Does IBON Know Anything About Electrical Supply and Demand?

Everest Electrical

I remember that for the past few weeks, electricity in Cebu City has been unstable. Rotational brownouts were happening. I decided to tackle the IBON Foundation yet again after some time. A recent post from IBON said this, in which it criticized President Ferdinand "Bongbong" R. Marcos Jr. for opting for "easy power relief". Here's an excerpt that I'd like to share from that same post, as I'm critiquing IBON:

“The small relief that the removal of VAT on system loss charges brings to consumers should not be exaggerated as if this were the solution to expensive electricity,” said IBON Executive Director Sonny Africa. “The real problem lies in the privatization and profit-driven operation of the power sector itself under the Electricity and Power Industry Reform Act or EPIRA Law which oligarchs are profiting from.”

Looking into the fallacies by IBON

Even more, I feel another post from IBON that I'd like to bring up is how it blames the Electric Power Industry Reform Act for allegedly causing electricity prices to rise. Here's the statement where I'd like to ask, "Where is the evidence, and how did we land on these numbers?"

“The power sector may have expanded, but that doesn’t mean privatization was a success or even that it was necessary,” Africa said. “Many countries achieved universal electrification and reliable electricity with sustained and strong state involvement rather than surrendering their power systems to private interests. This is why Filipinos are paying the highest electricity prices in Asia.”

The Philippines has the highest residential electricity rates among ASEAN countries and the second-highest commercial and industrial rates in the region. Filipino households spent a total of Php372.8 billion on electricity in 2023, up from just Php59.7 billion in 2000—a 524% increase since EPIRA took effect. Electricity’s share in household spending has risen from 3% to 4.7%, even as the real value of workers’ wages has declined.

Africa's argument here is dealing with the fallacy of post hoc ergo propter hoc, aka the false cause fallacy. Is Africa, even if he was really a graduate of the London School of Economics, now ignoring the reality that there are other factors that EPIRA may not be enough to account for? Another logical fallacy worth nothing here is the Nirvana fallacy, which is prone to demanding sudden perfection. Also, I'd like to ask what countries can Africa even name of the "many countries that succeeded through strong state involvement". Africa may be committing what's called the "they say" fallacy or Argumentum ad Populum, as well as Appeal to Anonymous Authority, aka Trust Me Bro fallacy. 

Honestly, the way Africa framed "many countries", I wish that the late Miriam Defensor-Santiago were still alive. Who can remember the epic scolding that MDS gave to Harvey S. Keh during the impeachment against the late Renato Corona? Harvey gave MDS anonymous sources and got the scolding that he deserved. Honestly, what Harvey did was worse than Atty. Vitaliano Aguirre Jr.'s ear-covering act. Aguirre was disrespectful, but it was minor contempt, something that could've been remedied by asking him to get out of the courtroom. Harvey should've probably been given a heavy penalty when he gave those anonymous sources. 

Ignoring supply and demand?

In short, IBON is ignoring supply and demand. The cause of the rise wasn't EPIRA. Instead, we must realize that the demand for electricity naturally raises prices. EPIRA failed to account for having locally-owned private companies would never be enough to fill the huge supply and demand gap. 

Previously, I wrote a post asking whether or not Filipinos truly understand the economic why behind high electricity rates. The ASEAN Briefing even reveals an ongoing problem from 2023, and please, it's the second half of 2026:

What are the implementing rules and regulations?

100 percent foreign ownership of select public services

Starting April 1, 2023, select sectors such as railways, airports, expressways, and telecommunications are now open to 100 percent foreign ownership. Previously, these sectors were limited to 40 percent foreign ownership.

Restrictions on public utilities

The following public utilities have foreign ownership limited to 40 percent:

• Electricity distribution;
• Electricity transmission;
• Seaports;
• Water pipeline distribution and sewerage; and
• Public utility vehicles.

These systems are deemed vital and would have a debilitating impact on national security if they were incapacitated or destroyed.

By still limiting foreign ownership for electricity distribution and transmission, the Philippines has actually forced limited companies to cater to all 7,000+ islands of the Philippines. Even with EPIRA, there's still a shortage, which will naturally increase costs over time. I wonder if IBON truly has considered that? 

Is IBON ignoring the "secret" to Vietnam's success?

Dai Bieu Nhan Dan

On the other hand, Communist Vietnam has changed course. This is an update from the Emerhub on Vietnam's course and how it's using FDI to actually fill in the supply and demand gap for electricity:

Vietnam's power sector separates generating electricity from carrying it. Generation, which means running a solar farm, a wind farm, or a rooftop system, is open to private and foreign investors. Transmission and distribution, meaning the national grid, belong to Vietnam Electricity (EVN), the state utility, and are closed to foreign ownership.

For a developer, that means you can own your project company outright, with no local partner and no ownership cap.

However, you can't own the infrastructure that carries your electricity to your buyers.

A project therefore earns its return from the power it generates and from the contract that sells it, which is why the offtake arrangement matters as much as the site.

In practice, the split runs through the business classification codes you register.

Electric power generation is VSIC 3511 and carries no foreign ownership restriction. Electricity transmission and distribution is VSIC 3512, and it stays with EVN.

If you register the wrong code, or write an overly broad activity description, it can stall your business setup.

Even more, we need to understand that Vietnam doesn't put its economic restrictions in its constitution, but only in legislation. In fact, the secret of Vietnam's success was all about Doi Moi. If Vietnam suddenly wants to put power distribution beyond the limits, all the Communist Party of Vietnam needs to do is legislate again. Meanwhile, the Philippines needs to do a two-thirds vote just to even get an economic amendment done!

The real hard truth is Vietnam chose a more practical approach. Doi Moi chose a practical approach over Pinoy Pride Economics. The Philippines can't afford to lose ASEAN integration. The Philippines couldn't afford to keep thinking of Pinoy Pride, because it's not going to give long-term solutions. Then again, I guess some Filipinos would rather have brownouts non-stop than allow foreigners to invest in electricity, huh?