Privatization of National Power's Generation and TransCo's Transmission Assets

The Philippine power industry, which emerged from a virtually crippling energy crisis in the 1990s, continues to face major challenges that it will have to hurdle if it is to provide consumers a reliable and secure electricity supply at reasonable prices. The privatization of the sector is seen as an appropriate response to these challenges. The strategy is also expected to attract substantial investments in the energy sector to fend off a looming power crisis.

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

Seen as the key to dismantling the monopoly by government, the privatization of the generation assets is programmed to promote competition in the sector by expanding the ownership base. Republic Act No. 9136, the Electric Power Industry Reform Act (EPIRA), limits the ownership of generation assets by a single owner to only 30% of the generating capacity within a single grid. This means that in any single grid, there can be at least four different owners of generation assets to allow competition. The privatization of the generation assets will help bolster competition as envisioned by the EPIRA. This will also usher in a new regime where open access and retail competition will prevail to enable electricity consumers to enjoy the benefits of a restructured electricity industry.

In summary, the objectives of power privatization are:

  • Orderly and transparent privatization of the government's power and other disposable assets in order to liquidate NPC's financial obligations
  • Broader ownership base
  • Inflow of private capital
  • Reliable and secure power supply
  • Transparent and reasonable electricity prices
  • Competitive operation of the electricity market

Ultimately, the privatization of the Philippine power industry will significantly contribute to promoting competition; thus, providing the electricity consumers the "power of choice".