methods through which power supply agreements may be awarded) in October 2015; and ERC Resolution 1 (directing all DUs and generation companies to file PSAs not covered by CSP) in April 2016. These resolutions focused the priority on progressing the CSP for all demands of all DUs not yet covered by long-term contracts. While EPDP remains committed to provide the technical assistance required, it has deferred further work on the TOR pending the reconfirmation from key agencies involved in the CSP.

B. Strengthening Institutional Linkages with the Private Sector

Ongoing outputs: presentations, meeting minutes, conference collaboration

As part of EPDP’s mandate to strengthen institutional linkages and to share best practices, EPDP responded to the request of private entities such as the Meralco for a discussion on EPDP’s proposed fuel mix policy. In a different occasion, Meralco also shared with EPDP a study they conducted on the regional comparison of retail electricity tariffs, which could be relevant inputs in succeeding EPDP analyses. Further, the PEMC sought partnership with EPDP for the upcoming Philippine Electricity Summit on December 2016. The Summit is annually organized by PEMC to gather energy stakeholders in government and the private sector to tackle developments and issues in the Philippine power industry. As an identified partner for the Summit, EPDP will have a panel session, a forum to discuss and disseminate EPDP’s research papers. EPDP’s participation in forums organized by private sector entities, such as the Stratbase Albert Del Rosario Institute (ADRi) Energy Stakeholders’ Forum, also further expanded EPDP’s linkages. EPDP was subsequently invited by Senator Sherwin Gatchalian, Chairperson of Senate Committee of Energy and Economic Affairs, who was among the resource persons during the ADRi’s forum. The upcoming meeting with Senator Gatchalian is another step towards more direct engagements with key legislators and offices of the legislative branch. Beyond maintaining institutional linkages, these engagements manifest the increased credibility of EPDP with stakeholders.

3. Capacity Building Component

In Q4, more agencies participated in EPDP’s training courses, showing a stronger engagement with GPH, equally represented by the executive and legislative branches, and sector regulatory agencies. The Component’s capacity-

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building activities for the fiscal year culminated with an educational visit to a geothermal power plant.

A. Short-Term Capacity Building: Training Course on Forecasting, 11-13

July 2016 Delivered outputs: course modules and training

EPDP conducted the three-day Training Course on Forecasting last 11-13 July 2016 at the Microtel by Wyndham, Diliman, Quezon City. Thirty-two (32) technical officers and employees – 21 male and 11 female – from the following agencies attended the training course:

1. DOE 2. NEDA 3. ERC 4. National Electrification Administration (NEA) 5. National Power Corporation (NPC) 6. Department of Trade and Industry (DTI) 7. PEMC 8. Philippine Statistics Authority (PSA)

Resource persons included professors Dr. Rolando Danao and Dr. Geoffrey Ducanes of the UPSE; Dr. Dennis Mapa, Mr. Manuel Leonard Albis, Mr. John Carlo Daquis, and Mr. Michael Dominic Del Mundo of the UP School of Statistics; Mr. Richard Emerson Ballester of NEDA; and Ms. Marietta Quejada of DOE. The training course dealt with the fundamentals of forecasting methods, processes, and software systems. The training course consisted of lecture-discussions, guided group exercises, and case presentations. Building on earlier mid-level training courses on forecasting, this deepened the knowledge and skills of participants from eight (8) government agencies on Eviews, another commonly used econometric software for forecasting. Based on the four-part evaluation accomplished by the participants, on a scale of 1 (Poor) to 5 (Excellent), the training course was rated as shown below in Table 4. Table 4. Rating of the Training Course on Forecasting

Key Areas Average Rating

Notes

Overall Rating 4.56 out of 5 (Very Good to Excellent)

59.38% of the respondents gave the training course an overall rating of 5 (Excellent), 37.50% gave an overall rating of 4 (Very Good), and 3.13% gave an overall rating of 3 (Good).

Achievement of Objectives

4.63 out of 5 All respondents believed that the training course achieved its objectives. 62.50% strongly agreed (score of 5) and 37.50% agreed (score of 4).

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Notes

Relevance and Usefulness

4 out of 5 Most respondents rated the training course as relevant to their current function and will be useful for their work. 25% of the respondents strongly agreed (score of 5) and 50% agreed (score of 4). Meanwhile, 25% neither agreed nor disagreed (score of 3).

Content and Delivery

4.16 out of 5

Administrative and Logistical Arrangements

4.62 out of 5

A terminal report on the training course is enclosed as Annex 7.

B. Short-Term Capacity Building: Executive Course on Competition and

Regulation in the Philippine Power Sector, 16 September 2016 Delivered outputs: course modules and training

EPDP conducted the “Executive Course on Competition and Regulation in the Philippine Power Sector” last 16 September 2016 at the Oakwood Premier – Joy Nostalg Center, Ortigas Center, Pasig City. Thirty-seven (37) officials – 17 male and 20 female – from the following agencies attended the training course:

1. DOE 2. NEDA 3. ERC 4. PCC 5. NEA 6. NPC 7. DTI 8. PEMC 9. PSA 10. Senate Economic Planning Office/Office of Senator Sherwin T. Gatchalian 11. Joint Congressional Power Commission/Congressional Policy and Budget

Research Department Resource persons included EPDP Fellow and National Scientist Dr. Raul Fabella, ERC Commissioner Gloria Victoria Yap-Taruc, and PCC Commissioner Johannes Benjamin Bernabe. The training course dealt with theories of competition and regulation, and their applications in the Philippine power sector. The course also served as a platform for discussions on striking a balance between competition and regulation policies; Philippine electric power industry regulations vis-à-vis the EPIRA implementation; and the importance of a competition law.

20

Based on the four-part evaluation accomplished by the participants, on a scale of 1 (Poor) to 5 (Excellent), the training course was rated as shown in Table 5 below. Table 5. Rating of the Executive Course


Notes

Overall Rating 4.27 out of 5 (Very Good)

30% of the respondents gave the executive course an overall rating of 5 (Excellent), 66.6.7% gave an overall rating of 4 (Very Good), and 3.33% gave an overall rating of 3 (Good).


4.27 out of 5 Most respondents believed that the executive course achieved its objectives. 30% strongly agreed (score of 5) and 66.67% agreed (score of 4). Meanwhile, 3.33% neither agreed nor disagreed.


4 out of 5 Most respondents rated the executive course as relevant to their current function and will be useful for their work. 43.33% of the respondents strongly agreed (score of 5) and 40% agreed (score of 4). Meanwhile, 16.67% neither agreed nor disagreed (score of 3).


4.26 out of 5


4.47 out of 5

A terminal report on the executive course and session highlights are enclosed as Annex 8.

C. Long-Term Capacity Building: Faculty Research Grant

Outputs: research grant contract as instrument (delivered); research paper, policy brief, and lecture/brown-bag session (ongoing); expertise in the field of energy research (continuous)

In line with its objective of producing a pool of energy experts that the GPH may tap in the future, EPDP provides research grants to encourage members of the academe to undertake energy-related research and other significant output that will be of the highest standards and with excellent socio-economic potential. In relation to this, EPDP supports in further building the capacity of the UP School of Economics (UPSE) to establish a reputation as “good in energy policy.” A research grant was given to Dr. Renato E. Reside of UPSE for his paper provisionally entitled “The Impact of Energy Prices on Consumption in

21

the Philippines.” This will form part of EPDP’s second round of research studies.

D. Long-Term Capacity Building: Educational Visit to the MakBan

Geothermal Power Plant Outputs: educational visit (delivered), expertise in the field of energy research (continuous)

The EPDP organized an educational visit to the MakBan Geothermal Power Plant last 19 September 2016 in Bae, Laguna. The educational visit consisted of a two-hour orientation seminar and lecture by AP Renewables, Inc. and a two-hour tour of the Cleanergy Center and the power plant. Fourteen (14) participants – 7 male and 7 female – composed of EPDP fellows, graduate students/research assistants, and EPDP staff joined the educational visit. The educational visit provided the participants with a holistic appreciation of the country’s electric power industry, and with practical understanding of geothermal power plant operations and maintenance. The tour of the power plant also demonstrated concrete applications of theories and concepts related to energy, resource, and environmental economics. Based on the three-part evaluation accomplished by the participants, on a scale of 1 (Poor) to 5 (Excellent), the educational visit was rated as shown in Table 6 below. Table 6: Rating of the Educational Visit to the MakBan Geothermal Power Plant


Notes

Overall Rating 4.86 out of 5 (Excellent)

All respondents gave the learning activity an overall rating of 5 (Excellent). 85.71% gave the learning activity an overall rating of 5 (Excellent) and 14.29% gave an overall rating of 4 (Very Good).


5 out of 5 All respondents believed that the learning activity achieved its objectives.


4.71 out of 5 All respondents rated the learning activity as relevant to their current function and will be useful for their work. 71.43% of the respondents strongly agreed (score of 5) while 28.57% of the respondents agreed (score of 4).


4.88 out of 5

22


Notes

Administrative and Logistical and Arrangements

5 out of 5

E. Long-Term Capacity Building: Quest: A Research WorkshopDelivered output: orientation on possible energy research

On 26 September 2016, Dr. Majah-Leah Ravago, EPDP Program Director was invited to speak at Quest: A Research Workshop at the UP School of Statistics. Dr. Ravago shared with the undergraduate students EPDP’s key priority areas and research agenda and offered numerous guidelines as to how to undertake research on specific energy topics. During the open forum, Dr. Ravago responded to questions from students on data and their topic of interest. This event provided EPDP a platform to encourage and to spark interest among students to take up energy research.

4. Communications Component

This quarter, the Communications Component focused on polishing thewebsite, expanding the resource center databank, packaging EPDP productsand offering continuous support to other EPDP components. In addition tomaximizing digital platforms to cut costs, the last quarter of the fiscal year wasabout adjustments within the component to prepare for the dip in budget andmanpower come FY 3. Given the crosscutting nature of the CommunicationsComponent’s main tasks, efforts to work more efficiently with fewer resourceswithin the component and with others have become a priority.

A. EPDP Resource Center and Enhancement of WebpageOngoing outputs: enhanced website and EPDP resource center

After the completion of the EPDP website in Q3, the first weeks of Q4 were dedicated to troubleshooting and debugging, which necessitated updating the website’s content management system WordPress to its latest version in order to accommodate further changes without producing more errors. After this, the download monitor became functional. This means that data on the number of times a product has been downloaded and by whom can now be determined.

Databank expansion has been fast-tracked and a training session will be done by the web developer to help the Communications and Research Components manage the website and resource center with minimal technical assistance after the fiscal year ends. The goal is for the databank to be fully functional and structurally complete in time for the next PSC meeting. The databank will house a wide array of data on economics, energy, environment and natural disaster. Visitors will be able to download tables and create graphs according to the required information. This extend EPDP’s commitment to evidence-

23

based research and its support to energy scholars even beyond the life of the Program. As of 27 September 2016, Google Analytics showed that the EPDP website has had 1,227 users and 14,042 page views since 11 May 2016, when Analytics was installed. These translate to 200% increase of new visitors and almost 300% increase of viewers since Q3. Annex 9 captures the number of EPDP users and visitors between 11 May 2016 to 27 September 2016.

B. Communications-specific products and activities

Delivered outputs: newsletter, social media updates/posts

Newsletter vol. 2 no. 1, the fifth since the Program started in 2014, was released in July 2016 through the EPDP’s website and Facebook page. It was also emailed to over 500 recipients in the Program’s mailing list. The newsletter can be found at http://www.upecon.org.ph/epdp/wp-content/uploads/2016/07/Newsletter-5-Single-Paged-050716.pdf Annex 10 is EPDP Newsletter Vol. 2 No. 1. In addition to the website, the Component continuously maintains and manages the social media accounts of EPDP, expanding the potential reach of EPDP to include those that are not captured by the mailing list or are more accustomed to social media. Through these platforms, more stakeholders are informed about products and activities across the various EPDP components. As of 27 September 2016, EPDP directly reached at least 1,012 followers on Facebook, Twitter, LinkedIn, and Instagram. Even with only 634 likes on Facebook, EPDP page activities can reach almost three times the number of individuals. For example, Facebook insights show that the number of people reached by EPDP’s Facebook activities went up to 1,787 on 21 July 2016, the highest for the quarter, as shown on Figure 2 below. Figure 2. EPDP’s Reach in Q4

http://www.upecon.org.ph/epdp/wp-content/uploads/2016/07/Newsletter-5-Single-Paged-050716.pdf

http://www.upecon.org.ph/epdp/wp-content/uploads/2016/07/Newsletter-5-Single-Paged-050716.pdf

24

The Component also regularly monitors energy-related content in local news. These articles are sent weekly via email to EPDP fellows, researchers, and research assistants, and counterparts in USAID.

C. Communications support

Delivered outputs: photo documentations, collaterals, copy edited materials

The Communications Component continually supports other components through the photo documentation of activities; composition, design, and production of collaterals such as posters, banners, certificates, and invitations; social media and online dissemination of activities and products; post-activity updates on social media; and writing, proofreading, and/or copy editing of products and report contents. For Q4, the Component documented eight (8) EPDP activities, including lecture series sessions, training courses, a national conference, a research workshop, and an educational trip; copy edited internal documents, letters, proposals, and the Technical Advisory Note on biodiesel. The Component also packaged two (2) working papers and eight (8) policy briefs for dissemination.

D. EPDP in the News

As another manifestation of the credibility of EPDP in the energy sector, it has started to gain the interest of mainstream media. One of its studies has been the content of an article in Business World Online. The mainstream media’s pick of EPDP-related studies also opens up opportunities to expand the reach and broadly disseminate EPDP’s analyses and policy recommendations.

i. UNTV – Serbisyong Kasangbahay, 5 August 2016

On 5 August 2016, EPDP was featured on UNTV's Serbisyong Kasangbahay. Dr. Majah Ravago and the show's hosts discussed topics crucial not only to environmentally-sound energy development but also to the country's growth. The video can be viewed at: https://www.facebook.com/energypolicyanddevelopmentprogram/videos/1258998510778458/

ii. Business World Online – “Eliminate red tape in the Philippine energy sector”

by Bienvenido S. Oplas, Jr., 15 September 2016

The opinion piece by Mr. Oplas talked about EPDP’s research study “The Value Added Tax and Red Tape: What Contributes More to Electricity Tariffs in the Philippines,” authored by Dr. Ramon Clarete, an EPDP fellow. This article came out after the 8 September 2016 EPDP lecture on the study, which Mr. Oplas attended. The article can be accessed at: http://www.bworldonline.com/content.php?section=Opinion&title=eliminate-red-tape-in-the-philippine-energy-sector&id=133467

http://www.bworldonline.com/content.php?section=Opinion&title=eliminate-red-tape-in-the-philippine-energy-sector&id=133467

http://www.bworldonline.com/content.php?section=Opinion&title=eliminate-red-tape-in-the-philippine-energy-sector&id=133467

25

5. Cross-Cutting

This section captures the activities that are being carried out across various components, contributing to multiple Program objectives or having across-the-board implications. These include high-level meetings, monitoring and evaluation, gender, and lecture series. In Q4, the Program had preliminary meetings with the new set of senior officials in NEDA and DOE as part of its efforts to establish relationships with the new set of GPH officials. The Performance Monitoring and Evaluation Plan (PMEP), Performance Indicator Reference Sheet (PIRS), and the Gender Action Plan were also updated. Meantime, the lecture series continues to build capacities, offer venues for multi-stakeholders interaction, and disseminate research.

A. Engagements with senior GPH officials

Output outputs: meeting highlights

Led by Dr. Majah-Leah Ravago, Program Director, EPDP met with Socio-economic and Planning Secretary Ernesto Pernia on 8 August 2016. This was a follow through of the preliminary meeting with Secretary Pernia prior to his official assumption as NEDA Director-General and Socio-economic and Planning Secretary. Secretary Pernia is a professor emeritus of UPSE. From this meeting, Secretary Pernia linked EPDP with DOE Secretary Alfonso Cusi. EPDP subsequently had a courtesy call on Secretary Cusi on 12 August 2016. DOE Undersecretaries Felix William Fuentebella and Jess Posadas, Assistant Secretary Robert Uy, Director Jesus Tamang, and two officials from NEA and Philippine National Oil Company (PNOC) also joined the meeting. EPDP shared with both Secretaries the initial copies of the policy briefs of completed research studies to serve as additional briefing materials on key issues in the energy sector.

B. EPDP Lecture Series

Outputs: lectures (delivered), expertise in the field of energy research (continuous)

Launched in March 2016, the lecture series offers a mechanism to support various program objectives. This contributes in (i) building short- and long-term capacities through providing holistic understanding of the country’s electric power industry; (ii) engaging with government, practitioners, professionals and other stakeholders on EPDP research studies; and (iii) disseminating the research studies to the public and raising their awareness on various energy-related issues. The lecture series also contributes towards the establishment of academic and policy programs specific to the energy sector in institutions of tertiary education. By bringing in energy experts and professionals, the EPDP aims to

26

integrate energy concepts into regular graduate and undergraduate courses in economics, and encourage more policy research work. In Q4, EPDP organized three (3) lectures, as follows:

i. Philippine Energy Planning (PEP) Part 2: Transmission Development Plan

(TDP) and Distribution Development Plan (DDP) 25 August 2016

This lecture discussed how the TDP and DDP were drafted by the NGCP and DOE, respectively. The TDP details transmission grid expansion and upgrading projects, while the DDP is a consolidation of distribution utilities’ plans. Both development plans serve as inputs to the DOE’s annual Philippine Energy Plan. This lecture was delivered by Engr. Redi Allan Remoroza of the National Grid Corporation of the Philippines and Mr. Rodel Limbaga of the Department of Energy. 17 participants – 9 male and 8 female – from government, the academe, and the private sector attended the lecture.

ii. Value Added Tax and Cost of Doing Business: What Contributes More to

Electricity Tariffs in the Philippines 08 September 2016

The lecture presented a comparison of the effects of value-added tax (VAT) and red tape on electricity tariffs in the Philippines. A breakdown of the general equilibrium model used, as well as a view on the realities associated with VAT and red tape, was presented. The lecture portrayed the electricity industry as part of an economic system, not to be taken as an independent factor. The lecture correspondingly presented the effects of various industry policies examined on electricity prices and government revenues. This lecture was delivered by Dr. Ramon Clarete, EPDP Fellow. 32 participants – 15 male and 17 female – from government, the academe, and the private sector attended the lecture.

iii. The Role of Power Prices in Structural Transformation: Evidence from the Philippines 21 September 2016

The lecture discussed the effects of high electricity prices on the growth and composition of the manufacturing sector in the Philippines. It covered the causes of deindustrialization, such as globalization, political instability, and protectionism, and the impacts of premature deindustrialization to the Philippine economy. Cross-country comparisons were made to further illustrate that high electricity rates may accelerate deindustrialization. This lecture was delivered by EPDP Fellow Dr. Arlan Brucal and EPDP Researcher Mr. Jan Carlo Punongbayan.

27

20 participants – 13 male and 7 female – from the academe and the private sector attended the lecture.

Table 7 below summarizes the four-part evaluation accomplished by the participants for the four lectures, on a scale of 1 (Poor) to 5 (Excellent).

Table 7. Summary Ratings of the EPDP Lectures


Phil. Energy Planning Part 2

VAT and Cost of Doing Business

Role of Power Prices


4.45 out of 5 (Very Good to Excellent)

4.47 out of 5 (Very Good to Excellent)


4.27 out of 5 4.55 out of 5 4.55 out of 5







Annex 11 contains more details of the evaluations.

C. Performance Monitoring and Evaluation PlanDelivered outputs: updated PMEP and PIRS

The team engaged with the monitoring and evaluation specialist in updating the PMEP and the PIRS to capture the needed modifications, including additional indicators and activities that were no longer pursued following information on the FY3 budget cut. Systems have also been simplified in aid of the transition to a reduced human resource by FY3 when budget will be 75% lower than what was initially anticipated. The M&E specialist position will be dissolved. The function will be taken on by the Deputy Program Director and two part-time program assistants.

D. Gender Action PlanDelivered outputs: updated Gender Action Plan, draft technical paper,peer review comments

The EPDP updated the gender action plan, a component of the PMEP. The main consideration was the limited technical support to progress the implementation of the action plan. It had to abort the plan to get a gender specialist to mentor and assist the program given the budget cut.

EPDP will seek out collaboration with DOE’s for gender collaboration and maximize the opportunity presented by the recently completed DOE Gender Toolkit for the Energy Sector.

28

In relation to the research work on “Gender, Energy, and Weather Shocks,” EPDP already received a draft technical paper from Dr. Connie Bayudan-Dacuycuy on 25 July 2016. The next iteration of the technical paper is expected to incorporate and address the peer review comments conveyed to Dr. Dacuycuy on 31 August 2016.

IV. Program Management

1. Work Plan for Fiscal Year 3

Consistent with the provisions of the grant agreement, EPDP drew up and submitted a proposed Work Plan for FY3 to USAID on 30 August 2016. The proposed Work Plan took into account the key accomplishments of the Program in FY2 and the reduced budget in FY3. It reflected the set of activities presented to and endorsed by the PSC on 20 May 2016, which were recalibrated following the budget cut announcement. In addition, the Work Plan identified strategies to maximize the impact of reduced resources, and prioritized the activities that were unfunded to guide and facilitate the planning on the use of any additional funding that may come online.

The updated PMEP and PIRS were also submitted along with the proposed Work Plan for FY3.

2. Human Resource

As a result of the reduced budget, EPDP management decided to consolidate and dissolve certain positions for FY3. The policy and capacity building associate positions were collapsed into one associate position. One of the two program assistant positions was converted to accommodate the functions of the policy and capacity building administrative assistants. The communications administrative assistant position was also dissolved.

This decision brought down the number of positions from 19 in FY2 Q4 to 14 in FY3. Of the 14 positions (excluding the Advisors and Data Management Unit Manager), nine (9) and five (5) are full-time and part-time, respectively. The new configuration was conveyed to the team on 2 September 2016 after a formal endorsement of the core ManCom.

EPDP saw the departure of five (5) personnel by end September. One completed her contract in July while the other four opted to complete their contracts by 30 September 2016. This left one (i.e. Capacity Building and Policy Components Associate) of the 14 positions vacant. EPDP then initiated the recruitment process to fill the position. A new personnel member will be selected by October 2016.

29

These changes are assessed necessary due to the significant budget cut. Nonetheless, these will entail a degree of adjustment to all members of the team. In anticipation, the Work Plan for FY3 already factored in this limited resource.

Figure 3: EPDP Team in FY3 (as of 30 September 2016)

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Annexes

Annex 1 Performance Indicator Tracking Table (as of 30 September 2016)

Annex 2 Photo documentation of EPDP FY2 Quarter 4 activities

Annex 3 EPDP-International Food Policy Research Institute workshop program and discussion note on the research collaboration

Annex 4 Minutes of the meeting with US Energy Agencies

Annex 5 Exchange of letters between Congressman Lord Allan Velasco and Dr. Orville Solon (Dean of University of the Philippines - School of Economics) and EPDP’s technical comments

Annex 6 Technical advisory note on the increase in biodiesel blend mandate

Annex 7 Terminal report on the Training Course on Forecasting

Annex 8 Terminal report on the Executive Course on Competition and Regulation in the Philippine Power Sector and session highlights

Annex 9 EPDP users and visitors between 11 May 2016 to 27 September 2016

Annex 10 EPDP Newsletter Vol. 2 No.1

Annex 11 Evaluations of the lectures

Annex 1. Performance Indicator Tracking Table (PITT) for FY2 (as of 30 September 2016) Indicators in red fonts are standard USAID indicators

Year Value Target Rationale Planned Actual Q1 Q2 Q3 Q4

Indicator G: Government plans/policy/frameworks/

implementation guidelines/administrative procedures

with EPDP inputs issued/adopted or implemented

2014 0 0 2 0 0 2 0

Indicator PP: Number of EPDP-supported research

outputs that served as inputs to draft government

plans/policy frameworks/implementation

guidelines/administrative procedures

2014 0 Some results from

previous year's

activities but

uncertainty due to new

government

2 2 0 0 2 0

Indicator SP1: Number of EPDP-supported research

outputs with NEDA and DOE commitment to utilize in

the formulation, implementation and monitoring &

evaluation of energy-related policies, breakdown by:

2014 0 Uncertainty due to new

government

3 4 0 1 2 1

a) Demand-driven outputs - Research 0 0 0 0 0

b) Demand-driven outputs - Just in-time 4 0 1 2 1

c) Supply-driven outputs 0 0 0 0 0

Indicator SP1-O1.1 Number of government requests

received for EPDP policy research support or technical

assistance

2014 0 Given EPDP has already

established

relationship, EPDP

anticipates 6 additional

research requests

6 51 1 49 0 1

Indicator SP1-O1.2 Number of key priority areas

(KPAs) cumulative coverage out of 5 identified KPA in

the approved research agenda

2014 0 Research workshop

conducted by Q3 FY2

5 3 3 3 3 3

Indicator SP1-O1.3: Number of days of USG funded

technical assistance in technical energy fields provided

to counterparts or stakeholders

2014 0 274 218 39 87 79 13

Indicator SP1-O1.4: Number of days of USG funded

technical assistance in climate change provided to

counterparts or stakeholders

2014 0 193 193 67 87 39 0

Goal: Decision-making environment to support cost-effective and clean

energy development improved

Project Purpose: GPH capacity to formulate coherent and evidence-based policies and strategies for cost-effective and

environmentally-sound energy development strengthened

Sub-Purpose 1: Improved GPH capacity to guide and inform energy-related policy and practice through enhanced research

Sub-Purpose 1 Output 1: Institutional platform to provide evidence-based advice and inputs to energy policy and strategies is

established

Sub-Purpose 2: Increased capacity of GPH to undertake and sustain coherent and evidence-based energy policy & decision-

making

Logical Framework Narrative Summary and

Indicators

Baseline FY2 FY2 ACTUAL (Quarterly)



Indicators


Indicator SP2.1: Number of institutions with improved

capacity to address climate change issues as a result of

USG assistance

2014 0 At the minimum: NEDA,

DOE, and ERC

3 11 0 0 0 11

a. clean energy capacity 2014 0 3 11 0 0 0 11

b. cross cutting: climate change capacity (including

reduction of GHG emissions)

2014 0 3 11 0 0 0 11

Indicator SP2.2 Number of institutions with improved

capacity to address other energy issues as a result of

USG assistance

3 20 2 0 7 11

Indicator SP2-01.1: Number of person hours of

training completed in climate change as a result of

EPDP/USG assistance, breakdown by:

2014 0 Activity will support 1

day executive training

and two 3-day mid-

level training. Clean

energy subject to

availability of resource

person.

52 37 0 0 0 37

a. clean Energy men 2014 0 17 0 0 0 17

b. clean Energy women 2014 0 20 0 0 0 20

c. cross-cutting climate change men 2014 0 21 17 0 0 0 17

d. cross-cutting climate change women 2014 0 31 20 0 0 0 20

Indicator SP2-O1.2: Number of person hours of

training completed in other energy topics as a result of

EPDP/USG assistance, breakdown by:

2014 0 Activity will support a 1

day executive training

and two 3-day mid-

level training

1328 2360 432 0 864 1064

a. Energy men 2014 0 531 1264 168 0 456 640

b. Energy women 2014 0 797 1096 264 0 408 424

Indicator SP2-O1.3: Percentage of capacity building

participants that find the training/workshop “relevant”

and/or “satisfactory”

2014 0 Refinements

undertaken and new

field may included

based on demand;

refined targets based

on FY1 experience

70% 82.41%

(relevant);

100%

(satisfactory)

82.35%

(relevant);

100%

(satisfacto

ry)

NA 85.71%

(relevant);

100%

(satisfacto

ry)

79.17%

(relevant);

100%

(satisfacto

ry)

Indicator SP2-O2.1: Number of faculty or teaching staff

whose qualifications are strengthened through

EPDP/USG-supported tertiary education program,

breakdown by:

2014 0 Activity will support at

the minimum

additional 6 faculty or

teaching staff

8 74 0 45 12 17

a. Male 2014 0 5 47 0 30 8 9

b. Female 2014 0 3 27 0 15 4 8

Target refined based on

FY 1 experience; more

women involved: 40%

men, 60% women

Target refined based on

FY 1 experience; more

women involved: 40%

men, 60% women

Sub Purpose 2 Output 2: Partnership with other institutions in place

Sub-Purpose 2 Output 1: Increased training of GPH officials and staff in the use of research/analytical tools for energy policy

planning & decision-making



Indicators


Indicator SP2-O2.2: Number of students or energy

practitioners whose qualifications are strengthened

through EPDP/USG-supported program, breakdown by:

2014 0 24 447 1 179 191 76

a. Male 2014 12 210 1 71 95 43

b. Female 2014 12 237 0 108 96 33

c. Sector: private sector 2014 0 88 0 15 49 24

d. Sector: academe 2014 22 269 1 128 115 25

e. Sector: government 2014 2 90 0 36 27 27

f. Specialization: clean energy 2014 67 0 1 62 4

g. Specialization: climate change 2014 11 0 0 7 4

h. Specialization: other energy 2014 373 1 178 122 72

Indicator SP2-O2.3: Number of U.S.-host country joint

research projects

2014 0 One other additional

institutional linkages

identified.

3 4 2 0 2 0

Indicator SP2-O2.4: Number of energy-related

educational activities supported by EPDP, breakdown

by:

2014 0 The activity will

support 2 class

conferences and 2

educational visits

4 16 0 5 7 4

a. clean energy 3 0 0 2 1

b. climate change 1 0 0 0 1

c. other energy 13 0 5 5 3

Indicator SP2-O2.5: Number of USG-supported tertiary

programs with curricula revised with private and/or

public sector employers’ input or on the basis of market

research

2014 0 Revision of curriculum

in UP requires a lengthy

review and approval

process

0 0 0 0 0 0

Indicator SP2-O2.6: Number of education

program/subjects/modules that incorporated energy-

related topics as a result of USG assistance

2014 0 0 3 2 0 0 1

Indicator SP3.1:Number of presentations in national &

international conferences/seminars or citations in

media, public and legislative discussions of EPDP-

supported research outputs.

2014 0 EPDP will release 1

policy brief per

research paper at

minimum.

5 41 6 20 4 11

Indicator SP3.2: Number of policy

reforms/laws/regulations/administrative procedures

drafted and presented for public/stakeholder

consultation to enhance sector governance and/or

facilitate private sector participation and competitive

markets as a result of USG assistance

2014 0 Some research studies

are completed but

uncertainty due to new

government

0 0 0 0 0 0

Sub-purpose 3: Increased capacity to share results of energy-related and complementary economic research

Subpurpose 3 Output 1: Increased exposure of researchers to scientific community; researchers are increasingly informed

regarding developments in the energy sector



Indicators


Indicator SP3-O1.1: Number of research outputs

developed with EPDP assistance submitted to peer-

reviewed journals

2014 0 Minimum target 1 0 0 0 0 0

Indicator SP3-O1.2: Number of EPDP-supported

researchers and staff participating in local and

international energy-related conferences or trainings,

breakdown by

2014 0 Available budget 12 66 10 21 9 26

a. Male 6 34 5 13 3 13

b. Female 6 32 5 8 6 13

Indicator SP3-O2.1: Number of EPDP-led

conferences/stakeholder fora/roundtable discussions

held, breakdown by specific stakeholders targeted,

6 7 1 3 2 1

a. government decision makers 4 4 0 2 0 2

b. private sector 1 2 1 0 1 0

c. others - multi-sector 1 2 0 1 1 0

Indicator SP3-O2.2: Number of stakeholders that

participated in conferences/stakeholder

fora/roundtable discussions, breakdown by:

Estimated based on

participation in

conference (150),

stakeholders fora (60,)

and consultation (20)

230 235 3 209 17 6

a. Male 138 135 3 122 8 2

b. Female 92 100 0 87 9 4

c. Sector: Government 160 118 0 104 8 6

d. Sector: Private 40 81 3 71 7 0

e. Sector: Others 30 36 0 34 2 0

Indicator SP3-02.3: Number of EPDP products

downloaded or requested

2014 0 More materials become

available on the

website.

5 10 0 3 6 1

Indicator SP3-02.4: Number of private stakeholders

that served as a technical resource to EPDP-supported

activities

2014 0 Average based on FY1 2 24 0 16 4 4

Indicator SP3-02.5: Number of cumulative website

visitors

2014 0 Website fully

functional.

(as of June 30)

50 1318 0 0 409 909

Indicator SP3-02.6: Number of platforms for

distribution of EPDP products

2014 0 EPDP products

disseminated through

various platforms:

social media, direct

mail, email, mass

media, and online.

5 5 4 5 4 5

Subpurpose 3 Output 2 Increased engagement with stakeholders for raising awareness and building understanding

2014 0 The activity will

support 1 conference +

3 forum + 2

consultations

Additional for a

included due to new

government.2014 0

Assumed 60% male,

40% female

Conference will also

attract academe from

other countries



Indicators


* Indicators are for the entire program period.*For the definitions/details, please refer to the Performance Monitoring and Evaluation Plan (PMEP) and Performance Indicator Reference Sheet (PIRS).

Training Course on Forecasting (11-13 July 2016)

EPDP-IFPRI Workshop in Washington, D.C. (19 July 2016)

Presentation of the Filipino 2040 Study during the 30th NAST Meeting (14 July 2016)

Annex 2. Photo documentation of EPDP FY2 Quarter 4 activities

Meeting with NEDA (08 August 2016)

Lecture on Philippine Energy Planning Part 2 (Session 6 -- 25 August 2016)

Lecture on “The Value Added Tax and Red Tape: What Contributes More to Electricity Tariffs in the Philippines” (Session 7 -- 08 September 2016)

Executive Course on Competition and Regulation in the Philippine Power Sector (16 September 2016)

Educational Tour to Makban Geothermal Power Plant

Lecture on “The Role of Power Prices in Structural Transformation: Evidence from the Philippines” (Session 8 -- 21 September 2016)

Quest: A Research Workshop (26 September 2016)

Annex 3. EPDP-International Food Policy Research Institute workshop program and discussion note on the research collaboration

ENERGY, WATER, FOOD, AND COMPETITION POLICIES EPDP-IFPRI Workshop

July 19-20, 2016 | IFPRI Headquarters

PROGRAM

DAY 1 (July 19)

Welcome Remarks Mark Rosegrant International Food Policy Research Institute (IFPRI)

Opening Remarks Majah-Leah Ravago Energy Policy and Development Program (EPDP)

Gloria Steele United States Agency for International Development (USAID)

09:00am-09:05am

09:05am-09:10am

09:10am-09:15am

Photo Opportunity 09:15am-09:20am EWF Presentations from IFPRI and EPDP Morning Session 1

Energy, Water and Food under Climate Change: Tradeoffs and Policies Mark Rosegrant, IFPRI

Energy-Water-Food Policy Issues in the Philippines: Managing

Water Storage

Majah-Leah Ravago and James Roumasset, EPDP

Comments: Yusuke Kuwayama, Resources for the Future (RFF)

Open Discussion

09:20am-09:40am

09:40am-10:00am

10:00am-10:15am

10:15am-10:35am Coffee Break 10:35am-10:45am

Morning Session 2

An Assessment of the Philippine Power Sector Policy Landscape Ruperto Alonzo, EPDP

Understanding Increasing Power Demands in the Philippines Geoffrey Ducanes, EPDP

Comments: Bradford Simmons, U.S. Department of State

Open Discussion

10:45am-11:05am

11:05am-11:25am

11:25am-11:40am

11:40am-12:00nn

Lunch 12:00nn-01:00pm Afternoon Session 1 Exploring implications of energy use in agriculture for environmental sustainability: Insights from IFPRI’s global water quality assessment Hua Xie, IFPRI

Philippine’s sustainable energy and low carbon development strategies: A prototype evaluation using the TIMES model Alam Mondal, IFPRI

Comments: Geoffrey Ducanes, EPDP

Open Discussion

01:00pm-01:20pm

01:20pm-01:40pm

01:40pm-01:55pm

01:55pm-02:15pm Coffee Break 02:15pm-02:25pm Afternoon Session 2

Role of Water in the Agriculture and Power Sectors in the Indus River Basin, Pakistan Claudia Ringler, IFPRI

Food, Energy, and Competition Policies Arsenio Balisacan, Philippine Competition Commission

Comments: Jayne Somers, USAID Asia Bureau

Open Discussion

02:25pm-02:45pm

02:45pm-03:05pm

03:05pm-03:20pm

03:20pm-03:40pm End of Day 1

DAY 2 (July 20)Morning Session 1

Water-Energy-Food Nexus in Large-Scale Irrigation Systems: Insights from Pakistan Dawit Mekonnen, IFPRI

Water-Energy-Food Nexus modeling: The case of Egypt Perrihan Al-Riffai, IFPRI

Comments: James Roumasset, EPDP

Open Discussion

08:00am-08:20am

08:20am-08:40am

08:40am-08:55am

08:55am-09:10am Morning Session 2

The Economics of Managing Scarce Water Resources Yusuke Kuwayama, RFF

Comments: Mark Rosegrant, IFPRI

Open Discussion

09:10am-09:30am

09:30am-09:45am

09:45am-10:00am Coffee Break 10:00am-10:10am

Morning Session 3 (EPDP and IFPRI team)

EPDP-IFPRI Research Collaboration Introduction and Setting the Objective Presentation of Project Concept

Discussion of Collaboration/Moving Forward/Team Members

10:10am-10:20am

10:20pm-12:00pm Working Lunch 12:00pm-01:00pm

Reactions from PH government Arsenio Balisacan, PCC

Closing remarks Mark Rosegrant, IFPRI

01:00pm-01:15pm

01:15pm-01:30pm

Masters of Ceremonies: Rowena Valmonte-Santos, IFPRI

J. Kathleen Magadia, EPDP

ENERGY POLICY AND DEVELOPMENT PROGRAM

Meeting with IFPRI 20 July 2016, Wednesday, IFPRI Headquarters, Washington, DC Meeting Notes Attendees:

1. Dr. Majah-Leah Ravago, EPDP Program Director

2. Dr. James Roumasset, EPDP Program Advisor

3. Prof. Ruperto Alonzo, EPDP Policy Component Advisor

4. Dr. Geoffrey Ducanes, EPDP Fellow

5. J.Kathleen Magadia, EPDP Research Coordinator

6. Shirra de Guia, EPDP Research Assistant

7. Chairman Arsenio Balisacan, Philippine Competition Commission

8. Dr. Mark Rosegrant, IFPRI Division Director

9. Dr. Claudia Ringler, IFPRI Deputy Division Director

10. Dr. Dawit Mekonnen, IFPRI Research Fellow

11. Dr. Alam Mondal, IFPRI Research Fellow

12. Rowena Valmonte-Santos, IFPRI Senior Research Analyst

13. Dr. Nicostrato Perez, IFPRI Senior Scientist

14. Angga Pradesha, IFPRI Research Analyst

Time: 10:30am - 12:00 nn

Agenda: EPDP-IFPRI Research Collaboration

SUMMARY OF DISCUSSIONS

Salient Points

- EPDP will be in charge of the theoretical aspect of the research while IFPRI will take care

of the modelling

- Involvement of NEDA and DOE is important in the early stages of the research

collaboration to enhance the possibility of uptake from both agencies

- Before the capacity building seminar (on modelling), another internal meeting between

EPDP and IFPRI is suggested to ensure that both are on the same page

- The output of the collaboration is two-fold: (1) research; (2) capacity-building for

government (DOE and NEDA) and students of UP School of Economics

- Filipino 2040 / Ambisyon 2040 papers by EPDP to be used as anchor to the development

of the modeling

Other Points Raised

- Look at potential gains from the policies (e.g. improved efficiency in the irrigation sector,emission taxes, electric wholesale market, unfreezing land market, etc) and costs of ill-

formed policies (e.g. 30-30-30 fuel mx, FIT, 70% carbon emissions)

- Determine how the nexus can contribute to high quality employment / labor (look at skilledvs unskilled)

- Determine how to improve investment coordination

- Results must be intuitive and timing is very important (get some results out within the yearso it can be shared with agencies in time for the drafting/release of the Philippine

Development Plan. Consider releasing a technical advisory that will introduce the nexus idea

in the planning process.)

- IFPRI to look at the opportunity to put together a regional study built on the EPDP-IFPRIcollaboration (e.g. adding a chapter on Vietnam or Myanmar) to get funding from USAID Asia

Bureau (c/o GSteele)

- Conduct a training/seminar on CGE and the other models used in the project to better

understand the modelling process.

- The TIMES model will use the electricity consumption projections from RDanao and

GDucanes' paper.- EPDP will engage a water engineer from the Philippines to calibrate the water model.

Annex 4. Minutes of the meeting with US Energy Agencies

ENERGY POLICY AND DEVELOPMENT PROGRAM Meeting with USAID 20 July 2016, Wednesday, USAID Office, Washington, DC Meeting Notes Attendees:

1. Dr. Majah-Leah Ravago, EPDP Program Director

2. Dr. James Roumasset, EPDP Program Advisor

3. Prof. Ruperto Alonzo, EPDP Policy Component Advisor

4. J.Kathleen Magadia, EPDP Research Coordinator

5. Shirra de Guia, EPDP Research Assistant

6. Jayne Somers, USAID Asia Bureau Energy Advisor

7. Allen Eisendrath, USAID Energy & Infrastructure Office Director

8. Amanda Conklin, USAID East Asia Program Specialist

9. Bradford Simmons, U.S. State Department

10. Marjorie Jean-Pierre, United States Energy Association (Program Director – Energy Utility

Partnership Program

11. Jamie Kern, U.S. Department of Energy (Senior Fellow – Science and Technology Policy)

Time: 2:35 - 4:00 pm

Agenda: Energy Markets

SUMMARY OF DISCUSSIONS

Salient Points

- AEisendrath underscored the importance of ancillary and forward markets, which tend to

be more efficient than retail markets. He also suggested to look into the wholesale market

first (e.g. is it working properly?) before exploring retail market. From an old school

perspective, AEisendrath considers retail market as having fairly small economic gains.

- USEA can coordinate/organize on-ground trips in electric cooperatives and can

coordinate meetings between PH energy companies/agencies and US energy related

organizations to discuss the different market designs.

- The U.S. State Department could provide technical assistance to the PH DOE if the latter

expresses interest

Other Points Raised

On Market Design

- PJM and ERCOT are U.S. examples that can be looked into in terms of IMO/ISO market

designs

- Kazakhstan and India only have ancillary services market and a spot/day-ahead market;

only 6-7% trade in the market

For the Philippines, AEisendrath said to consider how many enter sport market and

through bilateral contracts (MRavago: Only 7-10% is contracted from WESM, the rest are

bilateral contracts)

- In New Zealand, it is required that all power plants sell in the market

On Reverse Auctions

- In Tanzania, they are establishing reverse auctions wherein participants are shortlisted

and the auction is facilitated by an independent operator (third party)

- When Mexico needed 1700 MW of capacity, they did a reverse auction for the IPPs and

they successfully awarded contracts to 15 companies.

- In Texas, after the PPAs expire, generation plants have to compete in an auction for the

short-term PPAs.

On FIT

- Instead of FIT, PH may consider applying a ceiling similar to Australia and El Salvador.

- The Mexico market is also a good example; they conducted small auctions depending on

the grid capacity for RE integration.

- UAE was successful in integrating solar PVs.

- For Australia, Brazil, and South Africa, the LCOE of wind plants were actually lower

compared to coal.

Addressing variability of RE resources

- Improve the system operator features /software (e.g. synchrophasors, millisecond

readers)

- Build or upgrade the transmission

For the interconnection upgrade between Luzon and Visayas, you may check the case of

Ireland and UK

- Expand balancing areas

- Create and ancillary services market; thermal / hydro fleet has a lot of flexibility (e.g.

Ireland -use gas fleet for balancing)

- Change ramp design of the different technologies e.g. coal plants can be used for

balancing if its ramp design was adjusted

- Create an externally-designed forecasting system for renewables; this will help improve

the dispatch of Res. In Spain, they use big data to forecast

On Texas Case

- They did an LCOE analysis per zone and consulted the land owners

- Annually, they pay land owners $2000-$7000 per turbine per land

- The transmission investment costs $5 Billion

On RE Grid Integration

- US DOE has a study on the PH RE Grid Integration. Copy is with from Lily Gutierrez. This

will give you an idea whether the PH needs an ancillary market or not.

Others

- US EIA has an article on the US Energy Market (see July 20 article -

http://www.eia.gov/todayinenergy/detail.cfm?id=27152)

- Check Brazil and South Africa markets

- Midcontinent Independent System Operator (MISO) – combination of market and

bilateral

Further research needed

- Load following balancing vs. reserve

- Flex study of the system at the various nodes

- Reverse auction vs. Wholesale market

- Check the characteristics of the PH market

http://www.eia.gov/todayinenergy/detail.cfm?id=27152

-601011;111-1TEE ON ENEiEGY-

111•MIENtli NIS= Mill•••••••••••••• •

CTSS I, Committee Affairs Department, 3t RVM Building, Hoise of Representative;, Constitution Hills, Quezon City ft +63 2 931-3.t93 or 931-5001 local 7133; Fax No.: +63 2 931-359 5

September 13, 2016

Mr. Orville Jose C. Solon Dean UP - School of Economics Room 203, University of the Philippines Diliman, Quezon Fax No. 920-5463

Sir: 1 May we refer to you for comments the attach House Bill No. 2298, authored by Representative Maximo Rodriguez, Jr., entitled: "An Act Amending Paragraph (J) Section 47 of Republic Act 9136m or the Electric Power Industry Reform Act of 2001".

We would appreciate receiving your comments within ten (10) working days from receipt hereof.

Thank you very much.

........e7.- Very truly yours,

LORD AL Q. ELASCO Chairman

1

Ft At-

ar71A--'

Annex 5. Exchange of letters between Congressman Lord Allan Velasco and Dr. Orville Solon (Dean of University of the Philippines - School of Economics) and EPDP’s technical comments

Tin EL. RS' t/L(, LIP(

A t.,(1< L. C ?), DR G. -C1 C.4.1 rip cc Oct' 1 cr

SEVENTEENTH CONGRESS REPUBLIC OF THE PHILIPPINES ) First Regular Session

HOUSE OF REPRESENTATIVES

Introduced by by Representative Maximo B. Rodriguez, Jr.

House Bill No. 2298

EXPLANATORY NOTE

In its report on the 2013 power supply-demand outlook, the Department of Energy (DOE) noted that the Mindanao grid has been experiencing "undergeneration" since 2010. It also said half of the region's plants are hydroelectric and depends on "the availability of water and affected by weather conditions!' The DOE further said that Mindanao needs 1,600 megawatts of additional power "to meet the electricity demand and the required reserve margin of the grid".

These very dark projections can actually be already felt on the Island as parts of Mindanao are now suffering from 10-12 hours of rotating power blackouts.

There has been no dramatic improvement in Mindanao's power situation since the DOE issued its outlook with it recently reporting that the region's power supply of 1,064 MW was 158 MW short of its peak demand of 1,222 MW.

Dr. Gerardo Sicat already warned about this situation as early as 2012 when he said that the electricity problem in Mindanao "has been a crisis waiting to happen". In a paper he wrote, Dr. Sicat put the blame squarely on the government, which he said "did not pursue the series of long term actions required to solve the power development problems of Mindanao". He also partly blamed the EPIRA Law which mandated that privatization of government-run power plants and prohibited the government from entering into power generation.

According to the Association of Mindanao Rural Electric Cooperatives, the rotating brownouts are "largely the effect of EPIRA" and are "largely a power generation issue, caused by the provision in the EPIRA, which does not allow government to put up additional power generation capacity'.

As such, it is high time that the government seriously focus on generating other sources of energy. According to the Renewable Energy Act of 2008, it is the policy of the State to "accelerate the exploration and development of renewable energy resources such as, but not limited to, biomass, solar, wind, hydro, geothermal and ocean energy sources, including hybrid systems, to achieve energy self-reliance, through the adoption of sustainable energy development strategies to reduce the country's dependence on fossil fuels and thereby minimize the country's exposure to price fluctuations in the international markets, the effects of which spiral down to almost all sectors of the economy"

It is therefore imperative that all avenues be considered when it comes to renewable energy.

In view of the foregoing consideration, immediate approval of this bill is highly recommended.

K.%

(PM

MAXIMO B. RODRIGUEZ, JR.

SEVENTEENTH CONGRESS REPUBLIC OF THE PHILIPPINES ) First Regular Session

HOUSE OF REPRESENTATIVES

Introduced by Representative Maximo B. Rodriguez, Jr.

House Bill No. 2298

AN ACT AMENDING PARAGRAPH (J) SECTION 47 OF REPUBLIC ACT 9136 OR THE "ELECTRIC POWER INDUSTRY REFORM ACT OF 2001"

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Paragraph (j) of Section 47 of Republic Act 9136 or the EPIRA Law is hereby amended to read as follows:

SEC. 47. NPC Privatization. — Except for the assets of SPUG, the generation assets, real estate, and other disposable assets as well as IPP contracts of NPC shall be privatized in accordance with this Act. Within six (6) months from the effectivity of this Act, the PSALM Corp shall submit a plan for the endorsement by the Joint Congressional Power Commission and the approval of the President of the Philippines, on the total privatization of the generation assets, real estate, other disposable assets as well as existing IPP contracts of NPC and thereafter, implement the same, in accordance with the following guidelines, except as provided for in Paragraph (f) herein:

(j) [NPC may generate and sell electricity only from the undisposed generating assets and IP P contracts of PSALM Corp. and shall not incur any new obligations to purchase power through bilateral contracts with generation companies or other suppliers] THE GOVERNMENT, THRU THE NPC OR ANY OTHER GOVERNMENT OWNED OR CONTROLLED CORPORATION IS HEREBY AUTHORIZED TO GENERATE AND SELL POWER/ELECTRICITY FROM RENEWABLE ENERGY SOURCES AS DEFINED IN REPUBLIC ACT 9513 AND TO INCUR NEW OBLIGATIONS TO PURCHASE POWER THROUGH BILATERAL CONTRACTS WITH GENERATION COMPANIES OR OTHER SUPPLIERS.

SEC 2. Within 30 days after the approval of this Act, the Department of Energy is hereby mandated to prepare the Implementing Rules and Regulations necessary in order for the Philippine government to immediately implement this Act.

SEC 3. EFFECTIVITY. This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in any newspaper of general circulation in the Philippines.

Approved,

UNIVERSITY OF THE PHILIPPINES SCHOOL OF ECONOMICS

23 September 2016

Congressman Lord Allan Q. Velasco

Chairman

Committee on Energy

House on Representatives

Dear Congressman Velasco,

In response to your letter dated September 13, 2016, we are sending herewith our

comments of the House Bill No. 2298 entitled "An Act Amending Paragraph (1) Section 47 of Republic Act 9136m or the electric Power Industry Reform Act of 2001".

Thank you very much.

Sincerely yours,

Orville Jose C. Solon

Dean

WA

lip

FA-A

Intl vatic-6,

Wit-brot 19)61.04,

Encarnaci6n Hall, School of Economics, University of the Philippines, Diliman, Quezon City 1101 Philippines Tel. Nos. Nos. (632) 9279686 to 89 Telefax (632) 9205465/(632) 9205463 frxr` 14-

rm-ud • (V

ENERGY POLICY AND DEVELOPMENT PROGRAM (EPDP) ®USA ID UPecon Foundation

COMMENTS ON

House Bill No. 2298 An Act Amending Paragraph (J) Section 47 of Republic Act 9136 or the "Electric Power

Industry Reform Act of 2001"

If the purpose of the amendment is to allow the government to procure new generating capacity as reflected in the preamble, then the revised provision (j) does not actually address this. Purchasing power through bilateral contracts with generation companies or other suppliers is not the same as procuring new generation assets. If the aim of the proposal is to enable the government to invest in additional assets for power generation, then it must state so clearly along with citation of other provisions in EPIRA that are inconsistent with the object of the amendent.

As regards the Mindanao situation, there is no reason to believe that power deficit is in Mindanao's near term future. Figure 1 shows the Department of Energy's Supply Expansion Outlook for Mindanao until 2030. Total capacity is set to exceed system demand in Mindanao, if we include committed capacity, as well as indicative capacity. Thus, the possibility of power shortages in the near future is slim. Indeed, Mindanao is more likely in the near term to be a power surplus area.. Table 1 provides the list of indicative projects in Mindanao. The more recent (2012-2015) brownouts in Mindanao were/are caused by maintenance shutdowns and attacks on transmission lines (see Table 2).

Other points: The better way to ease the power problem in Mindanao is for the government to protect the integrity of transmission assets in order to avoid power outages in the region. The past bombings of transmission towers have resulted in sudden outages.

In the preamble, the main argument used to justify the revision is the case of Mindanao; however, it is worth noting that any amendment in EP1RA would affect not only Mindanao but also Luzon and Visayas.

Another way to ensure stable power in the Philippines is to upgrade the existing transmission assets and complete the Pan Philippine Grid. Thus, Mindanao consumers can purchase power from Luzon and Visayas and vice-versa.

1

, co*P- • in €, ENERGY POLICY AND DEVELOPMENT PROGRAM (EPDP)

@USAID UPecon Foundation

Figure 1: Mindanao capacity exceeds system demand by 2030

DRAFT AS OF 04 JANUARY 2016

SUPPLY EXPANSION OUTLOOK (MINDANAO) DDP Based Scenario Demand Supply Omit—. 7010.7070

MINDANAO GRID WILL NEED $10 MW CAPACITY ADDITION BY 2030

rain-

•

I Sp: 1.6 POW MO Wonsan Fm. ISO MW Thorp Sash Cowl I

LoacNan 100 MW MC CeS 1 10 MW LC Mos

1.6 MW GM Woes Capri Mot HAMM SMC Cern Cal U1 11.11PW SPC illannwil DPP ---...—.. a VW Lake Mt 141

Pr US 14W SW D.= USIA cops

335 MW MC Cal Ill

ssoo Sep: In Les DOC Cad la SP 100 MIN SI C Cast/

5.000 Oen US few we us vi

2017 10L Pm SS MW Morn C•611 n ibllf PAW GM?.,.,, Cad 1.2.5.4

LA MW Now\ Map MVP Jut 10 MP Pup MCP Pm SS MW Mintrry tOSI M. SS Mgt warm cam • 7111

4,4,41.41/6410 Kin Ott MPS PPM 1 HIPP

36.1 M•••• P 1•40: 1 P*

4,000 9,500 3,000 2,560 2,003 1,500 1,003

2015 2014 2017 2011 1019 2020 2021 2022 1013 1024 2025 2076 2027 2031 2029 2030 ;0 010 1 0 0 ' 0 1_0 4 0 0 0 0 1 000 0 0 4 0

200 ZDO 200 203 2E0 203 200 1200 200 200 • NO 300 400 602 700 , 700 t

Cap4dd-Pealdng CepAdt1.6114 Range

0 CspAddaaseload .0 010 0 0 1 010 0 0 , 0,0 1 0 0 0 105 210 4

Rum Cammitted Capacity 4 134 . 142 995 1,445 1,464 1,445 1,445.1,445.1,445 1,445 1,426 1,426 1,426 1,426 1,4261456

, -, . . tasting Dependable Capacity 2.003 1,911 1991,1.935 1,985 1,175 1975, LISS 1,965 1.9551,955 1,9451,145 1,936 1.0351.126

Considering Indicative Projects to meet required Capacity addition

MINDANAO (DDP-based Scenario)

54,91n/iDe000 1015 1017 2313 7019 2023 2112 r01 1031 MN 2 1026 KO XII 223 DM

WOO MI 7C0 1,310 1,113 1,310 LW 1,310 Ur 1.343 OM 3.343 Or 1.310 1.235 11.1) INDRANCE 0 0 0 D 0 0 0 0 0 0 0 0 (2079 KO (101,

526 NUM 61 131 222 X 526 46 526 516 525 526 526 526 96 526

I I /016 MI All 1031 X00

ILME10:10 4 MOMM2 • PUDIG.

Source: Department of Energy presentation at the EPDP Lecture Series on April 28 2016.

‘' Reel RENT* T311 315.- 330 -115-1-340 344 3/8 3521316 360 366 373 1. 379t 317 395 403 1 4. '1 —"Snlem Demand 1366 1.742 1.1772.003 2.131 2.233 2.325 2.421 2.520 2.623 2.777 2.939 3.112 3.294 3.4563.693

2

ENERGY POLICY AND DEVELOPMENT PROGRAM (EPDP)

OUSAID UPecon Foundation

Table 1. Mindanao Grid Indicative Power Projects, 1,925.61 MW

- Hama of the Project 7 Project Proponent — Mother/ JV Company

San Miguel deed Pow Corporation

•

Location J.

Elegy. Warren. Malta. Davao del Sur

Rated Capacity NW) • 1.11 - 150.0 1)2 — 150.0 03— 303.0

Target Commissioning U1 - Jen 2010 02 -June 2016 113— Dec 2018

SMC Davao Pow Pint Project Phase NI '

San Miguel Consolidated Power Corporation

Power Plant Project

Pheppme Materiel 01 Company (PNOC-EC)

Philippire Nations, Oil Company(MM) Stugay. Zamboanga 100.0 Sep 2016

Ozamlz Power Coal Fired Power Plant

Phew I -2 x 1013MW Phew 2 -1 x 100MW

CUM& Power GenerSon, Inc.

Our* Power. Demotion, Inc.

Orgy. Pulo1,0zank City,MisarrdS Ckoklemel

SO Phase 1 - Sept 2018 Phase 2- Dec 2018

SMC Davao Power Plant ' Project Phase II

San Miguel Consaidmed Power Corporation

San Miguel Consoadeted Power Corporation

Orgy. Cullman. Matta Davao del Sur 300.0 Dec 2013

SRPI Circulatng, Peeked Bad (CFB)

Coal-Flred Power Station San Raman Power Inc. - Ma:0,AS Power

Cceporalicc

Sitio San Ramon. Bgry. Teksayan. Zamboanga

City 100.0

1:100.0

TOO

Buttldnon Power Corporation

Ekskidnan 4.8 Nov 2015

4.8 PAW Fuel Power Plan4 &Moon Power Praieol I Caporation

OTAL DIESEL Energy Development

Corporation

if Kidapawan. North

Catabato

.

40.0

40,0

, Jun 2018 Mindanao 3 Geothermal Energy Developnent

COMOraton

Terrines Resources and

Dsvek'Prnud Corp. . (TRDC)

Cagayan de Oro City. Meanie °Pent& . 9.0 Jan-2018

Larbatangon klYnmalectho Pow-

Plciath

Turbines Resource & Deeesoprneet corp.

Togoloan Fell Gen Mindanao Hydropwir Corp. '

Pint Oen Mindanao Hydropower Cap.

Impasugong & Sumilao, Butodnon 39.0 Jun-2018

Culimin Power ter

Oriental Energy and , Power Generation

Corporation

Oriental Energy and Power Generation

,Corporation Montt Forte:IL Bukidnon '10.0 ;Jut 2018

Catedberan

Pasant* cant run liAiimicinom....

Phicerban. Inc. _ . rimr nee ewer — .Getwolenn

Phlrarbon, Inc. Ammmi vial

Zamboanga ay -..--.. . _......_

0.5 ___, ... .

Jrci 2019

Curio Pberanv Hydro Power

Corponiton - Gann. /awn Ocoldento 5.0 Apr 2019

Mat-1-1 Minn, Hydro Poet •

Corporation ' Cillifelilk Cagayan de Oro 2.0 Apr 2019

Pleinew Hydro Power Corporation lAski-2 1.6 Cagayan de OrojAiramle

Oriental SePt 2019

Maki-3 Phenols Hydro Power

Corporation Cagapsn de Om. Meanie

. Oriental 3.25 Sept 2019

Mangum Hydroelectric - Power Project

Pninew Hydro Power Cotentin

Manolo Relish, Butednon 10.0 Sept 2019

Maladugao River (Upper tascadeP

UHPC Butidnon Hydro Power I Corporation

UHPC Bukidnon Hydni Power learn/eaten

,wao. sukidnen- 5.50 ....lan 2020

Maladugoo River (Lower Cascade).

UHPC Eltilddrion Hydro Power I Corporation

UHPC Bulddnon Hydro Power I Corporation

Keitengan 8 Woo. Elteidnon 100 Apr 2020

. Laren (Lem-slur

Euro Hydro Power (Asia) Holdners Inc.

Earn Hydro Power (Asia) HolcUngs. Inc.

Lake Sebu. SCILId. Cotaboto 9.50 May 2020

Sgrece Plillorevriver Power Corp. Plillnernreer Power Conk klarratoll. Bokidoon 329 Jun 2020

Mee iiii Marano° Energy

Corporation Mares= Energy pante a Gab-I. no del

Corporation I Sur 8 tango del NOR@ 225 .M2020

Enfinity Digo+ Ory, Davao del Sur 103) Oct 2015 °Ws SS' PhmannElc - Paver Project .

Entine): PhlipPiele Renewable Resources,.

Inc,

Mora Soler Photovoltaic Renweabla EurretY Prlotceses. Dips alt.Demo del Sea 19.58 Dec 2015 Power Raked 1r Inc.

Kdiewe Solar Pow Project Attire GreenEnemy Corp. Asian GreenEnergy Corp

-Bevy. Ladino.% Kibees. Bokidron 10.49 Jan 2016

Kirehon Solar Power Pitied Phase1

Kaaba(' Solar Energy Corporation

Elroy. Klrahon, Vilenueva, Mit:tr.Oriental 12.5 Jul 2016

Centralia Solar Power 'INV Vogt Philippines Solar Prziecl Energy Dria. Inc.

1&lfitt4,,1

Orgy. Centralia, Surallah, South Cotabato 6.25 IBC.

Source: Department of Energy in their presentation at the EPDP Lecture Series on April 282016.

3

AND UPecon Foundation

ENERGY POLICY DEVELOPMENT PROGRAM (EPDP)

Table 1 con'd. Mindanao Grid Indicative Power Projects, 1,925.61 MW

flame bf the Pro INIMPtafct Propene 1 ',ay cempen ne. ocelipplikleS/ Reed Capacity 41EWlar

21A

t CommIsslonin 1m

EPC Woody Biomass Power Plant Project

Eastern Petroleum Corporation

Agusan del Nona Dec 2017.

Kallengan Bic-Energy Corporation Multi- Feedstock Power

Generating Fealty

Kallangan Rs-Energy Corporatton

Bukidnon R0 . Aug 2016

Don Carlos No-Energy Corporation IAA- Feedstock Pow Generating Peaky

Don Carlos Bo-Energy Corporationa Bukidnon 9.0 Aug 2016

MalatbsdaY Bc'EnergY Corporation Muni Fee:Isla&

Maleybsiey Bio-Energy Carpormion

Malaybatay Bio-Energy Carponatian Bukidnon 9 0 Dec 2017'

Biomass PM*" Plant Project

Meant Oriental Elio- Energy Corporations

Misanis Onental Bio- Energy Corporations Minerals Oriental 10A Oct 2017

NaPier Gass-Fled Biomass Power Plant Prolee

Mamas Ech B Energy Jr ktando Fortich Norms.

Energy Corporation Buludnon 104 Jon 2018

0E1941,27144 -ZE4..

OTA

Source: Department of Energy in their presentation at the EPDP Lecture Series on April 28 2016.

4

ENERGY POLICY AND DEVELOPMENT PROGRAM (EPDP) OU§AID UPeain Foundation

Table 2. Recent Recorded Blackouts in Mindanao

Period Daily duration

Cause/s Reference/s

August - September

2009

2 — 4 hours • 4-6 hours in Regions 1X

and X

Tripping of Agus I in August 2009

Shutdown of the 100 MW Western Mindanao Power Corp. (WMPC)

Scheduled preventive maintenance operations of Agus 2, Agus 5, Pulangi 4 and the Mindanao STEAG Coal (Unit 1)

Overall, more than 400 MW of a total of 620 MW dependable capacity were affected.

GMA News. 2009. Rotating brownouts implemented in Mindanao. littp://www.gmanetwork.comrnews/story/172093/monev/rotatinu- brownouts-implemented-in-mindanao

February 2010

2 — 4 hours The El Nifio phenomenon resulted to significantly reduced production from major hydropower plants - a 50 percent reduction in Agus Hydro and 75 percent in the Pulangi plant.

Dry spell resulted to a reduction in the Lanao Lake water level.

Senate of the Philippines. 2010. Loren: Solution to Power Crisis Begins at Home, Alternative Sources. http://www.senate.gov.oh/oress release/2010/0222 legarda4.asp

National Disaster Coordinating Council. 2010. Update on Mindanao Power Crisis.

January — May 2011

2— 12 hours Agus 6 was on forced outage due to generator air . cooler and turbine guide bearing problems

IBON Foundation. 2014. EPIRA hinders real solutions to Mindanao power crisis. http://ibon.orn/2014/05/epira-hinders-real-solutions-to- mindanao-power-crisis/

5

ENERGY POLICY AND DEVELOPMENT PROGRAM (EPDP) UPecon Foundation

February — May 2012

1 -8 hours Low water levels resulting to reduced capacity in the Agus and Pulangi plants; problem exacerbated by dry spell and high demand during summer.

Navarro, Adoracion. 2012. Finding Solutions to the Mindanao Electric Power Problem. Discussion Paper Series No. 2012-21, Philippine Institute for Development Studies.

January - March 2013

2 — 6 hours Low water levels in Lanao Lake and Agus River

Slow rehabilitation of damaged transmission lines due to Typhoon Pablo (December 2012)

GMA News. 2013. Mindanao scrambles to avert another power crisis. http://www.gmanetwork.comMews/story/301559/money/economy/mindanao-

scrambles-to-avert-another-power-crisis

February 27 - May 14,

2014

2— 7.5 hours (5 hours

during peak hours and 2.5 hours during

off-peak)

10 — 14 hours in Zamboanga

City

Unwanted loss of generation of 2 x 105 MW STEAG Mindanao Coal-fired Power Plant caused by unprecedented plant control system trouble, defective equipment of Agus 1 Hydroelectric power plant and insufficient Automatic Load Drop (ALD) at Off-Peak scenario

Repair of Unit 1 (105 MW) was completed on May 8, 2014 and Unit 2 (105 MW) went online on June 1,2014.

Balita PH. 2014. Power situation worsens, blackout in Davao now 7.5 hours. http://balita.ph/2014/05/09/power-situation-worsens-blackout-in- davao-now-7-5-hours/

Department of Energy. 2014. Power Sector Situationer.

February — March, 2015

2 hours Low water level in Lake Lanao and Agus 4

Scheduled preventive maintenance of the STEAG State Power Incorporated's coal-fired power plant in Misamis Oriental from February 19 to March 16

Manlupig, Karlos. 2014. Rotational power outages in Davao City starting Feb 21. http://www.rappler.com/business/industries/173-power-and- energy/84511-davao-city-rotational-brownouts-feb-2015.

July 2015 1 —4 hours Low water levels brought down the generating capacity of the Agus — Pulangi Hydropower complexes

Preventive maintenance shutdown (PMS) of the 105 MW Unit 2 of the 210 MW STEAG coal fired power plant of State Power Inc. (SPI) in

Capistrano, Zca lo Ming. 2015. Low water levels of dams causes power interruptions in Mindanao — MinDA. http://davaotoday.comimain/economy/low-water-levels-dams-causes- power-interruptions-in-mindanao-minda/

Mindanao Development Authority. 2015. MinDA-MPMC Statement on current power situation. htip://minda.gov.ph/index.php/news/142-

6

ENERGY POLICY AND DEVELOPMENT PROGRAM (EPDP)

eU§AID UPecon Foundation

Misamis Oriental. minda-mpmc-statement-on-current-power-situation

October 2015

2 — 6 hours Low water elevation resulting to lower capacity for Agus and Pulangi plants.

One of NGCP's towers in Marawi City was bombed, resulting to the isolation of Agus 1 (80 MW) and Agus 2(180 MW) from the grid.

Lagsa, Bobby. 2015. Blackout hits parts of Mindanao after bombing of NGCP tower. http://www.rappl cr.comInationn 11167-blackout- mindanao-bomb-ngcp-tower

February - April 2016

2 — 7 hours Shutdown of a 120 MW generating unit of Thema South, a coal-fired power plant.

Low water levels of Pulangi River in Bulcidnon and Lake Lanao in Marawi City, the main sources of power in Mindanao.

Davao Light. 2016. Scheduled Power Interruptions. Available from http://skedsearch.com/search?s=davao+light&action=SkedName

Manlupig, Karlos. 2016. Daily Brownouts reduced to 3 hours in Mindanao. Available from http://newsinfoinquirennet/780146/daily-brownouts- reduced-to-3-hours-in-Mindanao.

7

Annex 6. Technical advisory note on the increase in biodiesel blend mandate

1

Technical Advisory on the Increase in Biodiesel Blend Mandate from 2% to 5%

14 September 2016

The Biofuels Act of 2006 (RA 9367) was legislated to reduce the Philippines’ dependence on imported fuels and to protect public health and the environment. Pursuant to this policy, all liquid fuels for motors and engines sold in the Philippines shall contain locally sourced biofuels components. Moreover, the law specifies incentives (zero specific tax, exemption from VAT, exemption from wastewater charges, financial assistance to producers) to encourage investments in the production, distribution, and use of locally produced biofuels at and above minimum mandated blends. This Act also enables government agencies to implement programs that will encourage local production of biofuels such as feedstock1, jatropha propagation, and fuel bioethanol programs.

The Biofuels Act mandates that diesel engine fuels in the Philippines should contain a proportion of biodiesel blend. Under the Act, the Department of Energy (DOE) is authorized to increase the proportion of biodiesel blend upon the recommendation of the National Biofuels Board (NBB) and upon consideration of the domestic supply and availability of the locally produced biodiesel component. As specified in the Philippine Energy Plan (PEP) of 2013-2030, the biodiesel blend mandate was expected to increase gradually throughout the period to 5% by 2015; 10% by 2020; and 20% by 2025. Beginning at 1% blend, the mandate was raised to 2% in February 2009.

In June 2013, the NBB recommended an increase in the biodiesel blend to 5%. Consequently, the DOE requested the National Economic and Development Authority (NEDA) to study the overall impact of an increased blend on the coconut industry considering (1) the decrease in coconut production due to the severe damage inflicted by Typhoon Yolanda in 2013 on Eastern Visayas, the second largest coconut-producing region in the country; and (2) the additional setback caused by insect (cocolisap) infestation and more typhoons in 2014. NEDA then requested the Energy Policy and Development Program (EPDP) to provide assistance in the conduct of the research. In this regard, EPDP commissioned two (2) independent contractors to undertake the impact study on the effect of increasing the biodiesel blend from 2% to 5% on the Philippine coconut industry (see Briones et al., 2016). The commissioned study analyzes the economic impact on the coconut industry of an increase in biodiesel blend from 2% to 5%, as well as the environmental impact from reduced greenhouse gas (GHG) emissions and toxic air pollutants.

Economic Impact

With the use of a multi-market simulation model, the commissioned study concludes that raising the mandate from 2% to 5% will stimulate coconut production, thereby increasing the profitability of coconut farmers. Furthermore, the increase in biofuels blend from 2% to 5% will result in an increase in net farm income per hectare of 1.4% for 2016, rising to 1.6% by 2022. Projected to the total hectarage planted to coconuts, the commissioned study comes out with benefits of Php 918 million for 2016. This result is based on the “semi-open economy” model wherein, with a “constant elasticity of transformation,” increases in demand for coconut oil through the increased blend raise

1 Feedstock refers to organic sources such as molasses, sugarcane, cassava, coconut, jatropha, sweet sorghum or other biomass used in the production of biofuels.

2

the price of coconut oil and therefore copra, thus leading to increased farm incomes.2 At the same time, Philippine exports of coconut products, particularly coconut oil, will decline and diesel pump prices will increase because coconut oil prices and therefore biodiesel prices with increased blend are higher than petrodiesel prices.

The 1.4% to 1.6% increase in farm income per hectare that results from the simulation model of Briones et al. (2016) is triggered purely by the coconut output price increase, as the farm level estimates assume no adjustment in inputs and outputs. As such, this increase is not due to any gains in physical productivity or production but is the effect only of the price increase. From an economic efficiency viewpoint, therefore, the increase in farm income per hectare is not per se a net welfare gain, but simply a transfer from consumers of coconut products and diesel products to the coconut farmers.

As a matter of fact, the increase in diesel pump prices resulting from a mandated increase in the biofuels blend from 2% to 5% is likely to lead to significant welfare losses in the market for diesel itself, both in consumption and in production. For a first order estimate, with a baseline price of Php 22.45 per liter for petrodiesel and Php 40.00 per liter for pure biodiesel, the biodiesel-blended price rises from Php 22.80 per liter at 2% blend to Php 23.33 per liter at 5% blend, following the formula:

𝑷𝒄𝒐𝒎𝒑𝒐𝒔𝒊𝒕𝒆 = ( 𝒑𝒆𝒓𝒄𝒆𝒏𝒕𝑩𝑫)(𝑷𝒃𝒊𝒐𝒅𝒊𝒆𝒔𝒆𝒍) + (𝟏 − 𝒑𝒆𝒓𝒄𝒆𝒏𝒕𝑩𝑫)(𝑷𝒅𝒊𝒆𝒔𝒆𝒍)

where: Pcomposite is the composite price per liter of blended diesel; Pbiodiesel is the price per liter of pure biodiesel; Pdiesel is the price per liter of petrodiesel; and Percent BD is the specified biodiesel blending.

The increase of Php 0.53 per liter in the pump price will lead to some decrease in the consumption of blended diesel. The higher the price elasticity of demand for diesel (in absolute value), the larger the decrease in consumption. Table 1 summarizes the market effects of mandating the biodiesel blend from 2% to 5%.

Table 1 Effects on the Diesel Market of an Increased Blend from 2% to 5%,

Biodiesel price at Php 40.00 per liter

2 Under the usual assumption that the country is a price taker in the world market for coconut oil, an increase in domestic demand brought about by an increase in the blend would not result in any price increase; instead, the increase in domestic demand will be absorbed totally by a decrease in exports.

-0.25 -0.50

price petrodiesel 22.45 22.45 22.45

price pure biodiesel 40.00 40.00 40.00

price blended diesel 22.80 23.33 23.33

qnty blended (ML) 7176.41 7134.98 7052.13

qnty pure biodiesel (ML) 143.53 356.75 352.61

total loss to consumers (₽M) 3767.47 3745.66

deadweight cost of underconsumption (₽M) 10.91 32.72

deadweight cost of overproduction (₽M) 3756.57 3712.94

2% blend5% blend, ƞ =

3

Following Briones et al. (2016), Table 1 begins with a base price of Php 22.45 per liter for petrodiesel and Php 40.00 per liter for (pure) biodiesel, yielding a composite price of Php 22.80 per liter for the 2% blend. Initially disregarding the environmental benefits from the blend that will be discussed later, the cost of raising the mandated blend from 2% to 5% may be estimated as follows. The increase in mandated blend causes the price of blended diesel to rise from Php 22.80 per liter to Php 23.33 per liter. This will induce diesel users to reduce consumption, the exact amount depending on the price elasticity of demand ƞ.

In Table 1, for ƞ = -0.25, diesel consumption falls from 7176.41 ML to 7134.98 ML per year. The total loss to consumers due the price increase is Php 3,767.47 million. The deadweight cost of underconsumption is small at Php 10.91 million (0.5*Δp*Δq). The major efficiency loss is in the deadweight cost of overproduction, amounting to Php 3,756.57 million, if the full price of Php 40.00 per liter for pure biodiesel reflects real resource cost. If this price incorporates some non-competitive profit or quasi-rent, that amount is not a deadweight loss but is merely a transfer. Nevertheless, from a social equity and distribution standpoint, the transfer is from mostly poor diesel users (public utility commuters, drivers, and operators) to the owners of biodiesel plants.3

For ƞ = -0.50, the last column of Table 1 shows that the fall in consumption is bigger, the total loss to consumers and the deadweight cost of overproduction are smaller, but the deadweight cost of overconsumption is larger compared to ƞ = -0.25.

Figure 1 below (not drawn to scale) offers a heuristic representation of the market results of raising the biodiesel blend mandate. Let point A be the initial state of X0 = 7,176.41 ML per year and P0 = Php 22.80 per liter with a 2% blend. If the mandate is raised to 5%, the blended price rises to P1 = Php 23.33 per liter. Quantity consumed will fall to X1, the magnitude depending on the price elasticity of demand. The total loss to diesel consumers is the area P0P1BA; the deadweight cost of underconsumption is the triangle ABC; and the deadweight cost of overproduction is the rectangle P0P1BC.

Figure 1 Effects on the Diesel Market of an Increased Blend

P Pmax

P1 B P0 C A

0 X X1 X0

A more complete estimation of the economic welfare effects of raising the mandated biodiesel blend should take into consideration the effects on other related markets and the existing

3 See de Gorter and Just (2009) for a full exposition of the underlying model.

4

distortions and externalities in these other markets. For example, the increase in the pump price of diesel will increase the demand for gasoline, a close substitute. To the extent that the Biofuels Act of 2006 also mandates an ethanol blend for gasoline (10% ethanol since 2012), it is highly likely that the marginal social cost of the blended gasoline is above its market price. An expansion in the consumption of gasoline due to the increase in diesel pump price triggered by an increase in the biodiesel blend mandate may therefore even add to the deadweight costs discussed above.

It should be mentioned that the price of Php 40.00 per liter for pure biodiesel may be a conservative estimate. The study of Briones et al. (2016) uses Php 50.00 per liter as base. If this were the case, the deadweight cost of increasing the mandated blend from 2% to 5% rises to Php 5,914.18 million. Is Php 50.00 per liter a reasonable price? It is hard to find online data on the “market” price of pure biodiesel. A DOE presentation reports a wide range of prices for coco methyl ester (CME), as seen in Table 2 (de Guzman, 2015). These CME price fluctuations are probably wider than petrodiesel price movements.

Table 2 Coco Methyl Ester (CME) Price Range

Source: de Guzman (2015)

The website http://www.ph.all.biz/biodiesel-bgg1064229 lists several Philippine companies that produce and sell biodiesel, each with the teaser, “Get latest price.” But upon clicking the button, one is asked the amount and periodicity of purchase, with a pop-up window that says, “Please introduce yourself; elaborate on the specifications and actuality of price; find out the delivery options or self-pickup, terms of payment.” No price quotation appears at all. In short, the domestic CME market is not that transparent.

Environmental Impact

One of the main objectives of the Biofuels Act is of course to “mitigate toxic and greenhouse gas (GHG) emissions.” Expected to offset the deadweight costs in overproduction and underconsumption of biodiesel discussed earlier are environmental benefits, including a sizable reduction in GHG emissions based on life cycle analysis, and substantial health benefits from reduced toxic air pollutants. Briones et al. (Table 13) calculate the reduction in carbon dioxide-equivalent (CO2e)4 emissions at 362,610 MT for 2016 if the mandated blend is raised from 2% to 5%. This is equivalent to 1,684.24 MT of CO2e per ML of biodiesel.

Meanwhile, a recent survey of studies on the economic impact of climate change and its marginal damage costs reports a mean estimate of $25/MT as the social cost of carbon for a 3% social rate of time preference (Tol, 2013). With 3.67 MT of CO2 per MT of C, this amounts to $91.75/MT of CO2. As this is for the whole world, Gayer and Viscusi (2014) suggest prorating this to any specific country according to the country’s share in world GDP, which for the Philippines is only 0.44%.5

4 CO2e includes other greenhouse gases expressed in CO2 equivalent. 5 See Ravago et al. (2016). Briones et al. (2016) cite a United Nations Environment Programme Report (2014) that attributes only a 0.31% share for the Philippines.

Year Price, pesos/liter

2010 34-80

2011 57-106

2012 30-88

2013 29-60

2014 38-75

http://www.ph.all.biz/biodiesel-bgg1064229

5

The social cost of carbon dioxide emissions for the Philippines is therefore $0.4037/MT or Php 19.3776/MT of CO2 at an exchange rate of Php 48/$1. At 1,684.24 MT of CO2e per ML of biodiesel, the social cost of CO2e emissions is thus Php 0.0326 per liter of biodiesel. In the aggregate, Table 1 shows that for 2016, if the mandate for biodiesel is raised from 2% to 5%, for ŋ = -0.25, the increase in pure biodiesel consumption will be 213.22 ML, so that the total reduction in the social cost of CO2 emissions is only Php 7.02 million. If the country’s contribution to the global GHG cost is measured as its share in world population instead of GDP, the reduction in the social cost of carbon emissions rises to Php 25.88 million.

The health benefits from the reduction in particulate matter (PM) with the higher biodiesel blend may amount to Php 443.5 million in 2015, according to Briones et al. (Table 17), citing Vergel and Tiglao (2013). The benefits include savings in treatment cost and increased productivity and working life due to the expected reduction in morbidity and mortality with the reduction in respiratory illnesses due to cleaner air as the mandate is increased from 2% to 5% biodiesel blend. Projected to 2016 to factor in a 6.5% population and income growth, the health benefits sum up to Php 472.34 million.

Summary of Economic and Environmental Impact

Table 3 summarizes the economic, environmental, and health impacts of raising the mandated blend for biodiesel from 2% to 5%. The negative economic impact far outweighs the positive environmental and health benefits, with the net loss amounting to Php 3.26 billion for 2016 alone. The estimate of economic impact is even conservative, as it is based on a biodiesel price of Php 40.00 per liter (the Briones et al. study assumes Php 50.00 per liter).

Table 3 Impact of Raising the Mandated Biodiesel Blend from 2% to 5%, 2016

(In million pesos at current prices)

The estimate of economic benefits does not include the increase in farm incomes of Php 918.09 million because, as pointed out earlier, this is not in itself a net welfare gain, but simply a transfer from consumers of coconut products and diesel products to the coconut farmers. Also, as pointed out by the simulations of Briones et al. econometric model, the increase in coconut oil prices induced by the higher mandated blend may divert hectarage away from food crops like rice and corn towards coconut for fuel. While coconut farm incomes may increase, therefore, it is likely that rice and corn consumers will be negatively affected.

Concluding Remarks

The NEDA Agriculture, Natural Resources and Environment Staff (NEDA-ANRES) has actually prepared a draft “Preliminary Assessment of the Impact of Biofuel Production on Food Security

(10.91)

(3,756.57)

7.03

25.88

442.17

30.17

(3,262.23)

saving in social cost of carbon emissions, GDP weights

saving in social cost of carbon emissions, pop'n weights

benefits from reduced mortality

benefits from reduced morbidity

deadweight cost of underconsumption

deadweight cost of overproduction

Economic:

Environmental:

Health:

TOTAL

6

and the Economy” (December 2015) that may serve as a sound basis for deciding on whether to raise the blend now or postpone the decision to the future.

The “Preliminary Assessment” begins with an examination and analysis of price trends to determine the feasibility of raising the blend of biodiesel and shows the wide gap in prices between crude oil and coconut oil in the world market. The table below updates Table 2 of the NEDA Assessment to the most recent World Bank projections. It can be seen that the ratio of coconut oil to crude oil prices (in US$/MT), while softening in the early part of this decade, rose to 3.05 in 2015 and is expected to reach an average 3.30 for 2016 to 2020. This suggests that raising the blend from 2% to 5% would lead to even higher fuel cost.

Table 4 Trends in World Prices of Crude Oil and Coconut Oil (in constant 2010 US dollars)

Year Crude oil, average Coconut

oil Coconut oil/

Crude oil

($/bbl) ($/mt) ($/mt) price ratio

2000 35.48 253.63 566.03 2.2317 2005 60.88 435.14 703.48 1.6167 2010 79.04 564.98 1123.58 1.9887 2011 95.47 682.44 1588.10 2.3271 2012 97.60 697.62 1032.42 1.4799 2013 98.13 701.45 886.86 1.2643 2014 90.89 649.70 1208.84 1.8606 2015 48.04 343.38 1050.16 3.0583 2016 38.10 272.34 1208.00 4.4357 2017 45.70 326.66 1154.00 3.5327 2018 47.90 342.39 1103.00 3.2215 2019 50.20 358.33 1055.00 2.9401 2020 52.60 375.98 1008.00 2.6810 2021 55.20 394.57 964.00 2.4432 2022 57.90 413.87 921.00 2.2253 2023 60.70 433.88 880.00 2.0282 2024 63.60 454.61 840.00 1.8477 2025 66.30 473.91 802.00 1.6923

Note: Values from 2016 onwards are World Bank projections Source: World Bank Commodities Price Forecast (19 April 2016)

The NEDA Assessment also points out that the “supply-utilization projection based on the data of from the Philippine Statistics Authority/Bureau of Agricultural Statistics (PSA/BSA) indicates the likely difficulty of meeting the increased demand of coconut/copra for the proposed 5% blending rate.” Notwithstanding the optimistic production targets of the Philippine Coconut Authority (PCA), the projected surpluses would still be “not enough to cover the requirements of the proposed 5% blending rate.” Thus, even without the cost and benefit calculations given in Table 3, the relative world price trends in coconut oil and crude oil prices plus the bleak scenario for domestic coconut production scenario augur well for a postponement of raising the blend, at least in the short run.

In the medium to long term, a review of the Biofuels Act of 2006 is in order, as several economic studies (such as de Gorter and Just, 2009) point to the distortive effects of mandates and subsidies in addressing climate change issues. Applied welfare economics suggests that the best

7

approach to correcting a distortion is to impose taxes or subsidies so that marginal private cost is made to align with marginal social cost. In the case of GHG emissions, the appropriate action is to impose an environmental tax on the fuels that cause the emissions. The proposal of imposing excise taxes on fuels (particularly diesel) being floated by the Department of Finance (DOF) is a move in the right direction. Meanwhile, equity objective of uplifting the economic well being of coconut farmers is best met by agricultural policies that raise their productivity.

REFERENCES

Briones, R., R. Demafelis, B. Tongko, and K. Gatdula. 2016. “Economic and Environmental Analysis of the Impact of Higher-Blended Biodiesel on the Philippine Coconut Industry.” EPDP Working Paper.

De Gorter, H. and D. Just. 2009. “The Economics of a Blend Mandate for Biofuels.” American Journal of Agricultural Economics, 91(3):738-750.

De Guzman, R. 2015. “Philippine Policy on Biodiesel for Transportation and Market Experience,” powerpoint presentation at the Workshop on Higher Blending of Biodiesel (H-Fame) for Automotive Utilization In ASEAN, Bangkok, Thailand.

Gayer, T. and K. Viscusi. 2014. “Determining the Proper Scope of Climate Change Benefits.” Vanderbilt University Law School, Law & Econ. Working Paper 14-20.

National Economic and Development Authority, Agriculture, Natural Resources, and Environment Staff (NEDA/ANRES). 2015. “Preliminary Assessment of the Impact of Biofuel Production on Food Security and the Economy.”

Ravago, M., R. Fabella, R. Alonzo, R. Danao, and D. Mapa. “Filipino 2040: Energy-Power Security and Competitiveness.” EPDP Working Paper.

Tol, R. 2013. “Targets for Global Climate Policy: An Overview.” Journal of Economic Dynamics and Control 37(5):911-928.

United Nations Environment Programme (UNEP). 2014. The Emissions Gap Report 2014.

Vergel, K., and N. Tiglao. 2013. “Estimation of Emissions and Fuel Consumption of Sustainable Transport Measures in Metro Manila.” Philippine Engineering Journal 34(1):31–46.

Annex 7. Terminal report on the Training Course on Forecasting

I. Introduction1

The Energy Policy and Development Program (EPDP) is a four-year program that aims to strengthen the capacity of the Philippine government (GPH) to formulate coherent and evidence-based policies and strategies for the sustainable, reliable, and efficient use of energy resources and technologies. It supports the national government, in particular the National Economic and Development Authority (NEDA) and the Department of Energy (DOE), in policy analysis and formulation for the energy sector. EPDP is implemented by the UPecon Foundation, Inc. through a grant from the United States Agency for International Development (USAID).

Under its Capacity Building Component, the EPDP yearly conducts an executive course for senior GPH officials and midlevel courses for GPH technical staff. The EPDP likewise conducts special training courses specifically requested by NEDA, DOE, and its bureaus.

Following the training course Introduction to Statistical Principles and Survey Data Analysis held last 25-27 November 2015, EPDP held the Mid-Level Training Course on Econometrics last 11-13 April 2016 at the UP School of Economics.

This training course dealt with econometric methods and their applications to estimation, testing, interpretation, and evaluation of economic relationships. Emphasis was given on the hands-on experience of using Stata, a widely used econometric software for data analysis.

II. Course Objectives and Content

The course objectives were:

1. Acquaint the participants with the theory and practice of modern econometrics at alevel appropriate for energy practitioners and with emphasis on the application oftechniques for policy analysis;

2. Equip the participants with the necessary skills and knowledge of the techniques ofmodern econometrics required for applied research in energy and developmenteconomics;

3. Deepen and/or broaden the participants’ knowledge and understanding of materialsneeded for empirical quantitative analysis of micro and macro data relevant to energyissues; and

4. Acquaint the participants with Stata and provide them with the technical proficiency ofundertaking data management and statistical analyses using Stata.

The training course consisted of lecture-discussions, guided group exercises, and case presentations.

III. Program of Activities

11 April 2016

09:00 - 09:30 Registration

09:30 - 09:35 Welcome Remarks EPDP Presentation Dr. Majah-Leah Ravago

1 End-of-Event Report prepared by Ms. Charmaine Mignon S. Yalong, Capacity-Building Component Associate, with the assistance of Ms. Rochel S. Bartolay, Capacity-Building Component Administrative Assistant. April 2016.

09:35 - 09:40 Training Course Overview

09:40 - 10:00 Coffee Break

10:00 - 12:00

GETTING STARTED: Using Stata Data Presentation Summary Measures of Data Graphs of Data, etc. (HECS)

ESTIMATION Random Samples Point Estimation Some Methods of Estimation

Mr. Michael Del Mundo Mr. John Carlo Daquis Mr. Manuel Albis

12:00 - 1:30 Lunch Break

01:30 - 02:30 ESTIMATION AND HYPOTHESIS TESTING Interval Estimation Hypothesis Testing

Mr. Michael Del Mundo


03:00 - 05:30

ECONOMETRIC MODELS AND ECONOMIC DATA Econometric Models Variables Basic Functional Forms Data

SIMPLE LINEAR REGRESSION The Model Estimation of the Model Distribution of the Least Squares Estimator Properties of the Least Squares Estimator

Mr. Manuel Albis

12 APRIL 2016

08:00 - 09:00 Breakfast

09:00 - 10:00 Group Dynamics / Unfreezing

08:30 - 10:00

MULTIPLE LINEAR REGRESSION The Classical Multiple Linear Regression Model Estimation of the Regression Coefficients Distribution of the Least Squares Estimator

Dr. Rolando Danao Mr. John Carlo Daquis


10:30 - 12:00

ASSESSMENT OF THE ESTIMATED EQUATION Goodness-of-Fit: Coefficient of Determination and the Adjusted Coefficient of Determination Significance of the Regression Coefficients: The t Test Significance of the Regression Equation: The F Test Normality of the Residuals: The sk Test Exercise: Estimation using Stata

Dr. Rolando Danao Mr. John Carlo Daquis

1:00 - 01:30 Lunch Break

01:30 - 03:30

PROBLEMS IN LINEAR REGRESSION Multicollinearity

Consequences, Detection, and Remedial Measures Serial Correlation

Consequences, Detection, and Remedial Measures

Dr. Geoffrey Ducanes Mr. John Carlo Daquis


04:00 - 05:30

PROBLEMS IN LINEAR REGRESSION Heteroskedasticity

Consequences, Detection, and Remedial Measures

SPECIAL TOPICS Dummy Explanatory Variables Specification Error: The Ramsey Test

Dr. Geoffrey Ducanes Mr. John Carlo Daquis

13 APRIL 2016

07:00 - 08:00 Breakfast

08:00 - 09:00 Case Study Presentation Dr. Geoffrey Ducanes


09:10 - 11:30 Group Work on Cases Dr. Geoffrey Ducanes Mr. John Carlo Daquis Mr. Michael Del Mundo

11:30 - 12:30 Lunch

12:30 - 02:30 Case Presentations

Dr. Rolando Danao Dr. Geoffrey Ducanes Mr. John Carlo Daquis Mr. Michael Del Mundo


03:00 - 04:00 Closing Ceremonies Dr. Rolando Danao

IV. Resource Persons

The resource persons were as follows:

1. DR. ROLANDO A. DANAOProfessor EmeritusUP School of Economics

2. DR. GEOFFREY M. DUCANESProfessorUP School of Economics

3. MR. JOHN CARLO P. DAQUISAssistant ProfessorUP School of Statistics

4. MR. MANUEL LEONARD F. ALBISAssistant ProfessorUP School of Statistics

5. MR. MICHAEL DOMINIC DEL MUNDOAssistant ProfessorUP School of Statistics

The complete profile of the resource persons are provided in Annex 1.

V. Participants

Table 1 details the breakdown of the participants according to agency while the complete directory of participants is provided in Annex 2.

Table 1. Breakdown of Participants According to Agency

Agency Male Female Total

Department of Energy 9 10 19

Department of Trade and Industry 1 1 2

National Economic and Development Authority 0 4 4

Philippine Statistics Authority 1 1 2

National Electrification Administration 4 1 5

National Power Corporation 2 0 2

Philippine Electricity Market Corporation 2 0 2

TOTAL 19 17 36

Of the 36 participants, 52.77% were male (19 of 36) and 47.22% were female (17 of 36). Table 2 details the participants’ gender disaggregated data, with the number of person hours for the training.

Table 2. Number of Male and Female Participants and Corresponding Person Hours2

Particulars Male Female Total

Freq. % Freq. % Freq. %

Number of participants 19 52.77 17 47.22 36 100 Number of person hours of training completed 456 - 408 - 864 -

Other attendees. A total of nine (9) people who were not counted as official participants to the course also atttended the activity, namely: the EPDP Capacity-Building Component Advisor, four (4) resource persons, and four (4) EPDP staff.

VI. PowerPoint Presentations

Copies of the PowerPoint Presentations are provided in Annex 3.

VII. Workshop

The workshop involved group case work in the last afternoon session of the training course,where the participants were divided into 5 groups of 7-8 members each. Each group wasprovided with a specific case, five (5) questions to answer, and HECS data for analysis.

Dr. Geoffrey M. Ducanes moderated and provided the materials for the workshop.

Each group presented its case work at the end of the workshop. A panel composed of Dr.Rolando Danao, Dr. Geoffrey Ducanes, Mr. John Carlo Daquis, and Mr. Michael Del Mundoprovided observations and recommendations on each group’s presentation.

Annex 4 provides copies of each group’s output.

2 Required information by USAID for evaluation of training courses.

VIII. Pre- and Post-Course Tests

Pre- and post-course tests were conducted at the beginning and at the end of the trainingcourse to measure the amount of knowledge gained by the participants. Table 3 summarizesthe results of the participants’ pre- and post-course tests.

Table 3. Results of Pre- and Post-Course Tests

Last Name First Name Agency Pre-Course Post-Course

Almanzor Aejay NEA 12 14 Antoni Arrianne Ada DTI 10 14 Binondo Ferdinand DOE 9 - Bitare Gwendolyn NEDA 10 11 Catayong Andrew DOE 11 13 Coligado Michael DOE 12 13 Cruz Daisy DOE 14 13 Del Rosario Christian DOE 13 15 Dela Cruz Shiela DOE 14 14 Elmaga Anabel DOE 9 11 Evangelista Rodolfo NEA 10 9 Esquilona Mara Eloiza DOE 16 16 Gabis Mary Grace DOE 14 17 Hapil Josephine NEDA 14 11 Jandusay Jovee Rose DOE 9 13 Lived Roger NPC 14 13 Llavata Alona NEA 9 12 Lodovice Rosario PSA 10 14 Marqueses Raymond Joseph PEMC 13 14 Medrana Christopher DOE 6 11 Nique Jocelyn NEDA 12 14 Panado James NEA 10 16 Olap Marc Louie DOE 12 15 Orense Mario Pocholo DTI 13 16 Quitaneg Rachel Ann DOE 11 13 Reforma Kenneth DOE 11 11 Reyes Emilyn DOE 14 12 Salcedo Jeric Kim PEMC 11 12 Santos John Carlos NEA 9 13 Sernal Noel DOE 14 12 Siruma Karen Anne DOE 15 16 Tancongco Ziggy NPC 11 11 Tandoc Lianelle NEDA 14 17 Tolentino Genevieve DOE 9 16 Tolin Ernesto DOE 7 11 Velilla Redempta PSA 10 12

Copies of the pre- and post-course tests are provided in Annex 5.

IX. Summary of Evaluation

The 35 participants3 were requested to accomplish a four-part evaluation at the end of the training course, rating the following components: (1) achievement of course objectives; (2) course content and delivery; (3) evaluation of administrative and logistical arrangements; and (4) overall evaluation of the training course. The participants were also requested to evaluatethe resource persons considering mastery, presentation, and teacher-related personalitytraits. Table 4 summarizes the average of course ratings for each component.

Table 4. Average Score for Each Course Component4

Course Component Average Score

Achievement of Course Objectives 4.49

Course Content and Delivery 4.22

Administrative and Logistical Arrangements 4.31

OVERALL COURSE RATING 4.43

KEY RESULTS5

Achievement of Course Objectives. 94.29% or 33 out of the 35 respondentsbelieved that the training course achieved its objectives. 54.29% or 19 respondentsstrongly agreed (score of 5) and 40% or 14 respondents agreed (score of 4).Meanwhile, 5.71% or 2 out of 35 respondents neither agreed nor disagreed (score of3). The average score for achievement of course objectives is 4.49 out of 5.

Course Relevance and Usefulness. 85.71% or 30 out of the 35 respondents ratedthe training course as relevant to their current function and will be useful for their work.45.71% or 16 out of 35 respondents strongly agreed (score of 5) and 40% or 14 out35 respondents agreed (score of 4). Meanwhile, 14.29% or 5 out of 35 respondentsneither agreed nor disagreed (score of 3). The average score for course relevance is4.31 out of 5.

Overall Course Rating. 45.71% or 16 out of the 35 respondents gave the trainingcourse an overall rating of 5 (Excellent), 51.43% or 18 out of the 35 respondents gavean overall rating of 4 (Very Good), and 2.89% or 1 out of the 35 respondents gave anoverall rating of 3 (Good). The average score for overall course rating is 4.43 out of 5(Very Good to Excellent).

Course Strengths. The respondents commended the resource persons for being veryknowledgeable of the subject matter. The participants appreciated that the resourcepersons all tried to put econometrics and statistics jargon in simpler terms, and taughtin manner that was easy to understand for all participants. The respondents also highlyappreciated that they were able to apply all the theoretical principles they learned inthe exercises/case studies, which also allowed for hands-on practice of using Stata.

3 Mr. Ferdinand Binondo of the Department of Energy (DOE) was unable to accomplish the evalution form having left the training course early on the last day. 4 The evaluation forms utilized a likert scale where respondents were asked to answer in a scale of 1 to 5 (from strongly disagree to strongly agree and poor to excellent). The average score for each course component was obtained by (1) multiplying the number of respondents by the score of their chosen answer for every item; (2) adding all the products of each item and dividing by the total number of respondents to find the average score per item; and (3) getting the average score of all items to get the final score for each course component. 5 Achievement of course objectives, course relevance and usefulness, and overall course ratings are key performance indicators required by USAID.

The participants also highly appreciated that the training was participated by relevant public stakeholders in the energy sector. Finally, the respondents highly appreciated that resource persons and EPDP staff were all very approachable and accommodating.

Areas for Improvement. Some of the respondents felt that the training design shouldbe more focused on policy analysis. While the exercises in Stata were helpful, theparticipants felt that the output should also be interpreted. Some of the respondentsfelt that the time allocated for the course was insufficient. They felt that because timewas limited, some of the resource persons had to go over the topics in a hurried pace.As a result, some of the participants were not able to follow in some sessions. Therespondents also felt that some important topics were not fully discussed due to timeconstraints and believed that the training course would have been more effective if thetraining was scheduled for 5 days instead of 3. A number of respondents also felt thatsome hands-on exercises needed more detailed step-by-step instructions for thebenefit of those who were not very familiar with the computer programs used. Some ofthe participants requested for more individual/group exercises. In using Stata, most ofthe participants requested for a summary list of commands in the PowerPointpresentations so they can also practice on their own. Finally, most of the participantsrequested for a more spacious venue and better accessibility to power outlets,especially that the training course involved using laptops.

Tables 5, 6, 7, and 8 below present the results of the course evaluation conducted.

Table 5. Achievement of Course Objectives

CRITERIA

RATING

Strongly Disagree

(1)

Disagree (2)

Neutral (3)

Agree (4)

Strongly Agree

(5)

1. The training course provided theparticipants with sufficientinformation and technicalproficiency on econometricmethods and their applications toestimation, testing, interpretation,and evaluation of economicrelationships.

2 14 19

Table 6. Course Content and Delivery

CRITERIA

RATING

Strongly Disagree

(1)

Disagree (2)

Neutral (3)

Agree (4)

Strongly Agree

(5)

1. The training course wasorganized and easy to follow. 3 20 12

2. The training course was suitablefor the level of its participants. 1 8 15 11

3. The training course provided anappropriate balance betweeninstruction and practice.

5 17 13

4. The exercises usefullycomplemented the lectures. 1 16 18

5. The training course encouragedparticipation and interaction. 1 19 15

6. The time allotted for the trainingcourse was sufficient. 6 10 12 7

CRITERIA

RATING

Strongly Disagree

(1)

Disagree (2)

Neutral (3)

Agree (4)

Strongly Agree

(5)

7. The training course is relevant tomy current function/class and willbe useful in my work/studies.

5 14 16

Table 7. Evaluation of Administrative and Logistical Arrangements

CRITERIA

RATING

Strongly Disagree

(1)

Disagree (2)

Neutral (3)

Agree (4)

Strongly Agree

(5)

1. The room was an appropriatevenue for the training course andthe facilities were adequate.

1 3 18 13

2. The training course kitsdistributed were helpful andfacilitated the participants’learning.

1 13 21

3. The food and drinks served weresufficient and satisfactory. 18 17

4. The accommodations providedwere convenient and comfortable. 5 16 14

5. The transportation provided wasconvenient and comfortable. 9 17 9

Table 8. Overall Course Rating

CRITERIA

RATING

Poor (1)

Fair (2)

Good (3)

Very Good

(4)

Excellent (5)

OVERALL RATING OF THE TRAINING COURSE

0 0 1 18 16

EVALUTION OF RESOURCE PERSONS

A. Dr. Rolando A. Danao

CRITERIA

RATING

Poor (1)

Fair (2)

Good (3)

Very Good

(4)

Excellent (5)

1. Mastery of the Subject Matter

Ability to exhibit knowledge ofsubject matter.

Ability to inject currentdevelopments relevant to thetopic.

Ability to balanceprinciples/theories withpractical applications.

Ability to answer participants'questions on the subjectmatter.

2 14 19

2. Presentation of SubjectMatter

Preparedness of speaker Ability to arouse interest Ability to organize materials

for clarity and precision Ability to use appropriate

instructional materials

1 4 12 18

3. Teacher-Related PersonalityTraits

Ability to establish rapport2 5 14 14

Dr. Rolando A. Danao obtained an average score of 4.49 out of 5 for mastery of thesubject matter, 4.34 out of 5 for presentation, and 4.14 out of 5 for ability to establishrapport for an overall average of 4.32 out of 5.

B. Dr. Geoffrey M. Ducanes

CRITERIA

RATING

Poor (1)

Fair (2)

Good (3)

Very Good

(4)

Excellent (5)

1. Mastery of the Subject Matter 2 9 24 2. Presentation of Subject

Matter2 13 20


2 15 18

Dr. Geoffrey Ducanes obtained an average score of 4.63 out of 5 for mastery of thesubject matter, 4.51 out of 5 for presentation, and 4.46 out of 5 for ability to establishrapport for an overall average of 4.53 out of 5.

C. Mr. John Carlo P. Daquis

CRITERIA

RATING

Poor (1)

Fair (2)

Good (3)

Very Good

(4)

Excellent (5)


Matter


3 14 18

Mr. John Carlo P. Daquis obtained an average score of 4.43 out of 5 for mastery of thesubject matter and 4.43 out of 5 for ability to establish rapport for an overall average of4.43 out of 5.

D. Mr. Manuel F. Albis

CRITERIA

RATING

Poor (1)

Fair (2)

Good (3)

Very Good

(4)

Excellent (5)

1. Mastery of the Subject Matter 14 21 2. Presentation of Subject

Matter15 20


1 16 18

Mr. Manuel Albis obtained an average score of 4.60 out of 5 for mastery of the subjectmatter, 4.57 out of 5 for presentation, and 4.49 out of 5 for ability to establish rapport foran overall average of 4.55 out of 5.

E. Mr. Michael Dominic C. Del Mundo

CRITERIA

RATING

Poor (1)

Fair (2)

Good (3)

Very Good

(4)

Excellent (5)

1. Mastery of the Subject Matter 14 21 2. Presentation of Subject

Matter15 20


15 20

Mr. Michael del Mundo obtained an average score of 4.60 out of 5 for mastery of thesubject matter, 4.57 out of 5 for presentation, and 4.57 out of 5 for ability to establishrapport for an overall average of 4.58 out of 5.

X. Recommended Training Courses

The respondents were requested to list down their recommended courses for succeeding EPDP trainings. Below are their responses.

Recommended Training Courses

1. Forecasting Methods2. Short-term and long-term forecasting3. Comparative analysis of project cost4. Identification of policy issues and policy gaps5. Database management and other database-related courses6. Statistics course for beginners7. SPSS software training

ANNEXES

Annex 1 Profile of Resource Persons Annex 2 Directory of Participants Annex 3 PowerPoint Presentations Annex 4 Output of Group Case Work Annex 5 Pre- and Post-Course Tests

Annex 8. Terminal report on the Executive Course on Competition and Regulation in the Philippine Power Sector

A and session highlights

I. Introduction1

The Energy Policy and Development Program (EPDP) is a four-year program that aims to strengthen the capacity of the Philippine government (GPH) to formulate coherent and evidence-based policies and strategies for the sustainable, reliable, and efficient use of energy resources and technologies. It supports the national government, in particular the National Economic and Development Authority (NEDA) and the Department of Energy (DOE), in policy analysis and formulation for the energy sector. EPDP is implemented by the UPecon Foundation, Inc. through a grant from the United States Agency for International Development (USAID).

To foster a steady stream of technical and advisory support to the Philippine energy sector, EPDP organizes training courses aimed to create a pool of skilled practitioners in government who may be engaged to conduct energy policy development and program design.

In 2015, EPDP conducted an Executive Course on Competitive Electricity Markets designed to provide an understanding of the essential elements of competitive electricity markets with specific reference to the Philippine wholesale electricity market and its operations.

On 16 September 2016, EPDP held an Executive Course on Competition and Regulation in the Philippine Power Sector at Oakwood Premier Joy Nostalg Center, Ortigas, Pasig City. This executive course dealt with theories of competition and regulation, and their applications in the Philippine power sector. The course also served as a platform for discussions on striking a balance between competition and regulation policies; Philippine electric power industry regulations vis-à-vis the EPIRA implementation; and the importance of a competition law.

II. Course Objectives and Content

The course objectives were:

1. Acquaint the participants with the theories of competition and regulation, and itsapplications in the power sector at a level appropriate for energy practitioners;

2. Build better understanding and appreciation among GPH officials/officers on issuesrelating to competition and regulation in the Philippine power sector; and

3. Provide recommendations on how to strike a balance between competition andregulation given the current structure of the Philippine power sector.

III. Program of Activities

TIME TOPIC

08:00 - 08:30 Registration

08:30 - 08:45 Welcome Remarks EPDP Presentation

Dr. Majah-Leah Ravago, EPDP Program Director

08:45 - 10:15 Competition and Regulation: Theory and Practice

Dr. Raul V. Fabella, Professor Emeritus, UPSE


10:30 - 12:00 Philippine Power Sector Competitiveness Pre- and Post-EPIRA

Atty. Gloria Victoria Yap-Taruc, Commissioner, ERC

1 End-of-Event Report prepared by Ms. Charmaine Mignon S. Yalong, Capacity-Building Component Associate, with the assistance of Ms. Rochel S. Bartolay, Capacity-Building Component Administrative Assistant. 30 September 2016.

12:00 – 01:30 Lunch Break

01:30 - 03:00 The Philippine Competition Act: Advancing Competition in the Power Sector

Atty. Johannes Benjamin R. Bernabe, Commissioner, PCC


03:15 - 04:45 Striking a Balance between Competition and Regulation in the Philippine Power Sector

Dr. Raul V. Fabella, Professor Emeritus, UPSE

04:45 – 05:30 Evaluation

05:30 – 07:00 Light Dinner

IV. Resource Persons

The resource persons were as follows:

1. DR. RAUL V. FABELLAProfessor EmeritusUP School of Economics

2. ATTY. GLORIA VICTORIA C. YAP-TARUCCommissionerEnergy Regulatory Commission

3. ATTY. JOHANNES BENJAMIN R. BERNABECommissionerPhilippine Competition Commission

The complete profile of the resource persons are provided in Annex 1.

V. Participants

Table 1 details the breakdown of the participants according to agency while the completedirectory of participants is provided in Annex 2.

Table 1. Breakdown of Participants According to Agency

Agency Male Female Total

Department of Energy 1 2 3

Department of Trade and Industry 1 0 1

National Economic and Development Authority 2 4 6

Philippine Statistics Authority 0 2 2

National Electrification Administration 2 0 2

Philippine Competition Commission 3 4 7

Energy Regulatory Commission 2 3 5

National Power Corporation 2 0 2

Philippine Electricity Market Corporation 2 3 5

Senate Economic Planning Office / Office of Senator Sherwin T. Gatchalian

2 0 2

Joint Congressional Power Commission / Congressional Policy and Budget Research Department

2 1 3

TOTAL 19 19 38

Of the 38 participants, 50% were male (19 of 38) and 50% were female (19 of 38). Table 2 details the participants’ gender disaggregated data, with the number of person hours for the training.

Table 2. Number of Male and Female Participants and Corresponding Person Hours2

Particulars Male Female Total

Freq. % Freq. % Freq. %

Number of participants 19 50 19 50 38 100 Number of person hours of training completed 152 - 152 - 308 -

Other attendees. A total of 23 people who were not counted as official participants to the course also atttended the activity, namely: EPDP Agreement Officer’s Representative from USAID, EPDP Program Director, Deputy Program Director, three (3) resource persons, a representative from the USAID B-LEADERS, three (3) professors, and thirteen (13) EPDP staff.

VI. PowerPoint Presentations

Copies of the PowerPoint Presentations are provided in Annex 3.

VII. Summary of Evaluation

30 respondents accomplished the four-part evaluation at the end of the executive course, rating the following components: (1) achievement of course objectives; (2) course content and delivery; (3) evaluation of administrative and logistical arrangements; and (4) overall evaluation of the executive course. The participants were also requested to evaluate the resource persons considering mastery, presentation, and teacher-related personality traits.

Table 3. Average Score for Each Course Component3

Course Component Average Score

Achievement of Course Objectives 4.27

Course Content and Delivery 4.26

Administrative and Logistical Arrangements 4.47

OVERALL COURSE RATING 4.27

KEY RESULTS4

Achievement of Course Objectives. 96.67% or 29 out of the 30 respondentsbelieved that the training course achieved its objectives. 30% or 9 respondents stronglyagreed (score of 5) and 66.67% or 20 respondents agreed (score of 4). Meanwhile,

2 Required information by USAID for evaluation of training courses. 3 The evaluation forms utilized a likert scale where respondents were asked to answer in a scale of 1 to 5 (from strongly disagree to strongly agree and poor to excellent). The average score for each course component was obtained by (1) multiplying the number of respondents by the score of their chosen answer for every item; (2) adding all the products of each item and dividing by the total number of respondents to find the average score per item; and (3) getting the average score of all items to get the final score for each course component. 4 Achievement of course objectives, course relevance and usefulness, and overall course ratings are key performance indicators required by USAID.

3.33% or 1 respondent neither agreed nor disagreed. The average score for achievement of course objectives is 4.27 out of 5.

Course Relevance and Usefulness. 83.33% or 25 out of the 30 respondents ratedthe training course as relevant to their current function and will be useful for their work.43.33% or 13 out of 30 respondents strongly agreed (score of 5) and 40% or 12 out30 respondents agreed (score of 4). Meanwhile, 16.67% or 5 out of 30 respondentsneither agreed nor disagreed (score of 3). The average score for course relevance is4.27 out of 5.

Overall Course Rating. 30% or 9 out of the 30 respondents gave the training coursean overall rating of 5 (Excellent), 66.67% or 20 out of the 30 respondents gave anoverall rating of 4 (Very Good), and 3.33% or 1 out of the 30 respondents gave anoverall rating of 3 (Good). The average score for overall course rating is 4.27 out of 5(Good to Excellent).

Course Strengths. The respondents appreciated that the topics covered in thetraining course were relevant and commended the resource persons for being verymuch involved in and knowledgeable of the subject matter. The respondentsexpressed that the dialogues among officials/officers from the GPH provided moreopportunity to directly discuss the issues in the Philippine power sector. Therespondents also complimented the executive course for being well-organized andstructured.

Areas for Improvement. Some of the respondents felt that more specific examplesand illustrations from the resource persons were necessary for clarity and betterunderstanding of the subject matter. One of the respondents stated that casepresentations or a study on actual transactions relating to agreements could have beenbeneficial to test the “competitive elements” in the power sector. Another respondentalso felt that the lunch break could have been minimized to an hour instead of an hourand a half to maximize the afternoon session and for the program to finish earlier. Oneof them also expressed that the tables could have been arranged in a way thatparticipants from the back portion of the conference hall could still read the slidepresentations in front.

Other Recommendations from EPDP Team. It would be beneficial to have asynthesis of the discussion at the end of the course, to be conducted by a moderatorengaged by EPDP. The synthesis can also serve as an input to a Technical AdvisoryNote, which may serve as an output of the Executive Course. To encourage earlyattendance, breakfast may be served instead of morning snacks.

Tables 4, 5, 6, and 7 below present the results of the course evaluation conducted.

Table 4. Achievement of Course Objectives

CRITERIA

RATING

Strongly Disagree

(1)

Disagree (2)

Neutral (3)

Agree (4)

Strongly Agree

(5)

1 The executive course facilitated for better understanding and appreciation of issues relating to competition and regulation in the Philippine power sector.

1 20 9

Table 5. Course Content and Delivery

CRITERIA

RATING

Strongly Disagree

(1)

Disagree (2)

Neutral (3)

Agree (4)

Strongly Agree

(5)

1 The executive course was organized and easy to follow. 21 9

2 The executive course was suitable for the level of its participants.

1 22 7

3 The executive course encouraged participation and interaction. 1 19 10

4 The time allotted for the executive course was sufficient. 1 22 7

5 The executive course is relevant to my current function and will be useful in my work.

5 12 13

Table 6. Evaluation of Administrative and Logistical Arrangements

CRITERIA

RATING

Strongly Disagree

(1)

Disagree (2)

Neutral (3)

Agree (4)

Strongly Agree

(5)

1. The room was an appropriatevenue for the training course andthe facilities were adequate.

15 15

2. The course kits distributed werehelpful and facilitated theparticipants’ learning.

1 16 13

3. The food and drinks served weresufficient and satisfactory. 15 15

Table 7. Overall Course Rating

CRITERIA

RATING

Poor (1)

Fair (2)

Good (3)

Very Good

(4)

Excellent (5)

OVERALL RATING OF THE ACTIVITY

1 20 9

EVALUTION OF RESOURCE PERSONS

A. Dr. Raul V. Fabella

CRITERIA

RATING

Poor (1)

Fair (2)

Good (3)

Very Good

(4)

Excellent (5)

1. Mastery of the Subject Matter

Ability to exhibit knowledge ofsubject matter.

Ability to inject currentdevelopments relevant to thetopic.

Ability to balanceprinciples/theories withpractical applications.

11 19

Ability to answer participants'questions on the subjectmatter.

2. Presentation of SubjectMatter

Preparedness of speaker Ability to arouse interest Ability to organize materials

for clarity and precision Ability to use appropriate

instructional materials

15 15


Ability to establish rapport2 13 15

Dr. Raul V. Fabella obtained an average score of 4.63 out of 5 for mastery of the subjectmatter, 4.5 out of 5 for presentation, and 4.43 out of 5 for ability to establish rapport foran overall average of 4.52 out of 5.

B. Atty. Gloria Victoria C. Yap-Taruc

CRITERIA

RATING

Poor (1)

Fair (2)

Good (3)

Very Good

(4)

Excellent (5)


Matter1 3 16 10


1 4 15 10

Atty. Gloria Victoria C. Yap-Taruc obtained an average score of 4.33 out of 5 for masteryof the subject matter, 4.17 out of 5 for presentation, and 4.13 out of 5 for ability to establishrapport for an overall average of 4.21 out of 5.

C. Atty. Johannes Benjamin R. Bernabe

CRITERIA

RATING

Poor (1)

Fair (2)

Good (3)

Very Good

(4)

Excellent (5)


Matter3 16 11


3 16 11

Atty. Johannes Benjamin R. Bernabe obtained an average score of 4.3 out of 5 formastery of the subject matter, 4.27 out of 5 for presentation, and 4.27 out of 5 for abilityto establish rapport for an overall average of 4.28 out of 5.

VIII. Recommended Training Courses

The respondents were requested to list down their recommended courses for succeeding EPDP trainings. The lone suggestion was conducting a training course on renewable energy.

ANNEXES

Annex 1 Profile of Resource Persons Annex 2 Directory of Participants Annex 3 PowerPoint Presentations

SESSION TITLE AND

RESOURCE PERSONS Regulation and Competition in Far-from-Frontier Economies

Dr. Raul V. Fabella (UPSE/EPDP)

DATE 16 SEPTEMBER 2016 PREPARED

BY Shirra de Guia and Rainier Ric de la Cruz

SUBJECT MATTER/ISSUE

Many economies mainly rely on the market mechanism as the engine for growth. However, the market is not always perfect and there are instances wherein this mechanism fails due to the unbridled pursuit of self-interest by agents resulting in a social outcome inferior to the best feasible outcome given taste, technology and resources. When this occurs, government intervention may be an appropriate response, though noting that a market failure is a necessary but not a sufficient condition for government intervention.

When this need for government intervention arises, then the state may use two instruments, regulation and competition policy, to address the market failure. Regulation works best when institutions are strong and in cases where market dominance is natural. Meanwhile, competition policy is more appropriate when institutions are weak and market dominance is artifactual or created through legislative action. Regulation and competition policy when implemented properly may solve market frailties.

HIGHLIGHTS OF THE PRESENTATION

DR. RAUL V. FABELLA

Discussions on regulation and competition policy should not take place in a vacuumand must be situated in their proper context, that is, in both time and space. In thispresentation, the specific context is the Philippines as a far-from-frontier economy.

Frontier economies and far-from-frontier economies (FFFE) differ in two aspects,namely, technology and institutions. Frontier economies, mostly OECD members,have state-of-the-art technology and advanced institutions while FFFEs are usuallycomprised of less developed countries, which lag in both dimensions. Growth infrontier economies is driven by innovation in production driven by firms, while FFFEsrely on imitation innovation. To converge with frontier economies, far-from-frontiercountries need to close the gap between these two dimensions (e.g. the acquisition ofnew equipment from investments).

The relationship between competition and innovation is usually explained by theInverted U hypothesis which, according to Aghion (2002), posits that at the initialstages of development, new entrants will increase competition and innovation,however, as the number of firms increases, the level of competition and innovationwill reach its peak and investments will then decline due to the diminished gains frominnovation. Hence, an optimal number of firms must be determined to maximize thisrelationship. A monopoly (one dominant firm) is not optimal because there is littleincentive to innovate. On the other hand, perfect competition (many firms) is alsosuboptimal because the returns to innovation are too diffuse and firms will not be ableto afford the investment cost. Following Schumpeter, a small number of large firmswill be the optimal solution.

The market is the engine for growth while the state acts as the enabler of the market.When there is a market failure, then the state can use the following tools to heal thefrailty of the market, either through regulation or competition policy. The instrument tobe used depends on the type of the market failure:

o If the market failure is a moral hazard case, then this could be healed throughregulation. To illustrate, the fishing game example demonstrates how the statecan intervene through the use of statutes to influence the market in reachingthe Pareto Optimum. However, it is worth noting that the combination of thepenalty, cost, and enforcement of the statute is critical in the intervention. Apoor combination of the three could make the market failure worse. Inaddition, competition policy should not be used in this case since the use ofthe said policy would only result in another market failure known as thetragedy of the commons.

o Another type of market failure is the case of the monopoly. Here, bothregulation and competition policy could be used. For natural monopolies,imposing a price cap will lower the price and increase the consumer surplus.Meanwhile, for artificial/legal monopolies, lifting the franchise and allowingnew entrants will lead to an increase of the consumer surplus.

Regulation should be used when market dominance is natural, that is, the monopolyresults from economic laws and not through legal barriers (e.g. water distribution).Usually, a franchise is granted to a firm in order to attract entry of firms when thereare missing markets or to avoid waste of resources due to the nature of the market.On the other hand, competition policy should be employed when market dominanceis artifactual, that is, when the monopoly is enabled through a) an act of the state(franchise) without scale economies (PLDT in 1980’s, NASUTRA as sugarmonopsonist during Marcos era) or b) collusion/cartel.

Meta-market failures occur when properly functioning markets produce an outcomeconsidered as deficient from the perspective of the meta-social welfare function. Forexample, a perfectly competitive market’s Pareto efficient outcome may however bevery unequal (Piketty Inequality). In this case, only regulation will work (e.g. Piketty’staxation or Tobin tax).

It is important to mind the institutional context when advocating for interventions. Forinstance, the Philippines is considered to have weak institutions, and in this regard, itis more effective to implement light-handed interventions. In contrast, if the economyis known to have strong institutions, such as Japan, then heavy-handed interventionswould more likely succeed.

The market for influence and interest group lobbying will lead to restricted markets.The Olson effect shows that small cohesive groups beat large diffuse groups in themarket for influence.

The East Asian miracle is usually thrown as an argument against competition policysince the East Asian economies attained rapid growth and convergence even withoutcompetition policy. However, the East Asian success was not an industrial policystory but was mainly due to strong institutions. For the EA model, institutions are farmore important than the policies. Hence, for weak institutions, it is better to use

competition policy to enable the markets to grow since regulation will not likely work.

Q&A DISCUSSION

Mr. Jedison Sta. Ana (ERC): Can you enlighten us about the Piketty tax/Tobin tax?

Dr. Raul V. Fabella: According to the Piketty thesis, when left alone, market economies will lead to greater inequality in terms of wealth and income. If inequality is not stemmed, then this will threaten the viability of capitalism. However, government can respond to this by imposing wealth taxes and higher income taxes for the rich. The Tobin tax is a tax on movements of capital across borders. Here, part of the gains in capital flows should be taxed to solve the development problems.

Mr. Jedison Sta. Ana (ERC): I think that’s what we’re getting into, especially with the new policies from the Department of Finance.

Dr. Raul V. Fabella: I agree with some of the proposed policies. Abolishment of the VAT on the elderly should be seriously considered. Senior citizen privileges are comparably high in the Philippines. We should make policy more targeted. Reduce discount to 10% which is a more acceptable level.

Atty. Raphael M. Lotilla:

You talked about the historical part. We had the earliest implementation of the anti-trust law. Perhaps because of the EA model, we did not impose anti-trust regulations. Why is it that during the American period, anti-trust was not implemented despite the strong institutions?

Dr. Raul V. Fabella : The Sherman Anti-trust Act was enacted in 1890 but the implementation was spotty. The strength of the US economy in the gilded age was due to the activities of the robber barons; each robber baron had a senator representing him, and successful anti-trust suits were very few. It was only after the implementation of the 1914-1915 Federal Anti-Trust Act did the activity take off again. In the Philippines, perhaps the Americans felt that the country was a far-from-frontier economy. In addition, the most important problem faced by the country that time was the case of missing markets rather than lack of competition, hence anti-trust was not applicable.

---END---

EPDP LECTURE SERIES HIGHLIGHTS REPORT

SESSION TITLE AND

RESOURCE PERSONS Philippine Power Sector Competitiveness Pre- and Post EPIRA Gloria Victoria C. Yap Taruc (Commissioner, Energy Regulatory Commission)


BY David Joseph U. Anabo Shirra Jazel L. De Guia


The Philippine power sector has undergone structural changes with the implementation of the Electric Power Industry Reform Act (EPIRA) and its goal of making the electric power industry more competitive. Despite having made various efforts, the Energy Regulatory Commission (ERC) still sees multiple challenges going forward, especially in transmission and in distribution.

GLORIA VICTORIA C. YAP TARUC

The lecture is arranged as follows: 1) history of Philippine electric power (PEP)industry, 2) industry structure before and after EPIRA, 3) the Energy RegulatoryCommission (ERC), and 4) steps undertaken by the ERC when it comes tocompetition in the PEP industry

The history of the Philippines is intertwined with the history of the PEP industry. Fromthe 1890s to the 1960s, it was led by the private sector. There was only a shortsegment when the government was active in the PEP industry.

MERALCO started as a railway company and a provider of electric service, and wasestablished in 1903. The war damaged its electric rail asset, leading them to focusinstead on electric power service in the lode center of Manila.

The lode center of Manila where there was a private distribution utility was likewiseheld true in other areas in the archipelago like Davao, Cebu and Iligan. These are theprivate distribution utilities that operated in their own respective poblacions. Likewise,there were areas that were not energized. In our area, there was an electric companyowned by the private sector. It had its own generator and provided its owndistribution lines; however, hours of coverage were very limited. We had ourgenerator; same goes with businesses. There were businesses that had their owngenerator. It’s also closely intertwined with politics.

In 1936, the National Power Corporation (NPC) was established for hydraulic power.This was capital intensive, but there was a dearth of capital in the Philippines at thattime. It could have been the Americans who could have put it up, but it was thePhilippine government that tried to put in hydraulic power. In the 1960s, to addressrural electrification, the Electric Administration was created, but it did not answer theneeds of our citizens from the fringes

In 1969, National Electrification Administration (NEA) was put into office. It wasmandated to provide technical and financial help to electric cooperatives. I think thefirst electric cooperative was somewhere in Mindanao (MORESCO), which wasstarted by then Vice President Emmanuel Pelaez. The president at the time wasPresident Ferdinand Marcos

There were several changes in NPC. It had capital infusion in 1936 and was givenauthority to borrow funds that carried sovereign guarantee to strengthen its capitalstructure.

In 1972, Martial law was imposed and Presidential Decree No. 40 (PD 40) wasissued. PD 40 allowed NPC monopoly over the generation sector. It was also at thattime when NPC negotiated for the acquisition of the generating assets of MERALCOfor $1.1 Million. Prior to that, MERALCO was linked to the electric power industry.1903, it was the Americans who owned MERALCO (for the first 40 years), andsometime in the 1960s, it was bought by the Lopez family. The Lopez family,because we did not have a developed capital market which developed mortgageindentures and had a capital funding road show in Wall Street.

MERALCO in the 1960s became the first Philippine company that reached the 1Billion mark. When Martial Law came, most of the public utilities were acquired byGovernment. It seems that paying $1.1 Million was the fee that was paid by NPC inorder to acquire the generating assets of MERALCO pursuant to the mandate of PD40. PD 40 also allowed NPC to go into the distribution to the electric cooperatives.

PD 40 granted monopoly powers to NPC as it now concentrated all generation andtransmission and ownership and development rights to the entity.

Prior to 1987, NPC built the Bataan Nuclear Power Plant (BNPP). It was supposed toaddress our requirement for electricity supplies, but when 1987 came, it was shelvedafter the Aquino administration assumed into office due to allegations of corruptionand because there was not a safety measure in light of the Chernobyl incident.

In 1987, President Cory Aquino issued EO 215 which allowed private corporations,cooperatives and other similar associations to construct and operate generatingplants subject to the Rules and Regulation formulated by NPC. Before, it was onlythe NPC that was responsible for constructing for generation and transmission. EO215 allowed the entry of the private sector. Initially, the belief of NPC was that it onlyhad sole authority to build; to enter into contracts. But because there was a delay inthe approval of NPC contracts, we were experiencing a dearth of supply at that time

In 1987 - 2001, there was a power crisis during Aquino-Ramos regime. Weexperienced brownouts. We had electricity only until 9:00. Between 9:00am-4:00pm,there was no electricity. At that time, government employees were allowed to gohome early because it was inefficient to work without electricity.

The electric power crisis was addressed by the Ramos regime using the Electricpower crisis act. The act allowed them to modify procurements of foods and servicesand the manner of contracting. At that time, we were also experiencing the aftermathof the Marcos years. We were experiencing burdening debt.

NPC’s debt carried sovereign guarantee, and government can no longer sustainpayments for the obligations of NPC. At the same time, during the Ramos years, weentered into several IPPs that contained the minimum off-peak contracts. These weredone under the assumption that the economy was going to grow – but it did nothappen. Because of this, we were saddled with payments for unconsumed energy.

All of these served as the bedrock for the legislators to think of how to improve thePEP industry. NPC’s bankruptcy -> growing sentiment toward privatizing NPCassets, and restructuring the electricity industry -> Enactment of EPIRA

Prior to the EPIRA, generation and transmission was held by NPC, and wasdistributed to our electric cooperatives and DUs all the way to the consumers. Post-EPIRA in 2001 divided the sector into four sectors. Generation and Supply wereopen and competitive, whereas transmission and distribution were regulated as theyare natural monopolies. The structure is now Generation -> Transmission is now heldby the National Grid Corporation of the Philippines (NGCP) after being awarded theconcession sometime in 2007; WESM [PEMC] as market operator -> DistributionUtilities (DUs) -> Captive Consumers.

Some ask why there is a need for WESM. I think we need to explain, coming fromthe PEP, how the industry is now structured – since there are still a lot ofmisconceptions. They say WESM should not be put in place, but I think WESMshould be in place in a restructured industry. Before, when there was only a singlebuyer, where NPC was the generation provider and transmission provider, yes,maybe you don’t need a market operator. It was really government monopoly overgeneration sector. There wasn’t going to be any difficulty in dispatching. NPC wouldhave a portfolio that it would dispatch. Due to the privatization of NPC assets as aresult of EPIRA, there is a need for an entity that would now prioritize who should bedispatched. This is WESM. It is a necessary consequence of EPIRA.

As part of EPIRA, the ERC’s mandate was expanded. It now covers rate fixing,consumer protection, safety and reliability standards, and competition.

For rate-fixing, rates must be such that it allows for the recovery of just andreasonable costs and reasonable returns to enable the entity to operate viable. It’s abalance in the interest of the consumer and the interest of the investor.

ERC fixes rates to be charged by entities regulated as a common carrier. NGCP,transmission and distribution are considered common carriers, and the ERC fixes therates accorded to them. Before, RORV was the rate methodology used, but in 2003,ERC adopted the Performance Based Regulation (PBR) for the transmissionwheeling rate, and in 2004, in adopted PBR for the private distribution utilities. In thecase of electric cooperatives, the commission is adopting the benchmarking and thecash-based methodology for the off-grid area.

For distribution, we are using PBR for the private distribution utility, and the RSEC-WR for the electric cooperatives, basically through the benchmarking method, but forthe off-grid areas, we are using the cash-based methodology. We approve bilateralcontracts entered into by DUs with generation companies, and for those capitalexpenses required of a DU outside of what has been submitted in their regulatorycompact in the PBR period, there are times they would have certain capex whichwould fall under force majeure - that is likewise submitted to the approval andevaluation of the Commission.

We are also in charge of providing the rate for the Universal Charge (UC). UCs arepart of restructuring the industry and the components of which are for the payment ofthe standard debt and standard contract costs. There is a provision in the EPIRAwhen it comes to standard contract costs of eligible DUs. I think this will come on thelatter part when we have full implementation of Retail Competition and Open Access(RCOA). We also provide universal charges for missionary electrification for theSPUG areas managed by NPC. These are for the off-grid areas like Palawan,Mindoro, Romblon, Masbate, etc. Rates in these areas are subsidized. They do notpay the total cost of generation. Part of what is not paid by them from the totalgeneration charge forms part of the UC that is a non-bypassable charge paid by allon-grid users. It’s a subsidy.

Under the Renewable Energy (RE) Law, we also provided for the rates of the Feed-In-Tariffs (FIT). This is to incentivize the growth of renewable energy especially forthe emerging technology. This is also similar to a universal charge. This isdetermined by the ERC, and is applicable for a period of 20 years

Consumer protection is being done by the ERC, and we have actually issued ourMagna Carta for residential electricity consumers. We approve meter types andmeter shops that calibrate meters, and the monitoring of technical and non-technicalSystems loss.

Regarding Safety and Reliability Standards, under the EPIRA, the Commissionprovided with the assistance of the Distribution Management Committee and the GridManagement Committee. They serve as our technical arm and they help us inevaluating the safety and reliability standards that must be put in place

With respect to competition, under Section 45, the ERC is mandated to promotecompetition, encourage market development, ensure customer choice and penalizeabuse of market power. Even with the existence of the new Philippine CompetitionAuthority Act, the mandate of the ERC under Section 45 has remained intact. This isthe basis used by the Commission when it imposed several limitations on DUs actingas a local rep. As mentioned by Prof. Fabella earlier, we were hailed to the courtregarding RCOA. The Commission did the regulatory intervention, but as possiblyobserved by Prof. Fabella, we have weak institutions. The regulator is gung-ho onputting regulatory intervention to provide the level playing field, but we have otherareas of Government that we also have to contend with like the Judiciary.

Before EPIRA, it was basically a monopoly of Government for transmission andgeneration. Before your rate was a flat rate, without knowing the components of therate. By virtue of EPIRA, we have now identified the components of your rate.(Generation – 50%; Transmission – 10%; Distribution, Supply and Metering – 10%-12%; Non-Production Costs – 23%)

Removal of Cross-Subsidies within a Grid between Grid and our classes ofcustomers. The only subsidy left aside from the one for the off-grid would be thelifeline rate and the senior citizens’.

When privatization of NPC assets was commenced, ERC had the role of ratetranslation once it was already sold to the private sector and they enter into powersupply agreements. NPC assets can be categorized into transmission and sub-transmission assets, generation, and IPP contracts. Transmission assets that havealready been spun off through a concession agreement: the National GridCorporation of the Philippines.

The government corporation that holds the bulk of the NPC is now the Power SectorAssets and Liabilities Management Corporation (PSALM). This is also tasked tomanage the standard debt and standard contract costs and the universal charges.

The role of the ERC with respect to the WESM spot market, opened in June 2006 areas follows: 1) responsible for the approval of the price determination methodology, 2)responsible for the putting up of the offer cap which started initially at 62, a decisionmade by the tripartite composed of the Department of Energy (DOE) Secretary whichwas then headed by Sec. Popo Lotilla, when the amount of 62 as the offer cap wasput in place. Initially, that’s the start of the market. Then, sometime in December2013, we lowered the offer cap to 32, and also to address the spike in the market, thevolatility in the market, and also to mitigate the spike, we put in a secondary bid cap.This was really aimed at protecting the interest of the consumers.

Competition is also self-competition. In order to foster competition in the naturalmonopoly, the Commission put in place Performance Based Regulation (PBR) for thetransmission in 2003, and 2004 for the Private DUs. For the electric cooperatives, wealso termed it as a mini-PBR. Electric cooperatives are those serving outside MetroManila, on-grid and off-grid areas, are non-stock, non-profit entities owned by theconsumers. There were criticisms against the return on rate base (RORB) becauseof information asymmetry and possible gold plating, so around 2004, theCommissioners then with the help of consultants, adopted a different ratemethodology (PBR). The criticisms against PBR centers on determination of theRegulatory Asset Base (RAB). The determination of the RAB is critical in tariffsetting. The Commission had done its part in studying how to value the RAB. Weinitially adopted the OD-RT method, but we are now studying along the lines of rollingforward the RAB. PBR is a recognition that a trade-off exists between the service forquality at which electricity is supplied and the cost for providing service.

Service quality is regulated by ERC under the following means:o Efficiency thru review of the Annual Revenue Requirement (ARR). Before

PBR, whenever we determine the ARR, we only looked at ‘used’ and ‘useful’.Under the PBR, we have another filter, which is that the regulator asks whatis an efficient and prudent extent on the part of the regulator to haveemployed, for example a sub-station with this particular specification, asopposed to another sub-station? Why buy Mercedes vs Toyota assuming thatthey give the same utility? – need to explain this to the regulator.

o Service Quality thru setting of performance standards. A regulated entityunder the PBR would promise things like turn-around time for applicationsand length of interruptions. These are measured to test their efficiency in therendition of their service. If they do not comply with what they promised duringthe regulatory compact, they are penalized.

The Philippines’ total installed generating capacity continued to grow by 4.6% from2014 to 2015, with an equivalent 821 MW increase. Still, coal has the largest share.When ERC was able to put in place the FIT, we saw the growth of the renewableenergy in the form of wind and solar. This is likewise in tandem with the DOE as DOEis the entity responsible for the setting of the installation targets. As the regulator, wewould also like to coordinate the best that we can with DOE with respect to thesetting of the installation targets. The reason is that the FIT rate is getting higher withthe provision of higher installation targets. Note that in the first round of FIT, we onlyhad 50 MW for solar, but now, we have an addition of 450 MW.

The major players based on the annual report of the market in 2014 are still SanMiguel, Aboitiz, First Gen, PSALM, and Semirara Mining and Power Corporation. Interms of concentration, it is still moderately concentrated.

Regarding competition safeguards provided for under the EPIRA, regulatoryinterventions accorded to the ERC include putting market share limitations, cross-ownership provision, and sourcing of energy from your allied companies (as in thecase of MERALCO and San Bueneventura, and San Miguel and ALECO).

We promulgated our own competition rules in 2006. For monitoring; safety standardsand reliability, the Commission issued in 2013 rules to govern the monitoring ofreliability performance of generating units and transmission business. We arecurrently developing a performance card. During the December 2013 incident, a highpercentage of outages that resulted in the price spike. This is also a question ofmonitoring the schedules of the outages. With respect to the schedule of outages, itrests with DOE and NBPP as they are the ones in charge of the Brief OperatingManagement Protocol that is laid out annually and reviewed quarterly.

Inasmuch as we would like to push the reliability standards, we are still in the courseof developing a score card regarding the efficiency of the plant. While we issueCertificate of Compliance (COC) before a generating company is able to operate, ifthis is done, the technical evaluation is done when it renews or applies for a COC.Along the way, whether or not it performs well is something that we need to develop.We received news such as boiler tube leaks, but we can only rely on their logbook.The Commission is developing a scorecard in order to give them a grade – toascertain their efficiency – considering that inefficient plants more often than notincreases the cost of electricity.

To promote competition under the RE law, we put in the FIT. The FIT rate was basedon a cost of a representative project, is technology-specific, and is guaranteed 20years duration. The FIT allowance as of date is around P 0.124/kWh. This isattributable to the additional 450

One of the major concerns in implementing the FIT is the penetration limits. This isthe concern of the transmission company. If you would note in the Visayas region,particularly in Negros, you’ll see a lot of solar plants operating in Negros, but they arenot able to deliver because of constraints. There is only a 450 HVDC line connectingLuzon and Visayas, and there is a rate on how to dispatch it. There are times whenproduction of the solar plants is constrained.

RCOA is one of the critical aspects that the Commission is focused on. Inasmuch asthe Commission wanted to provide regulatory intervention, it was prevailed upon bythe players. In fact, there is a pending case in the Regional Trial Court (RTC) ofPasig. Just for the record, the Commission does not recognize the ruling of the RTCof Pasig because we take the position that it is only the Supreme Court (SC) who hasjurisdiction to halt the implementation of EPIRA, and RCOA is one of the pillars ofEPIRA.

Challenges in implementing RCOA includes slow migration of consumers to thecontestable market , market concentration, and displaced Contract Capacity Energyarising from the migration of Contestable Customers to the Contestable retail market.

The makeup of the contestable market as shown by data from PEMC shows thatMERALCO has 55%. The next, Aboitiz, is only 13%. The contestable market is about19%. Out of 19%, 55% of that is occupied by MERALCO. Quoting Sec. Popo, 2001EPIRA was put into place, but MERALCO’s franchise was extended sometime in2003 or 2004, and it even has an enlarged franchise. It was in 2003 that thefranchise of MERALCO was enlarged, and it accounts for 55% of the energy sales inthe Philippines. 46% of the GDP is generated within its franchise area, and data fromMERALCO’s disclosure to the PSE shows that 60% of Philippine manufacturingoutput is generated within its franchise area.

With this kind of set-up, we did put a regulatory intervention. Under EPIRA,MERALCO, or any DU for that matter doesn’t need to secure a license in order tosupply their contestable market. Having seen that, we tried to level the playing fieldby saying that this is just a transitional arrangement, but it does not mean that is avested right. By virtue of that, we issued the resolution sometime in Marchdisallowing a local Retail Energy Supplier (RES) to operate within the contestablemarket, giving it three years to wind out, but they’re not prohibited from creating theirown RES-DU affiliate. This is because of the possibility of cross-subsidy within thefirm. It would be in the best interest to have a separate juridical entity. The local RESis functionally related to a separate juridical entity, so you’ll not really know whetheror not the contestable are being subsidized. Those are the ills that we wanted toaddress in our resolution. We were not as successful as we were hailed to court.

Q&A DISCUSSION

DR. MAJAH-LEAH V. RAVAGO Does the regulator not recognize the RTC?

GLORIA VICTORIA C. YAP TARUC As far as the Commission is concerned, the RTC does not have jurisdiction over us because the ERC issued the resolutions (particularly on revised licensing and market share cap, etc.) in the implementation of the RCOA, a pillar of the EPIRA. Under Section 78 of the EPIRA, it says that it is only the Supreme Court that can halt the implementation of the EPIRA. That is the legal position that the Commission took. That is why, whenever there is a hearing, we say that the RTC does not have jurisdiction over us. The lower court, the RTC, insisted that they had jurisdiction over us, so we filed a position before the Supreme Court, questioning the actions of the judge. We have likewise submitted the motion to inhibit the judge.

DR. RAUL V. FABELLA You mentioned the gridlock in transmission, especially Negros? There is a problem here that NGCP, where the concession contract seems to mandate that expansion or upgrade of transmission is the role of NGCP, and ERC approving it, will then allow NGCP to raise the transmission tariffs. It seems to me that for really large projects like upgrading the Negros-Cebu-Leyte submarine connection, as well as possibly Negros-Zamboanga connection which is not there yet. If we wait for NGCP to do that, and for ERC to approve it, the wait will be really long. My position in such upgrading is that the Government should just spend money. After all, there is some fiscal space in the Government now. They can just turn over the asset to be managed by the NGCP. What is the position of the ERC on this?

GLORIA VICTORIA C. YAP TARUC First, I’d like to clarify that the Transmission Development Plan (TDP) is made by the NGCP, and it is assisted likewise by TransCo. After the TDP is made by them, it is submitted to the DOE for approval, and forms part of the national policy. After that, the TDP is translated into an application by the NGCP before the Commission, whether it be contained in their PBR submission, or in an emergency capex that they really need to do.

I think there should be a closer coordination between Government agencies and NGCP when it comes to capital infrastructure. I say this because the problem is that when it reaches the ERC, and the ERC sees that there are issues with affordability of the price, there are times it might slash on some of the capex of NGCP which are already contained in the TDP. On hindsight, and perhaps for the future, it might be good if ERC is already onboard not wearing a regulator’s hat, but providing guidance in saying the cost might be too prohibitive; the affordability concerns might not be addressed here.

With respect to why there are gridlocks, it’s not only confined to DOE; to the ERC, but likewise to the different departments of Government. Note that in the Batangas area, they are friendly to the generating companies. You see a lot of generating companies being magnetized in the area of Batangas. They have a friendly local Government. Also, I think in Negros, the conversion of the land. Under the charter of DOE, I think it’s Section 23, it may act as an alter-ego of the president, calling an inter-agency committee that will take a look at energy projects. With respect to local Governments, sometimes, putting up a power plant you even need to talk to the barangay. If the barangay official is not aligned with the mayor, then you don’t get the permit. The parochial politics should also be addressed maybe by having one person in Government, a conductor who steers the process. Perhaps the DOE secretary can be the captain of the ship in putting together different agencies of Government so that the policies could be more or less aligned, and also to do away with approval processes.

DR. RAUL V. FABELLA Is it to your understanding that transmission assets can be procured only through NGCP?

GLORIA VICTORIA C. YAP TARUC Because of the franchise, it can be interpreted that way, but the option you were saying earlier, is it possible for Government to put in the transmission facilities? Maybe we can ask TransCo since it is actually the owner of the facilities if it can put up the facility, then turn it over to NGCP for the operations and maintenance, and also maybe for the payments of the facility. The economic ownership is actually with NGCP during the duration of the concession agreement, and after the concession agreement is over, the Government buys back at fair market value of these assets. The concession agreement is only until 2025, and subject to renewal. I don’t know how it will be renewed; whether or not there’s going to be a direct negotiation or if it’s going to be a privatization in the same manner that Government did before where its franchise is good for 50 years. In fact, that’ the risk that NGCP is looking at. It only has a concession agreement good for 25 years, although its franchise is for 50 years.

DR. RAUL V. FABELLA Let me just clarify. NGCP does not own the assets, right? It manages it. It’s a concession.

GLORIA VICTORIA C. YAP TARUC The economic ownership is theirs, and it will be turned over to Government after.

DR. RAUL V. FABELLA Yeah, and that means that the Government does not have to pay NGCP when it is turned over because the asset has already been paid for by the increase in tariffs.

GLORIA VICTORIA C. YAP TARUC There is a terminal value, but the terminal value will count likewise what has been paid for in the form of tariffs. So there’s a terminal value, and there’s a computation for that

SOLFICAR P. PESCUELA (PSA): I would like to refer to the slide on the cross-ownership. I know that the ERC is monitoring the market share limitation, but I would like to flag the NGCP franchise, which I feel is usually overlooked, as the NGCP franchise allowed generation to have a 1% stake in NGCP, as opposed to what EPIRA said.

I was wondering if the ERC has been monitoring that aspect in terms of shares that generation companies might have with NGCP. Although it is just 1%, but there are several exemptions provided there.

GLORIA VICTORIA C. YAP TARUC You are actually right. The franchise is actually law right? It emasculates EPIRA to a certain extent when it comes to the ownership. To my knowledge, we have not had a formal study on that. Although there are a lot of stories floating around; some GenCos may have ownership also. We can take a look at that.

FELY JABRON

I just want to clarify, for as far as we know TransCo has been renamed to NGCP. Am I correct?

GLORIA VICTORIA C. YAP TARUC Before, NPP held generation and transmission. When EPIRA came into being, there were many several corporations put in place. PSALM managed the assets and liabilities of NPP, TransCo received the NPP’s transmission facilities that got spun off. TransCo is a Government-owned and controlled corporation. In 2007, TransCo, under its mandate from EPIRA to have a concession; to privatize the operations and management by way of concession agreement, Government undertook a privatization process, headed by DCAM, and after the privatization, the winning bidder was NGCP. TransCo is still the owner of the facility, but is not operating it. At the end of the concession agreement, it will all be turned over to TransCo.

MYLENE C. CAPONGCOL EPIRA’s objective includes encouraging competition in generation. We had experienced the difficulties of one generator interconnecting to the grid. This is a 600MW, and we all know that whenever Sual goes offline, we get always get an ‘alert’ from the NGCP. Maybe this is one area where the incumbents are using some kind of technical or commercial issues that hinders the operation of a generating asset. If this is the case for other areas, then we’ll be having a problem encouraging more generators. Another issue is the commercial banks. They are really asking too much from a generator.

GLORIA VICTORIA C. YAP TARUC I just want to add that generating companies nowadays is that they themselves put up a dedicated point-to-point. These dedicated point-to-point applications are submitted to the Commission. For as long as there is only one generating company that will be using it, it will not be turned over to the NGCP, although it is operated by the NGCP.

Our approvals would say that in the event that these are turned over to NGCP subject to optimization. Eventually, these should have been put in place by NGCP, but they did not put it up, so it is the generating companies that put it up. In the long run, these should all form part of the RAB of NGCP. So, when it now forms part of the RAB, that will also widen the base and increase the transmission costs. Tempering of the transmission costs may be done with a wider billing determinant with more users; population growth.

ATTY. RAPHAEL M. LOTILLA I think the transmission concessionaire is the biggest monopoly in the country. I think there’s a mismatch between the ability of Government transmission planning and transmission regulation. As I see it, ERC’s focus is really more on generation, and yet, the biggest monopoly actually has less regulation than is desirable. That is why I proposed last time that Government can make use of both the planning and the regulatory sides of both TransCo and PSALM as counterparties to the concession agreement. Right now, I think that both PSALM and TransCo feel they are mandated or have responsibilities in managing the concession contract.

The concession contract, as Commissioner Taruc pointed out, has been modified in parts by the franchise, which is a law passed by Congress, but to the extent that the concession contract as modified by the franchise has to be managed by somebody, then PSALM and TransCo should be drafted to perform those responsibilities, or at the very least, to provide those resources.

Right now, to the extent Grid Management Committee is dependent budget-wise on NGCP to provide. It’s a case where the regulated entity is the one providing the resources to support the mechanism that is supposed to supervise it. We can’t operate this way. Government, as Dr. Fabella pointed out, has surplus, and should provide the money. If we can’t provide it through the budget, it can raise it through the corporate mechanism; which are TransCo and PSALM, and then these resources will be made available to ERC and DOE. I think it is a matter of harnessing these two. We need consultants both domestically and abroad, but the budget of ERC will not be able to afford those. We will have to beg again with the development partners. It is a multi-billion dollar industry, and then you have a lynchpin which is the biggest monopoly. That’s the only way we can do it efficiently.

GLORIA VICTORIA C. YAP TARUC I don’t think we can do something about the concession agreement; TransCo’s role has certainly been emasculated in terms of the planning of the transmission development

ATTY. RAPHAEL M. LOTILLA But that’s with DOE now, and that’s why DOE also NEEDS those resources for planning. It cannot be the case where NGCP just submits the plan to Government and to the regulator during the regulatory period. There must be a way for DOE to plan on its own independent of

NGCP, then it can give instructions to NGCP on how to lay out the transmission lines, at what pace, and if necessary, provide additional funding or determine other ways of constructing transmission lines

GLORIA VICTORIA C. YAP TARUC It should really be Government dictating. It would seem that the initial output is from NGCP, and more often than not, whatever NGCP submits gets a go. Maybe Government should have a more active role in saying that “You have been given the franchise to operate and maintain and to improve the facility, and based on our own assessment, you are supposed to put in transmission facilities along this area. That would now be the role of DOE.

ATTY. RAPHAEL M. LOTILLA

Yes, and if needed, and Government can come in to finance the gap between what is really due for the financial returns of NGCP as a concessionaire, and the levels of transmission fees we are willing to pass on to consumers. I think this is where we can have a push.

DR. MAJAH-LEAH V. RAVAGO Going back to the issue of RCOA. I think you showed in one of your slides, it was 55% for Luzon and Visayas because we don’t have a market yet for Mindanao. I think a better way to look at how competition with regards to retailing is proceeding is to look at the franchise area of say, MERALCO as you are looking at the competition in the franchise area anyway.

I think from the data of PEMC we have looked at, about 20% of customers only are under customers, or are already contestable customers – 80% are captive. In that 20% of contestable customers, 11% is served by MERALCO in their franchise area. So, it’s like 80% is captive, and 11% of the 20% is also served by MERALCO. So, I wonder where the competition is going in that respect, because it’s still MERALCO.

Another thing, when we went to a PEMC open house, contestable customers also raise the issue that the suppliers are becoming like taxi drivers. It’s supposed to be that they are fighting over the customers for the RCOA, but in this case, it is the suppliers who are choosing whom to supply. I guess, like what they said, it depends on the load profile of the customer. As an example, Megamall has now BPOs on top of it, so its load profile is somewhat constant. Suppliers like this, unlike a manufacturing company that only operates 8:00am – 5:00pm where suppliers won’t have anyone to supply at night. So, what is the perspective of the ERC on this, and how do we proceed?

GLORIA VICTORIA C. YAP TARUC The manner of contracting is less with the end-user and the RES considering price is deregulated. What the ERC has done so far is we issued those resolutions to level the playing field. What has been quarantined by the TRO is actually the one of MERALCO as a local RES. The problem with MERALCO as a local RES is that it occupies a very large space – 55%. Most of the load centers of manufacturing are within the MERALCO franchise. That’s why they would like to remain with MERALCO. The problem is that remaining in MERALCO; we would have less retail electricity suppliers who would go into the picture. So far, what we did is that even existence of that case, we have been licensing a lot of RES in the hope that we would have more players who can offer their services to end-users.

DR. RAUL V. FABELLA I’ll give an example of a particular candidate for contestable market that opted to stay with MERALCO – and that is IRRI. IRRI wanted to become a contestable consumer and they looked at various suppliers like Aboitiz, but then they look at quality of supply – not only the price – and they decided that IRRI’s banks are sensitive to fluctuations, so they decided to stay with MERALCO. So, here is a case where there really was a consideration on the part of the consumer, and they realized that the quality of power was more stable with MERALCO, and that was why they stayed. So maybe some of these things are for considerations that are really economic.

MALE 1 (PEMC) I think there is some misinformation on how supply and distribution is related. If Supplier A will be using MERALCO as its distributor, then the quality that MERALCO will give to Supplier A should also be consistent with the quality if MERALCO should choose another supplier.

GLORIA VICTORIA C. YAP TARUC It is the same - what Manufacturing A and Manufacturing B in terms of reliability. Most contestable customers say that it is not my business. The only thing that is important is that if my cost of electricity is 20%, then I want to manage it to the extent of 20%. They don’t want to go into more robust negotiations. Maybe it depends on the customer. Though, there are also firms that really want manage their resources. They get their own RES and some even buy on their own. So, it also depends on the level of sophistication and need of the customer.

HELEN VALDERAMA I’d like to find out if there has been a resolution to the 2013 price spike issue? I’m sure it was a difficult investigation, but I’m wondering if you can share with us what the difficulties have been to correct market abuses. Since up to now, if I’m not mistaken, there’s no resolution; there’s no closure to the issue.

GLORIA VICTORIA C. YAP TARUC The investigation has already been completed. Our investigating units have already filed a case for anti-competition. 13 respondents, including MERALCO. Inasmuch as we wanted to proceed with the case, there were several pleading filed by them. These are motions pending before us, and we will be resolving these motions soon.

You ask what the challenges were when we put in the regulatory intervention. It was difficult on our part to look for that deregulated price. If we were to use the Administrative Price Determination Methodology (APDM) already in place, it would only account for the previous four weeks, prior to the December 2013 incident, but prior to that, the supply was already getting tighter. So we could not tell ourselves that that was already a normal supply. So, we made ourselves creative. We backtracked a little and said that for the previous 9 months, it would have at least represented normal pricing; normal supply. That’s why we came up with a 6.425 price, I think.

At the same time, it was subject for a motion for reconsideration, which we denied. After our denial for their motion of reconsideration, they also brought cases before us, now pending before the Court of Appeals. So, aside from the Supreme Court case, where they filed a petition under Rule 55 for perverted use of discretion on the part of the Commission to have allowed the staggering of the rate, we are still facing a Court of Appeals case regarding the imposition of the regulated price. Thank God the case filed against us before the Ombudsman has already been dismissed.

EPDP LECTURE SERIES HIGHLIGHTS REPORT

SESSION TITLE AND

RESOURCE PERSONS The Philippine Competition Act: Advancing Competition in the Power Sector Atty. Johannes Benjamin R. Bernabe (PCC Commissioner)


BY Rica C. Santos David Joseph U. Anabo


This session discussed the Philippine Competition Act, and how its passage and, later, the creation of the Philippine Competition Commission, will effectively promote efficiency and ensure market competition in the Philippine power sector.

Why should we care about competition law? This law operationalizes a mandate inthe constitution, almost 30 years since 1987. The application of the law is socomprehensive. It covers all matters of business activities and as consumers, all of usstand to be affected by the way that this law will be implemented. With these, it isimperative to understand and appreciate this law.

Historical Context of the Competition Law

It is not true that we did not have a competition law before. It just so happened that itwas enshrined in a fairly specific statute, which is more popularly known as theRevised Penal Code. It is a compilation of all the books of statutes and criminal lawprovisions, as enshrined in the two books of the Penal Code. There’s a particularsection there, Article 186, which provides the prohibitions and the liabilities arisingfrom the legal restraints of trade. This particular provision’s origin can be traced to theSherman Act of the United States. This Revised Penal Code has been in place since1930, during the American period, the colonial government at that time simplyadapted the provisions of the Sherman Code into our Revised Penal Code. In the 85years that it existed, one would think that there would be a lot of cases where theserecords of proceedings that would appear in our casebooks which show rulings of theSupreme Court on matters affecting competition. However, there’s only one case thathas been decided by the Supreme Court, which pertained to two operators of buslines in the Northern part of Luzon. Why is this so?

One possible reason is, being a criminal statute, to be able to find someone liable fora criminal offense, would require proof beyond reasonable doubt. In the RevisedPenal Code, the liability imposed for violating Article 186 was the equivalent ofroughly USD 5 or Php 200. There’s a scale, it goes up to Php 2,000 andimprisonment of up to six years. If you were a fiscal at that time and you want tomarshal your resources prosecuting meaningful offenses, would you go after violatorsof the competition provision?

Another thing to bear in mind, there have been a number of special laws or statuesscattered about our statute books, which seek to penalize anti-competitive acts orbehavior. You will find it in the Cheaper Medicines Act, the Price Act, special lawsdealing with specific industries. While those were in place, there has been very fewcases, where actual liability has been imposed on entities which may have violatedthese special statutes, notwithstanding the fact that they have been in place for 10-20years.

The very first initiative filed in the legislature on the comprehensive competition lawwas made in 1993. Given that the thrust of the Ramos administration was to grow theeconomy and expand business opportunities, having competition law in place in theearly 90s to punish near monopolization of an industry, that kind of legal initiative

would probably be seen as contrary to the aspirations of that particular administration. The initiative to have a comprehensive competition law lacked appreciation. From 1930s to 1990s, we were hard put to come up with this critical piece of competition legislation.

If you look at the structure of the Philippine economy, especially in the last 20 years,you will find that to a large extent, many of the industries are dominated by a fewentities. If that is the economic context, is it not the time to have a comprehensivecompetition law in place?

If you look at the trajectory of how international best practices evolve, almost allcountries have begun or are beginning the process of implementing competition law.In ASEAN itself, Cambodia is the only one that has not yet implemented competitionlaw.

The Philippine Competition Act

With all these factors in mind, there’s a strong argument for a competition law to beenacted. In August 2015, we finally had the Philippine Comprehensive CompetitionAct enacted and signed into law. It tries to discipline behavior in the markets. Broadlyspeaking, there are three categories which are sought to be disciplined by the PCA.The first relate to anti-competitive activities. Anti-competitive agreements include:cartels or price-fixing agreements, bid-rigging output limitation, and marketallocations. The extent to which they can substantially lessen or prevent competitiondetermines if they can be ruled as anti-competitive agreements. The second broadcategory relate to abuse of dominant position, which include predatory pricing,imposing barriers to entry, and tying agreements. Predatory pricing, for instance,happens when dominant players price match to drive new entrants out of the market,then ratchet up the price to recoup incurred losses. The third type related to anti-competitive mergers and acquisitions.

There are some preliminary considerations that have to be borne in mind. First, inimplementing the PCA, we should disabuse ourselves of the notion that there arehard rules. There are no precise applications of what are strictly prohibited except fora few particular circumstances. Many times, contextual analysis or the rule of reasonmeaning you look at the entire set of circumstances surrounding an activity should beexamined before you make a determination that an act is necessarily prohibited ornot. Another important consideration is that to test whether an act substantiallylessens or restricts competition. We take into account the social benefits and weigh itagainst the social costs of that activity. Another consideration, in the old initiatives,monopolies were prohibited on a per se basis. Now, reflecting the new thrust ofprogressive jurisdiction, bigness is not necessarily bad. You may even be a monopolyin the market for as long as it does not conduct itself in an abusive manner, it will notnecessarily be penalized or subject to liability under the PCA. In case of mergers andacquisitions, they will only be prevented if they prevent competition in a substantialmanner. If you juxtapose this in relation to the rules of EPIRA where you have cross-ownership requirements where there are percentages of what you are allowed to ownif you are already into the DU business, those are specific to EPIRA, thosepercentages do not apply in PCA. That said, there are certain thresholds, forinstance, when are we supposed to ascertain whether a particular market share istantamount to a dominant position, the law itself provides that on a preliminarydisputable --presumption basis — 50% would be regarded as dominance, but that isso far as percentages apply in the PCA.

Though the PCA is all-encompassing, there are a few exceptions. For instance, tradeassociations which are intended to maintain quality standards in a particular sector,are exempt from the application of the PCA. Secondly, collective bargainingagreements where employees’ unions are certified for the purpose of negotiating withtheir employers, are not covered by the PCA.

For anti-competitive agreements, there are three types which are sought to beprescribed by the PCA. The first type relates to those agreements which are between

and among competitors and are per se prohibited. For instance, restricting competition as to price, also known as price-fixing, and bid-rigging. Bid-rigging—how does it relate to the government Procurement Act (RA 9184)? RA 9184 already punishes any kind of bid-rigging or any fraudulent activity in the process of supplying services to government entities. Our perspective is that, insofar as the GPRA provides criminal penalties for both government officials and private stakeholders involved in bid-rigging, GPRA continues to apply. However, insofar as there are administrative liabilities which arise from the same kind of activity where bid-rigging are concerned, one would argue that even if GPRA imposes an administrative penalty, it should not preclude the PCC from its ability to impose similar administrative penalties for bid-rigging. The reason is, the harm that is being caused in the administrative penalties imposed under the GPRA is different from that of the PCC.

The second type of anti-competitive agreements relate to those between and amongcompetitors which have the object or effect of substantially preventing, restricting orlessening competition. The law enumerated a couple of examples: a) Setting, limiting,or controlling production, markets, technical development, or investment, b) Marketallocation.

The third type of anti-competitive agreements are those which are not covered by thefirst two. Those agreements may not necessarily be between competitors (say,between a generator and distributor, in the context of the energy sector), and havethe object or effect of substantially preventing, restricting or lessening competition.There are exceptions: a) those that have a contribution to efficiency where there isimprovement in the production or distribution of goods or services, or b) thosepromoting technical or economic progress while allowing consumers a fair share ofthe resulting benefits, may not necessarily be deemed a violation.

It is crucial to understand who are competitors in a market. The law does not definewho are competitors, rather it defines who are not competitors. We have adoptedwhat the European Union has provided in their regulations, and that is, if you are partessentially of a single economic entity, you are under common control with anotherentity/ies, have common economic interests, and cannot act independent of eachother, then those entities cannot be considered as competitors.

The next category that is sought to be disciplined by the PCA is abuse of dominantposition. We must first define dominant position and in what market, which brings usto the concept of relevant market. There is no hard and fast rule of defining what arelevant market is. Oftentimes, it is a case by case analysis of a particular set ofconditions. Another important aspect is that relevant market has a geographicalelement to it. Once you’ve determined that there is dominant position in a relevantmarket, then we can apply these enumerations of what constitutes abuse dominantposition. Some of these overlap others, and it must be noted that there are someexceptions for each: a) predatory pricing, b) imposing barriers to entry, c) tyingarrangements, d) price discrimination, e) Imposing restrictions on the lease orcontract for sale or trade of goods or services concerning where, to whom, or in whatforms goods or services may be sold or traded, f) Making supply of particular goodsor services dependent upon the purchase of other goods or services from the supplierwhich have no direct connection with the main goods or services to be supplied, g)Directly or indirectly imposing unfairly low purchase prices for the goods or servicesof, among others, marginalized agricultural producers, fisher-folk, micro-, small-,medium-scale enterprises, and other marginalized service providers and producers.

The third broad category relates to mergers and acquisitions. These are notnecessarily prohibited. Some would say that the PCA just adds another layer ofbureaucracy and red tape for business. Looking at international best practices,practically all competition authorities have some sort of power to review mergers andacquisitions. The PCA has also tried to come up with procedures intended to facilitateapproval of mergers and acquisitions. We have made sure that the process isexpedited with timing. We have to complete our reviews within a period of 90 days,otherwise, the review is deemed terminated and the submission for review of mergers

and acquisitions is deemed approved. We have worked on providing nexus thresholds. Instead of subjecting all M & As for review, only those with assets in excess of Php 1 billion and revenues are generated from these assets, are subject to compulsory notification and a corresponding review.

How the Competition Law Relates to the Energy Sector

The provisions that embody this relationship are found in three sections of the PCA.The first one lays out the relationship with sector regulators. In laying out thisrelationship, the PCC shall have an original and primary jurisdiction in theenforcement and regulation of all competition-related issues. If or when an issueinvolves competition, then the PCC would have “dibs” on adjudicating this issue.

What would happen if the issue involves both the regulator and the PCC? Among thesector regulators, ERC has the most explicit mandate on competition, in contrast tothe NTC and the Securities and Exchange Commission for example. The ERC doesbecause of what EPIRA and its rules on competition. When the law was beinglegislated, a more elaborate approach to this was being proposed. A section says thatthe agencies, referring to the ERC and PCC, should enter into memorandums ofunderstanding, which however was deleted as it might be ruled as unconstitutional inthe legislative sense. So now we have Section 32 which says that the entities whichhave a competition mandate or those sector regulators concerned should work hand-in-hand with the PCC to ensure that the aspirations of promoting competitionprotecting consumers are ensured. The Commission, when exercising its jurisdiction,should consult with the sector regulators.

The ERC is specifically mentioned in the list of powers and functions of the PCC,where it states that, the power to intervene or participate in administrative andregulatory proceedings require consideration of the provisions of this act, that areinitiated by, for instance, the ERC. There’s a Memorandum of Understanding to beexecuted between the PCC and ERC that aims to establish collaboration betweensaid agencies.

Some of the difficulties in trying to reconcile with EPIRA and PCA are probablybecause in the repealing cause of the PCA, the only functions of the ERC that wereexplicitly repealed pertain to Section 43U on the functions of the ERC under EPIRA.Section 43U states: “The ERC shall have the original and exclusive jurisdiction overall cases contesting rates, fees, fines and penalties imposed by the ERC in theexercise of the above mentioned powers, functions and responsibilities and over allcases involving disputes between and among participants or players in the energysector.”

There is a DOE directive recently for the ERC and PCC to look into the powershortage which occurred in July 2016. In the Senate investigation on the matter, boththe respective Chair of the ERC and PCC came out with the statement that theagencies are collaborating on conducting a fact-finding inquiry into the matter.Logically, that is the best way forward. You have a body with an expertise on theenergy sector and the other one makes a factual determination of basis for any legalaction.

Another area of complementarity between PCC and the ERC, in harmonizing thePCA and EPIRA, is in terms of establishing congruence between PCA andcompetition rules of EPIRA and its IRR provisions on Anti-Competitive Behavior andUnfair Trade Practices. Participants in the energy sector must be provided with betterguidance and clarity by coming up with a uniform set of elements which would consistof anti-competitive behavior.

Q&A DISCUSSION 1. Q (Dr. Fabella): Transmission is managed by NGCP. If an outside player says, “Here

is a stretch of transmission between Negros and Zamboanga. I can construct it for alower price.” Is that possible under a concession contract? Is the concession contractanti-competitive in that sense?

A (Atty. Bernabe): I’m assuming that the concession contract is exclusive in natureand that exclusivity is embedded there by government mandate?

Comment: Actually, it’s not just a concession contract but they actually get anexclusive franchise.

A (Atty. Bernabe): This would fall under one of those situations mentioned earlierwhere the perceived anti-competitive behavior of an entity actually arises from anissuance by a government authority, in the sense that there are two entities involvedhere—a private entity and the government. I would imagine that the entity whichsigned on behalf of the government is not the GOCC, but an actual governmentagency. Going by the definition of what constitutes an entity under the PCA, and thedefinition covers any private entity but it excludes the government. This particulararrangement you have referred to would not be necessarily seen as anti-competitivebecause one of the parties is not a covered entity under the law. What is the cure forthat? PCC is also mandated to have a review of all the different governmentissuances and come up with a recommendation that those which have an anti-competitive impact be (unintelligible) and that is one way to ensure that restrictionsare eliminated from the market.

2. Q (Dr. Fabella): Since this is a franchise, would there be revision of the law?

A (Atty. Bernabe): I would imagine that will be necessary.

Comment (Commissioner Taruc): If cost is the concern, when NGCP proposes aTransmission Development Plan, it goes through a consultative process to ensurethat it captures the infrastructure that is needed. We have to apply that with the ERCon a certain regulatory period and that goes through a public hearing. We also needproof from them that they also procured in the least cost manner for the projectconstruction, when they make the submissions. There are minimum requirements.

Comment (Dr. Fabella): NGCP is a private corporation. Submissions would thereforetake into consideration the bottom line of the company. Public infrastructure involvesmore than that, it also considers the social benefits. NGCP will not be able to takethat into consideration. The grant of exclusivity seems to be frail from the viewpoint ofpublic welfare.

Comment (Atty. Bernabe): The granting authority in this case is Congress.

Comment (Commissioner Taruc): Maybe we can ask from Usec Mylene. I think it alsohas to do with the nature of the industry, on whether or not having more than oneplayer would be beneficial to the consumers at large, or just a single one that’sregulated would be the best? In terms of taking into consideration the archipelagicnature of our country, the infrastructure that needs to be put requires one-grid policyfor transmission.

Comment (Usec Mylene): The nature of the transmission is monopoly. We’re anarchipelagic country, and duplicating facilities would be costly on the part of theconsumers. That’s the reason why it’s heavily regulated.

Comment (Dr. Fabella): The Negros-Zamboanga connection that I’m talking about

does not exist. In a sense there is no bar against an outside player because this is not covered by a scale economy argument of exclusivity.

Comment (Usec Mylene): One of the conditions for the concession is a new franchise, for the system operator. I think it is a matter of enforcing what is in the transmission development plan of the NGCP. The ERC has already provided support for the conduct of the feasibility study. It’s not easy to put up projects, particularly in Mindanao.

Comment (Commissioner Taruc): Dr. Fabella mentioned more particularly, with reference to the Visayas-Mindanao connection, which means Luzon, Visayas, and Mindanao will be interconnected. That falls into the purview of the one-nation one-grid policy, wherein the mandate is still with NGCP. For them to do that, first they have to apply with ERC, for the approval of the feasibility study. After that, they will submit the budgetary requirements for the actual construction, which goes through public hearing. More than the issue of monopoly is the fact of how NGCP can be compelled to do that in spite of certain socio-politico-economic constraints and challenges.

3. Q (Dr. Ravago): DOE circular 2015, 607-14 says that the DOE endeavors to maintain30% share of renewables, coming from the 2014 Power Statistics where the REshare is just 25% of the fuel mix. It may eventually be mandated for the generationsector to have that 30-30-30-10 fuel mix (30% coal, 30% renewable, 30% natural gas,10% others). It was presented earlier by Commissioner Taruc that after EPIRA, thegeneration sector has already been privatized. If this fuel mix becomes mandated,wouldn’t that be anti-competitive in a sense? Because we’re imposing the supposedlycompetitive generation sector to have that mix?

A (Atty. Bernabe): It’s subject to debate. First, it falls within the purview of government issuances, which as stated earlier, probably are not subject to PCA in a sense that it cannot be prohibited. It is something that the PCC is mandated to advise the government agencies on the propriety of, mindful of promoting the objectives of competition. Another element that has to be taken account is the fact that, to an extent it relates to another objective of the government, that it’s trying to achieve regulation, and that has to be balanced with promoting competition. The number of policy objectives that the government has to pursue, depends on which one has a preferential leg on the ladder given the current circumstances. I would not suggest that the PCC would necessarily be the priority policy objective.

4. Q (Dr. Mendoza): unintelligibleA (Atty. Bernabe): We won’t come in. even if we do, we wouldn’t want to wade in oneverything. We have to weigh, whether or not, given the meager resources of thePCC if it’s wise for us to use those resources, and to determine whether there is realpublic interest involved.

5. Q (Dr. Ravago): If we mandate that 30-30-30-10, it would be detrimental to theconsumers because of the price. In the long run, we don’t know. Suppose PCC wouldnot come in, would you personally think that mandating that mix would be anti-competitive? The generation sector is already competitive, so if we mandatesomething in an already competitive sector, is it conflicting?

A (Atty. Bernabe): One school of thought would probably argue that it tends to favor those that already have a strong renewable energy portfolio, and those who have a preponderance of generating capacity, they would naturally be at a disadvantage. It’s like a legal barrier to entry for those who are invested in fossil fuel technology. I am

not in favor of PCC wading in.

6. Q (PEMC): How are we treating the installed capacity limits of (unintelligible) inrelation to the merger notification? Will PCC also review? How do you view unfairprice?You have a presumption in the PCA that if you fall within a certain threshold for acertain industry, then you have to notify before any merger or acquisition? UnderSection 25 of the EPIRA, there are already market share limitation. No generationcompany can own 25% of the installed capacity in a single grid, or 30% in the entirenational grid (grid referring to Luzon, Visayas, and Mindanao).

A (Atty. Bernabe): Insofar as monitoring and ensuring compliance with the percentage caps of ownership defined under EPIRA, that is clearly within the mandate of the ERC. The thresholds under which entities notify the PCC of proposed mergers and acquisitions, are vastly different. It’s different because we’re looking at it from a competition person. What we would like to watch out for is a situation where a merger or acquisition will result in a concentration of market power that will presumably result in a substantially lessened competition. What we’ve done is to establish certain transaction value thresholds. These are proxy for what might constitute that level of market concentration that will limit competition.

Comment (PEMC): The 25% and 30% thresholds of the EPIRA are actually competition(?). In the electricity market, even with smaller market share, you can be a price setter. We just don’t rely on HHI for analysis because it’s too static. We look at pivotal suppliers and price setters, which may have smaller market shares. In that sense, it’s not very regulatory. Any acquisition of installed capacity will never go to the PCC, it will always be ERC, even if it affects competition.

A (Atty. Bernabe): I had a contrary feedback who said that given the nature of investments in the energy sector, all transactions will probably need to be notified because of the fairly low threshold. Unless we come up with rules that exempt from the notification requirement, acquisitions of ordinary assets for the conduct of business, the kind of facilities and equipment that are being acquired, will need to be notified to the commission. For the purposes of mergers and acquisition in the industry, given the nature of the industry and cost of the assets involved, it’s more than likely that any M&A will need to be notified to the commission because of the PhP1 billion threshold. The 25% and 30% caps do have a competition element in them, but we think this is one of the powers of authority invested in the ERC, which will better suit to be implemented. So why duplicate something that they are fairly competent with.

Unfair pricing is deliberately undefined in the law. I don’t think the IRR or any guidelines that we come up with will necessarily define what is unfair. In paragraph G, section 15 earlier, that is something that will be a challenge to implement. If the situation warrants, we will have to deliberate on a case-to-case basis.

7. Q (Usec Mylene): Just a question on whether this falls under the competition issue.As we all know, retail competition and open access has been implemented and thosecontestable customers have to secure a retail supply contract with licensed retailelectricity suppliers. The contract, I believe, is internal to both—it doesn’t come to theERC for approval—but there is a confidentiality clause that the contestable customeris not allowed to disclose, even with the government. What is the remedy for this? Wecannot evaluate the competitiveness or the effectiveness of the retail competition as itfalls under EPIRA. We don’t know the basis of the contract.

A (Atty. Bernabe): The problem is the lack of transparency. It’s a bit challenging for me to see where the PCC or the PCA can be evoked unless there is a supposition

that there is something anti-competitive about the agreement. If there is something that is constitutive of anti-competitive agreement, then I suppose that is somewhere that PCC can wade in. In terms of transparency issues, anything that would make it an anti-competitive agreement will make it under the purview of the PCA. I’m not certain that we can impose transparency obligations on that contract. The PCC is actually developing rules on leniency which would allow one party to become a whistleblower, so that’s a way that we can wade in.

Q (Usec Mylene): There is also another case in which the RES is in the process of offering to the contestable customer. There is a mandatory requirement for all the contestable customers to contract a retail supplier. Somehow, the contestable customers are trying to find out that in trying to contract RES in compliance with the regulatory issuances. One common practice among the retail suppliers is that before they offer the price and volume to the contestable customer, they make them sign a confidentiality clause. That prohibits us from assessing what really is the problem in the retail competition. There are allegations or complaints that they cannot find a retail supplier, but we’re blind as to assessing the situation.

A (Atty. Bernabe): What’s useful is if we sit-down with you and try to structure how it all works, where the possible areas of intervention PCC might have. We’d welcome an opportunity to understand the situation better.

8. Q (Dr. Ravago): A clarificatory question on abuse of dominant power in a relevantmarket. In relation to the power sector, the RCOA, would you say that the relevantmarket would be the franchise area? RCOA, we’re unbundling the function of thedistributor, say Meralco, its role as a distributor versus role as supplier. We comparethe supplier business in the franchise area.

A (Atty. Bernabe): That would be a logical starting point

Q (Dr. Ravago): Meralco can also be a supplier under a franchise area because that would be separate from its distributor franchise area. In that sense we’re not going to analyze the RCOA in terms of competition, it’s just the franchise area.

9. Comment (Name not given): A possible focus that the PCC and the ERC could lookat is the barriers to entry. There are actually barriers to entry, like the availability ofinformation, commercial agreements between affiliate companies. These are existingbut are not specified in the current competition rules, except for the thresholdlimitation identified in the EPIRA. There are reports that the deregulated rate ofMeralco with the captive consumers are actually lower than the retail supply contractsthe suppliers have, which is against the spirit of competition.

Comment (Atty. Bernabe): In terms of what constitutes barriers to entry, will probably be developed later on. We’d like to have an ex-ante determination of this.

EPDP EXECUTIVE TRAINING SESSION HIGHLIGHTS REPORT

SESSION TITLE AND

RESOURCE PERSONS Balancing Competition Policy and Regulation in the Power Sector Dr. Raul V. Fabella (UPSE/EPDP)


BY Rainier Ric de la Cruz and Rica Santos


Market failures occur when the unbridled pursuit of self-interest by agents results in a social outcome inferior to the best feasible given taste, technology and resources. A market failure is a necessary but not a sufficient condition for government intervention. In instances when state intervention is required, the government must choose between regulation or competition policy. Different eras led to competing policies depending on the prevailing paradigm. During the Gilded Age, competition policy was more predominant in the form of the Sherman Anti-Trust Act, leading to a minimal state and maximal firm model. After World War II, the Commanding heights model prevailed and the state owned most of the basic industries, including the power sector. A shift in policy was again experienced in the 1980’s during the Thatcher-Reagan era when the state “retreated”, leading to more privatization and less regulation. In the Philippines, many of the basic industries have already been privatized and are only subject to regulation by sectoral regulatory agencies (ERC, PCC, etc.) and many state-sanctioned monopolies (NPC, PLDT) have been broken up in favor of more competition.

HIGHLIGHTS OF THE PRESENTATION

DR. RAUL V. FABELLA

The impact of competition or anti-trust laws on macroeconomic outcomes is notapparent, until these laws are lodged in an independent competition agency, whichis what the Philippine Competition Act (PCA) created. What is important is theeffect of the independent competition agency with respect to macroeconomicoutcomes.

Even under the American regime, there was already an antitrust law. During thepost-WWII era, the consciousness was that the paramount economic problem wasnot abuse of power, but missing markets. There was no big firm that was abusingits prerogatives; in fact, there was no firm at all. In order to attract entry by thesefirms, you had to grab anti-competitive prerogatives. Giving franchise is one way ofattracting players to enter an underdeveloped market. The awareness at that timedetermined the level of implementation of antitrust laws. In Japan, when antitrustlaws came into contact with promotion and industrial policy, antitrust laws invariablylost out.

Capacity building and industrial policy was the thing to do at that time, which madesense. When the problem is missing market, then the likely remedy will have ananti-competitive aspect to it. The East Asian success is not an industrial policystory. Why are we having a competition policy instead of industrial policy? Industrialpolicy where strong interventions worked was invariably supported by stronginstitutions. But where industrial policy was supported by weak institutions,industrial policy created disasters. Strong interventions like industrial policy readilybecomes translated into rent quagmires.

There are two eras and environments that are of interest to remember. First is theGilded Age, which was from 1875 to 1900. This was when the United States caughtup and overtook Europe and also the age of the Robber Barons. It embraced whatwas known as the Minimal state/Maximal firms, under the rubric of laissez faire.The private sector built and owned power and infrastructures like railroads andshipping ports, all privately-owned. It also spawned what are known as the “trusts”.There was a proliferation of trusts in the US about this time, among them are thesugar trust, tobacco trust, and steel trust. Many of these agglomerations andpowerful groups had no scale economies support, so they were in a sense,artificial. Hence, the Sherman Antitrust Act was created. The act itself was hardlyused until the passage of the fair trade act. An independent implementation agencywas created and that started the real activity of competition policy in the US.Contrast that with post-WWII model, the “Commanding Heights Model”, where thestate owns large basic industries. The name of the model refers to Vladimir Lenin,and that time everyone looked at Russia for a model. All large strategic and basicindustries were nationalized. The party that pushed the Commanding Heightsregime was the Labor party in the United Kingdom. At the time, social policy goalswere paramount; there was tremendous fear of market failure. The governmentwas viewed as benevolent.

The Philippines followed the post-WWII model. The power sector was owned andoperated by the state (NPC). In the 1980s, the landscape changed completely,because with Thatcher, the consciousness was not about market failures but aboutgovernment failures. Those basic, large industries that were nationalized werebleeding the economy. Government failure exists when the governmentintervention does worse than the market failure, in other words, you are better offwith letting the market be. Thus, deregulation and privatization, neoliberalism andthe Washington consensus.

Right after WWII, the tradition that was dominant was the Structure-Conduct-Performance (SCP) and the use of per se rules to limit abuse of market power. Soif you are 70% of the market, for example, you are in violation.

When the Chicago tradition came into the picture, in the 1970s, they thought thatregulation was captured by various strong lobbyists’ private interests. Therefore,regulation was not the way to go. If there is such a thing as dominance, thenfacilitate entry and contestability. There was a more assertive rule for reason.There was forbearance for size.

The Schumpeterian-Evolutionary school bases economic progress on innovationand entrepreneurship. A small number of large firms are needed to continuereinvesting in new processes and new innovations. Again, a forbearance for size.There is a belief in the ability of the market to discipline dominant market players.

The question posed by Coase (1937) on where the state ends and where themarket begins was largely decided in favor of markets, resulting to a retreat of thestate. The triumphs of competition enhancement in the Philippines are largely thelifting of state-sponsored anti-competitive rules. The Oil Price Stabilization Fund inenergy was one of the largest state-sponsored monopolies. Now, our energyindustry is already competitive. OPSF may be the main reason for our badinfrastructure as it ate up so much of the fiscal resources. The state was the soleimporter of crude and dictated pump prices. This was deregulated and privatized.This is one of the biggest reasons why we have today a fiscal space, when OPSFwent. In the telecommunications industry, PLDT was also a state-inducedmonopoly. Services were provided by a sole supplier protected by a franchise. Itwas deregulated. First, the government imposed a service area scheme but it was

not sustainable. Finally, we have the EPIRA. NPC was eating up fiscal resources. EPIRA had teething problems but restored fiscal health. All these are government-initiated anti-competition structures. In the power sector, generation and distribution are effected by huge scale economies and fixed costs.

Most regulations in the Philippines are largely lodged in sectoral regulatoryagencies. Many agencies also have industry promotion and safety net provisions ormandates. Promotion goals frequently express themselves as entry barriers. Forexample, the negative list of DTI, measured capacity, franchise, and importmonopoly for NFA. Safety net provisions are largely extended by distorting themarket. For example, tariff-free import for coops, and NFA.

The Magsaysay Doctrine says that those who have less in life will have more inlaw. This doctrine is still served by subversion of competition.

Promotion and safety net provision by subversion of competition may have madesense in the past when the fiscal health was perennially bad. With improved fiscalhealth, we can be more flexible and more efficient.

Safety net goals may be better served by approaches less subversive ofcompetition, especially when you have some fiscal space. If you have some fiscalspace, safety net provisions are better served by direct additional cash transfers.

The Philippines has a small fragmented power market of 12,000 megawatts, withMindanao isolated and Visayas tenuously integrated with Luzon. Market Integrationalways results in more stable supply and lower prices. The Pan-Philippine Grid isthus a pro-competitive project.

Another issue that must be studied is the feed-in tariff. FIT subsidies are largelydetermined through Congressional lobbying. We should consider auctioning FIT.Subjecting it to competition will benefit consumers. The Philippine CompetitionCommission should weigh in on this issue.

Germany has already felt the pain of FIT and has decided to auction it. This is nolonger an isolated policy issue considering the efficiency of new renewables.Germany has a new policy which provides that its industrial sector be partlyexempted from FIT to maintain competitiveness. This is something to think aboutfor the Philippines. We can shift charges from industry to services and the NationalTreasury, or the global fund.

Q&A DISCUSSION

Female 1: In strengthening the independence of our institutions like the ERC and the PCC, how strongly would fiscal autonomy be as a factor? Do you think it is an important element to strengthen the independence of our institutions?

Dr. Raul V. Fabella: I already mentioned the importance of independent agencies. If fiscal autonomy makes them even more independent, I’m all for that. I think, for example, we are spending too little money on regulation, but if it has to come from one place, better to have it from an independent source. But how do you do that? MWSS, for example, gets its budget from collections by Manila Water and Maynilad, not the Treasury. How do you structure an independent budget?

Chairman Arsenio Balisacan (Philippine Competition Commission): The wisdom of separating the budget of regulatory agencies has to do with avoiding potential conflicts of interest (e.g. NFA). There is an incentive not to forgo collections, and the law is trying to avoid this. We can remove this possibility for PCC. But, how do you keep revenues without distorting incentives for regulatory agencies? On the other hand, the downside of PCC always going to Congress is that they may slash the budget when faced with adverse interests.

Dr. Majah-Leah V. Ravago: In addition to what you said about the Pan-Philippine Grid, we also have to emphasize the appropriate capacity. Because right now, Visayas and Luzon are connected, but there are congestions. NGCP does have a plan to have that parallel connection to increase the capacity, and to have a loop in case of natural disasters, so they can still deliver power through the loop system. NGCP has a process that they have to go through in securing approval of the plan before they can implement the plan.

Dr. Raul V. Fabella: The loop is an idea but I think we have to learn to walk before we run. Just completing the grid is good enough for the moment, we shouldn’t stop it. But currently, we are struggling to complete the connection.

Mr. Nico Borromeo (Office of Sen. Gatchalian): My question is about the FIT. It has been established that the prices of renewable energy have been falling down. Grid parity is now seen as a matter of when, not if. From my understanding, the FIT is there to promote investment in the renewable energy sector with the assumption that it won’t have the FIT. But we’re seeing that if we wait it out, it might be possible that the renewable energy itself will become competitive without us doing anything but just wait it out. Why are we doing the FIT? What’s your opinion on that?

Dr. Raul V. Fabella: It’s a promotional policy. The technology is progressing rapidly and prices are coming down rapidly. I think that the best interim policy is auction. The decrease in prices will become resources for the general public. I would like to see the FIT disappear. Then we’ll have neutrality across the fuel mix space. You get to the grid if you are lowest cost. But at the moment, additional FIT incentives, I think, should be subject to auction. We can’t really do anything about the FIT because it’s contracted for 20 years. So for example, for the cogeneration of bagasse, price per kWh is Php 2, what they are getting now is Php 6.50. So that is why they are interested in using bagasse in Negros. The reason is the payback period is 4 years. Once they get the FIT certified, in the next 20 years they will get a lot of money.

Commissioner Johannes Bernabe (Philippine Competition Commission): Just to help put a context, and use a perspective coming from the Geneva’s International Centre for Trade and Sustainable Development, the genesis of that is really the climate change imperative. There is a compelling need to mitigate climate change. Part of the solution that the international policy community came up with was to examine the range of options, and one of those is to encourage countries and communities to develop the renewable energy sector. You can approximate such objective by providing subsidies for investments in renewable energy, trying to have sustainable energy portfolios, and proper mix of power-generating capacities. It just so happened that we chose a number of these instruments in the Philippines. It’s a question of various policy objectives that the government wants to pursue. This FIT was pursued in response to the fact that the Philippines is one of the most vulnerable countries to climate change. There are a lot of concerns with regard to how to implement FIT, moving forward, in view of the varying organic changes in our economy.

Dr. Raul V. Fabella: It is rather disconcerting that if you look at the pledges to the climate change effort, the US pledged about 35% reduction of carbon emission, Japan 26% reduction. Everyone is at about 30% reduction; we were at 70% reduction. What were we trying to do?

Commissioner Johannes Bernabe (Philippine Competition Commission): I was part of the negotiating team advising the Philippine Climate Change Commission. Looking at it from an international policy community perspective, the Philippines was trying to take a leadership role in terms of showing this is what we’re going to do. We want other countries to follow suit. We are a climate change vulnerable economy but we are prepared to set aside the fact that other developed countries have contributed to climate change far more than we did, but we will take a proactive initiative in this.

Chairman Arsenio Balisacan (Philippine Competition Commission): Poverty may actually be the greatest contributor to climate change. One of the least cost interventions that can be pursued is family planning for poor countries.

Dr. Majah-Leah V. Ravago: We agree that there are concerns about the environment. If you rank the source of emission, it’s really transport. So if you rank the instrument to address the environmental concerns, in terms of the instrument that we are using, it may not be the best. We can still contribute to addressing environmental concerns by doing more conservation through the use of energy resources on the demand side rather than the supply side, and then promoting more competition is also another instrument. Population management would also be another instrument that may be better than FIT. It’s not that we are not concerned about the environment but we just have to balance it with our development goals.

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Annex 9. EPDP users and visitors between 11 May to 27 September 2016

Google Analytics data covering 11 May 2016 – 27 September 2016

Page engagements on 26 September 2016

Volume II • Issue 1 July 2016The official newsletter of the Energy Policy and Development Program (EPDP)

EPDP Conducts Econometrics Course for PH Energy Professionals

This newsletter (Energy Policy and Development Program) is made possible by the generous support of the American People through the United States Agency for International Development (USAID). EPDP is a four-year Program implemented by the UPecon Foundation, Inc. The contents of this newsletter are the sole responsibility of the EPDP Team and do not necessarily reflect the views of USAID, the United States Government, or the UPecon Foundation, Inc.

UPecon Foundation

Representatives of EPDP, headed by Program Director Dr. Majah Ravago, paid a courtesy call to Socio-economic Planning Secretary and Director-General Emmanuel Esguerra of the National Economic and Development Authority (NEDA). The topics covered were: the confirmation of PSC Alternate/Focal Persons of NEDA, the EPDP-International Food Policy Research Institute (IFPRI) workshop, the collaborative IFPRI-EPDP-NEDA-DOE-PCC Research Project, and NEDA’s plan on the technical papers of “Ambisyon Natin 2040.” The NEDA Director-General sits on the program steering committee of the EPDP.

UP President Dr. Alfredo Pascual visits the EPDP booth during the UP Knowledge Festival held from 17-19 April 2016 at the Taal Vista Hotel in Tagaytay City. The event, with the theme “Utak at Puso para sa Bayan,” gathered the UP system’s top scientists, researchers, and artists in order to forge stronger interdisciplinary collaborations among themselves, and to cooperate towards effectively showcasing their outputs to media and the general public. The amount of new knowledge that has been generated from different research projects calls for a venue where we can communicate the important applications, significance, and relevance of UP’s research and creative work to Philippine society.

EPDPnews

In support of its objective to strengthen the capacity of the Philippine government to formulate coherent and evidence-based policies and strategies towards sustainable and efficient energy use, a training course on econometrics was conducted by the EPDP last 11-13 April 2016 at the University of the Philippines School of Economics and University Hotel.

Building on the Introduction to Statistical Principles and Survey Data Analysis course conducted by EPDP last 25-27 November 2015, the course covered modern econometrics and their application to energy issues and development.

In attendance were 36 employees from the Department of Energy, Department of Trade and Industry, National Economic and Development Authority, Philippine Statistics Authority, National Electrification Administration, National Power Corporation, and Philippine Electricity Market Corporation.

The lecture-discussions, guided group exercises, and case presentations were conducted by EPDP Fellows Rolando Danao and Geoffrey Ducanes of the UP School of Economics; and Manuel Albis, Michael del Mundo, and John Carlo Daquis of the UP School of Statistics.

A follow-up course on forecasting will be held on 11-13 July 2016.

The 3rd EPDP Program Steering Committee Meeting was held on 4 May 2016 at the office of the National Economic and Development Authority in Ortigas Center. The meeting, chaired by Socio-economic Planning Secretary and NEDA Director-General Emmanuel Esguerra, was a venue for updates among EPDP PSC members Department of Energy Secretary Zenaida Monsada, UPecon Foundation chair Orville Solon, and USAID Environment Director Jeremy Gustafson (representing USAID Philippines Director Susan Brems) on various energy-related concerns and the ways EPDP can help address these issues and provide further support to the Philippine government. Also in attendance were NEDA Deputy Director-Generals Rolando Tungpalan and Rosemarie Edillon; DOE Undersecretary Mylene Capongcol, Assistant Secretary Patrick Aquino, and Director Jesus Tamang; and USAID representatives Rebecca Carter and Gil Dy-Liacco.

The second lecture, on April 18, hosted economist Roehlano Briones and biofuels expert Rex Demafelis who presented their draft paper (co-authored with Bernadette Tongko and Kristel Gatdula) on “The Impact of Higher-Blended Biodiesel on the Coconut Industry of the Philippines.” Requested by the National Economic and Development Authority (NEDA), the study aims to help inform policy-making decisions towards a cleaner, more sustainable Philippines by assessing the economic and environmental impacts of increasing the blend of biodiesel in engine fuels from 2% to 5%, as under the Philippine Energy Plan 2013-2030, the target is 5% for 2015.

On April 28, Director Jesus Tamang and Director Irma Exconde of the DOE led the first of two EPDP lectures on Philippine Energy Planning. “Energy Planning: The Philippine Energy Plan and the Power Development Plan” presented the DOE’s Philippine Energy Plan (PEP) 2012-2030, which aims to develop a secure power sector and more efficient and sustainable energy system in the country.

Prof. Ruperto Alonzo of the UP School of Economics and

EPDP Lecture Series Brings Philippine Energy Sector Discussions to a Wider Audience

In March 2016, the EPDP Lecture Series was launched. The bi-monthly classroom-type discussions on various energy issues in the Philippines seek to better inform the general public on the Philippine energy sector and its challenges as well as opportunities. Led by experts in the field, the lectures gather energy professionals, policy makers, academics, students, advocates, and other stakeholders to join the discussions, further their knowledge, and explore how these issues factor into the growth of the country.

The series commenced on March 31 with the lecture “Energy: Power Security and Competitiveness,” which is largely based on the paper “Filipino 2040 | Energy: Power Security and Competitiveness” by EPDP Program Director Majah Ravago and EPDP Fellows Raul Fabella, Ruperto Alonzo, Rolando Danao, and Dennis Mapa. The lecture gave way to a lively discussion among speakers and participants about topics like the generation, transmission, and distribution of power; electricity charges; and renewables and other energy sources. Among the attendees were UP President Alfredo Pascual and representatives from DOE as well as members of the power generation, transmission, and distribution industry.

Annex 10. EPDP Newsletter Vol. 2 No.1

EPDP NEWS is published by the Energy Policy and Development Program (EPDP). The information in this newsletter are provided by EPDP’s research, capacity building, policy, and communications components.

Suite B2-003 Centennial Bldg., Concordia Albarracin Hall, E. Jacinto St. corner C.P. Garcia Ave., University of the Philippines,

Diliman 1101 Quezon City, Philippines

ContributorsJean Marie Isabelle Lau Wang

J. Kathleen MagadiaMari-An Santos

Nedheline Barquin

Dr. Majah-Leah RavagoEPDP Program Director

LayoutNedheline Barquin

Editorial Staff

Editorial CoordinatorMari-An Santos

EPDP Class Conference Creates Environment to Foster Future Energy Professionals

EPDP hosted three class conferences for the students of the UP School of Economics, reinforcing the former’s role in helping increase the capacity of the academe in managing energy-related programs and issues.

Students of ECON 199 presented their theses during the first conference held on 2 May 2016 at the University of the Philippines Diliman. EPDP Fellows Ruperto Alonzo, Rolando Danao, and Sarah Daway from the UP School of Economics, and Dennis Mapa, Manuel Albis, and Michael del Mundo from UP School of Statistics served as evaluators.

Renewable sources of energy was the common thread among the research papers of students from ECON 198 and ECON 172 who presented on 16 May 2016. Guest evaluators assessed the research papers submitted by the students prior to the conference as well as the presentations of their studies during the conference.

The Energy Economics and Policy (ECON 198) class proposed policies that can potentially address prevailing economic issues of the country’s energy sector. The panel for this class was composed of EPDP Fellows Rolando Danao, Ramon Clarete, Laarni Escresa, and Romeo

Balanquit. EPDP Fellow Raul Fabella also provided his insights on possible improvements.

The environmental impact of economic advancements was the consistent theme among the studies presented by the Resource and Environmental Economics (ECON 172) class. The evaluators were EPDP ProgramDirector Majah-Leah Ravago, Adoracion Navarro, andConnie Bayudan-Dacuycuy.

The hope is that these UP Economics undergraduates, having been exposed to issues in the Philippine energy sector, will pursue further studies and careers that contribute to the industry.

Atty. Teresa Ira Maris Guanzon of EPDP’s Policy Component delivered on May 19 the lecture “Assessment of the Philippine Power Sector Policy Landscape.” Theyexamined the adequacy of the country’s energy policies,

plans, and programs in helping achieve the national goals of economic efficiency, inclusive growth and equity, and enhanced environmental quality.

EPDP Research Workshop Endeavors New Research Activities

Research is a critical pillar of EPDP. On April 4, EPDP fellows shared their ideas during the EPDP Research Workshop held at Microtel, UP Technohub in Quezon City.

The workshop served to update EPDP’s research agenda and validate emerging needs and priorities of the Philippine energy sector. The fellows also discussed proposed research undertakings for the program’s second year based on the EPDP research agenda, which will feed into the policy development, capacity building, and awareness-building components of the program. It also took up points raised during the Policy Workshop held in February.

The discussions were led by EPDP Program Director Majah Ravago. Energy topics that emerged as top priority are optimal fuel mix modeling; electricity cost comparison within and outside the Philippines; and

internal market integration with emphasis on grid management policies and regionalization of plans. These priority topics were identified via EPDP’s continued engagement with NEDA, DOE, and other stakeholders.

The third Research Workshop is in accordance with the research component’s mandate of generating conceptual foundations to support the discussion of energy issues and policy formation.

The Market Testing of Power Supply Agreements

Philippine Energy Planning Part 2

Macro-Micro Level Linkage of Energy and Poverty

Power Supply

11 August 2016

25 August 2016

15 September 2016

29 September 2016

EPDP Lecture Series

Email: [email protected] Policy and Development Program

Annex 11. Evaluations of the lectures

1. Philippine Energy Planning Part 2: Transmission Development Plan andDistribution Development Plan25 August 2016

Based on the four-part evaluation accomplished by the participants, on a scale of 1 (Poor) to 5 (Excellent), the lecture was rated as follows:


Notes


27.27% gave the lecture an overall rating of 5 (Excellent), 63.67% gave an overall rating of 4 (Very Good), and 9.1% gave an overall rating of 3 (Good).


4.27 out of 5 All respondents believed that the lecture achieved its objectives. 27.27% of the respondents strongly agreed (score of 5) and 72.73% agreed (score of 4).


4.38 out of 5 All respondents rated the lecture as relevant to their current function and will be useful for their work. 54.55% of the respondents strongly agreed (score of 5) and 45.45% of the respondents agreed (score of 4).


4.38 out of 5


4.73 out of 5

2. Value Added Tax and Cost of Doing Business: What Contributes More toElectricity Tariffs in the Philippines08 September 2016

Based on the four-part evaluation accomplished by the participants, on a scale of 1 (Poor) to 5 (Excellent), the lecture was rated as follows:


Notes


48.28% of the respondents gave the lecture an overall rating of 5 (Excellent), 48.28% gave an overall rating of 4 (Very Good), and 3.45% gave an overall rating of 3 (Good).




4.55 out of 5 All respondents rated the lecture as relevant to their current function and will be useful

for their work. 55.17% of the respondents strongly agreed (score of 5) and 44.83% agreed (score of 4).


4.53 out of 5


4.52 out of 5

3. The Role of Power Prices in Structural Transformation: Evidence from the

Philippines 21 September 2016

Based on the four-part evaluation accomplished by the participants, on a scale of

1 (Poor) to 5 (Excellent), the lecture was rated as follows:


Notes


52.94% of the respondents gave the lecture an overall rating of 5 (Excellent), 41.18% gave an overall rating of 4 (Very Good), and 5.88% gave an overall rating of 3 (Good).




4.55 out of 5 Most respondents rated the lecture as relevant to their current function and will be useful for their work. 58.82% of the respondents strongly agreed (score of 5) and 35.29% agreed (score of 4). Meanwhile, 5.88% neither agreed nor disagreed.


4.41 out of 5


4.68 out of 5

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