August 1st, 2022
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) was elected as Senior Vice Chair of the House Committee on Constitutional Amendments, whose mandate is “All matters directly and principally relating to amendments of the Constitution,” yesterday during the plenary session of the House. So far, no chair for the position has been elected yet, although the post is expected to be filled in the coming days.
In a statement following his election, Salceda said that his top priority as senior vice chair of the constitutional revisions panel will be “to liberalize the renewable energy sector, consistent with the President’s directive that we achieve energy security.”
“Foreign capital will be essential to expanding our renewable energy portfolio. Our power generation sector is simply too oligopolistic, so there is very little incentive for innovation or expansion other than to pad profits. In many ways, that is the crux of the accusation of regulatory capture in our energy sector agencies. We have very few market players.”
“The credible threat of market competition, as well as new sources of fresh capital, innovation, networks, expertise, and strategic partnerships will boost our domestic power generation sector.”
Under Article XII, Section 2 of the Constitution, “all forces of potential energy” are owned by the State. As such, “The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens.”
“I have tried to work with the economic managers to see whether we can resolve the question of foreign capital in our renewable energy sector through legislation of implementing rules. The answer, based on legal opinions from the energy and justice departments, seems to be, ‘no can do.’”
“Obviously, the constitutional provision is insane. Imagine. All forces of potential energy. No exceptions made. Eh, everything has force of potential energy. So, it fails the very basic test of practicality in law. I don’t know if the scientists were okay with that broad provision, but it’s holding us back,” Salceda said.
“So, the simple fix is probably to just say, “unless provided by law.’”
“It’s urgent, because energy prices will continue to rise if we keep utilizing finite, non-renewable sources as fuel for our power plants. That’s basic economics. Ultimately, these things run out or become more scarce, and when they do, prices go up,” Salceda said.
In 2020, the power generation mix in the Philippines was 57% from coal-fired facilities, 21% from renewable energy, 19% from natural gas, and 2% from oil.
“We import around 80% of our coal needs. Natural gas will soon be imported as Malampaya runs out. So, unless we are able to tap our renewable energy source soon, we’re in very bad structural shape.”
“And we need USD 121 billion in renewable energy investments until 2040 to achieve clean energy. That’s around P338 billion in annual investments in energy. Currently, that’s about the entire capex of all energy companies in the country for all sources, including coal and gas.”
“World energy prices are up 82.33% year on year. That might get better in the short run, as the Russia-Ukraine situation abates, but over the long term, if we don’t change our energy mix, we’re doomed to permanent baseload shortages, brownouts, and high costs of power. And that will hold industrialization back bigtime.”
Salceda says he will work with Energy Secretary Raphael Perpetuo Lotilla, “who was my best friend in the PGMA cabinet” to get liberalization done “piecemeal by rules, wholesale by constitutional amendments, whichever comes first and best.”
“I am also going to work with Senator Robinhood Padilla, who chairs constitutional amendments in the Senate, to get this through. We need both chambers.”