Press Release
November 29, 2022

TRANSCRIPT OF SENATOR RISA HONTIVEROS INTERPELLATION Confirmation Hearing of Sec. Popo Lotilla
29 November 2022

SRH: These are policy questions that are very important to advocates of energy democracy and the secretary's answers for the record will guide many engagements moving forward. All the way up to reviewing amending or even repealing the EPIRA and replacing it to a new energy law.

My first topic is membership in Aboitiz and Synergy Inc. Mr. Secretary, can you confirm that your brother served as a director of a company involved in the transmission of power?

LOTILLA: You're referring to the one of my brothers I think he is an independent director in the mother company or but not in the company itself that runs the transmission

SRH: You also served as a director of a power generation company, is that correct?

LOTILLA: That's right.

SRH: Sa opinyon po ninyo, sa tingin nyo po yung concurrent memberships sa boards ng isang generation, as well as a transmission company, respectively, consistent po ba yun sa Section 45 ng EPIRA which states that no stockholder or official of a generation company or distribution utility, or other entity engaged in generating and supplying electricity, within the fourth civil degree of consanguinity or affinity, shall be allowed to hold any interest, directly or indirectly, in TRANSCO or its concessionaire?

LOTILLA: Madam Chair if I understand it right you're quoting a provision of EPIRA and as far as I know, since in the case of my brother, he serves as an independent director not of a transmission company then there is a conflict of interest is not there. But I would like to study that particular issue more closely as you have indicated it.

SRH: Thank you. Pati po sa kabukasan na mas pag-aralan po ito moving forward kasi the fact na kailangan pa nating balikan ulit yung mga ganitong tanong, kailangan pang pag-aralan, ibig sabihin nagdedemand po sa atin ng higit na kalinawan and to be guided by such moving forward dahil yun pong issueng iyon ng coflict of interest, kahit saan po sa gobyerno na nagtatrabaho tayo it is so important at kaya po naitatanong rin po natin dito sa mga Komite ng Commission of Appointments. and young kumpanyta mismo or mother company lamang nya, the principle remains the same. I would say for the record.

Moving now to electricity prices. Hinggil naman sa presyo ng kuryente sa bansa, the way I understand it, the simple explanation about our ever-expensive power cost in the country is that: from generation, distribution, transmission and supply - lahat ng "pwedeng" ipasa, ipa-pass-on o ipa-pasan. May term pa nga na tinawag nilang "pasaload" sa Filipino consumers na lumulusot o nakakalusot sa ERC.

In other words, ang pagpapasa o pass-on provision ang ugat ng napakataas na presyo ng kuryente sa ating bansa. Gaya na lamang ngayon na biglang sumirit ang presyo ng maraming mga distribution utilities dahil may pass-on provision sila para sa tinatawag na "fuel cost adjustment"; tulad ng mga planta ngayon na kinokontrata nila na gumagamit ng coal, na tumaas ng almost 300 to 500% percent sa world market.

My question is, under the EPIRA law ineensure yung principle na "least cost" na dapat sana ay nagpababa ng presyo sa kuryente, how would you plan as a secretary na hindi maabuso ang mga konsyumer and that the principle of least cost is always strictly applied?

LOTILLA: The matter of course of rate setting lies primarily in our economic regulator which is the Energy Regulatory Commission but what I would like to emphasize are one as you noted, the increase in power prices is primarily driven by those which are non-renewable and in the case of the renewables, the fuel prices are not viable and therefore, we do encourage that more of the sourcing therefrom will be from renewable energy sources in order to soften the impact of the prices from fossil fuels.

The second part of it is that unfortunately right now, we need all the sources of power that we have. and in the course of transitioning to a low carbon future, we would have to make adjustments and that's where the targets of the government including those for renewable energy of 35% by 2030 and 50% by 2040 are quite important in order to address these conditions. But then, it is a matter also of addressing the entire power supply chain not only from generation but also for transmission because we need to bring the entire supply to the markets or where they are needed and eventually address also the issues that you have raised regarding distribution utilities and electric cooperatives because they are the ones delivering the power to the consumers.

SRH: What do you understand by least cost?

LOTILLA: The principle of least cost is of course what is of the least the impact on the consumers will be the least that would be the choice. But here, we have seen that some point for example, if we just follow the least cost principle., the time that we use contracted it might have been lower when you *inaud* energy because at a particular point, the cost of putting up renewable energy plants was actually higher but since then, technologies have changed and renewable energy has actually become less costly. The energy regulatory commission is constantly looking into the concept of least cost and we would like to be able to work with them so that the next update the Philippine Energy Plan would have some indicators of what would be least cost or what would be even affordable. When we say affordable prices of energy or power that would be. These are the things that we intend to address in the updating of the Philippine Energy Plan.

SRH: Pointing out na baka may mga sitwasyon na mas mura diumano ang coal kaysa sa renewable energy doesn't take anything away from the fact na prinsipyo ng EPIRA mismo ang least cost at alam naman natin na kapag may competition of policies perhaps contradictory or competing policies nasa sa governance or governors especially if they are acting the spirit of King David na bigyan ng preferential option yung mas makakatulong talaga sa mga tao lalo na yung mga mahihirap. And I'm glad to hear na gaya ng sinabi ng secretary, the ERC is looking at this principle of least cost bilang input din sa susunod na update ng Philippine Energy Plan but unfortunately the ERC is not here, the Secretary is here I need to hear from the Secretary, paano nyo po imomonitor yung compliance sa least cost at least yung thoughts ninyo about it at this point in time.

LOTILLA: Well, the competitive selection process is one such measure and definitely the other as I;ve said the other reforms like distributed energy systems and the microgrid systems are opportunity for us to make sure that access is at the least cost.

SRH: Salamat. I hope the Secretary can forgive for pursuing this point, it's just that kasi kayo yung energy secretary so syempre may expectation na masasgot nyo substantively ang tanong na ito. Dahil din ito yung isang pangako ng EPIRA na pinaka-pinanghawakan at pinaghahawakan ng mga tao na yung least cost pricniple. Yun yung interes ng mga tao sa anumang batas sa enerhiya, bukod sa maenergize ang buong bansa, magmumura hindi magmamahal utulad ngayon ang presyo ng kuryente. Dako po ako doon sa isang bahagi ng unang tanong ko kanina...

Ano ba ang allowed talaga na pass-on o pagpapasa sa konsyumer at ano naman po ang hindi dapat ipasa sa konsyumer tulad ng entertainment cost, public relation, advertisement, corporate social responsibility, corporate income tax, value added tax, buwis mula sa nawala o hindi nagamit na kuryente o VAT on system loss at marami pang iba na wala naman direktang kinalaman sa pag-generate, distribute at pagtra-transmit mula sa ating binabayarang kuryente?

LOTILLA: On that, there are detailed rules and regulations on what can be allowed by the ERC in so far as rate setting is concerned but we can of course revisit and discuss based on the principles. Now, I'm sure that the ERC will also be willing to engage in this. I try to draw the line between economic regulations and policy making because as contemplated in EPIRA, the ERc is independent of the Department of Energy. What I would like to see is the same as what you have in mind where there is a continuing dialogue between our rate regulators and our policy makers including Congress.

SRH: I hope po na doon as revisiting na sinabi ni Sec na pwedeng gawin on ano ba talaga ang pwedeng i-pass on at ano ang hindi dapat i-pass on in this whole process of the continuing dialogues and I would also like to hear about drawing the line kasi yun din ang inaasahan ng ating mga mamamayan sa atin lalo pa't dalawang dekada na nilang hinihintay yung kumpleto at mas murang kuryente. Drawing the line, so sabi ni Secretary, drawing the line between economic policy making and economy regulations. Sometimes our kababayan really want us to draw the line on their behalf lalo na kapag ka they feel that they need more championing by the respective government agencies. Minsan talaga nagbubuhos tayo sa economic policy making syempre on the developmental functions of the department pero minsan nabibitin ang mga mamamayan natin sa regulation, I would guess na itong usapin ng pass on at hindi dapat i-pass on ay one of the areas really where they would like to see more of drawing the line on their behalf.

Moving now to Malampaya...

So nasundan nyo naman po siguro ang kwento tungkol sa kung paano napunta ang share ng pamahalaan sa Malampaya sa kompanya ni Dennis Uy. Ito ay dahil pinayagan ng dating DOE Secretary na si Sec Cusi. Umabot dito sa Senado ang kasong ito at ngayon ay may kaso nang naisampa sa mga kinauukulan sa tanggapan ng Ombudsman. Ngayon ay nagkaroon ng naman ng palitan ng kamay sa Malampaya pero wala nang kinalaman ang pamahalaan dahil sa mas naunang pangyayari.

So Secretary, I have three main concerns and this is my last topic this morning, three main concerns on the sale of shares in Malampaya. So una po tama po ba na any any private contractor must be financially and technically viable PRIOR award.

LOTILLA: That's right.

SRH: Pangalawa, yung award ay dapat may PRIOR APPROVAL of the President of the Philippines. Pero bago pa man ito i-sumite sa Presidente, there must be a complete documentation prior to the said approval of the president para ma-examine ang desisyon. Tama po ba ito?

LOTILLA: That's right. This is we were talking about here. New service contracts, I think.

SRH: Yes we are talking about the takeover specifically the takeover of Prime Infra from Udenna

LOTILLA: When the case of the presidential approval, in our discussions with the Department of Justice and the Solicitor General, the __ is a Filipino company that becomes a service contractor or acquires an interest in service contract, then it will not have to be the president to approve it.

SRH: Well it's always nice to hear kapag may preferential option din tayo para sa mga Filipino companies pero ganoon pa man sa ganitong mga kalaking takeover, kung hindi si Presidente ang may prior approval, sino ang daoat may prior approval?

LOTILLA: Under PD 87 a transfer like that would be sufficient if approved by the Department of Energy and that's with me, Secretary.

SRH: In this case po, yung takeover ng prime infra sa Udenna sa Malampaya yun na po yung, yung secretary na po ang nag-certify ang nagsiguro na may financial and technical viability yung private contractor prior to award?

LOTILLA: That's right

SRH: And bagamat sabi ng DOJ at SolGen sa DOE hindi kailangan si Presidente ang may prior approval, may oversight ba si presidente, or pwede ba nilang either aprubahan ito. I mean hanggang saan yung mataas na level na may prior approval?

LOTILLA: The President of course has control over the departments and all offices and therefore, the President at any time can re-examine or review the decisions made by the departments concern but in this case, no one has gone ahead.

SRH: Now, yung the sale po ba ng Malampaya fully compliant kahit nitong concerns at issues na napag usapan so far? At least ayon sa prior approval na naibigay ng DOE?

LOTILLA: That's right, so financial. legal and technical, and technical compliance.

SRH: Pati sa pagbanggit sa legal kasi naalala ko nung inimbestiga namin noon ang pag-acquire ng Udenna sa Malampaya, natanong nga ung tatlong grounds na yun. Una, legal then financial then technical. Pwede po bang makahingi ang aming Komite ng kopya ng inyong review at saka documentation kaugany nitong requiremnts sa ilalim ng PD 87?

LOTILLA: Certainly, we will provide.

SRH: Huling punto ko sa umagang ito. Pwede rin po bang humingi ng sale at The Saleo purchase Agreement sa pagitan ng Shell Petroleum NV at saka Prime/ or MEXP?

LOTILLA: I will provide the commission with the proper documentation, yes.

SRH: And yung proper documentation po kasama po ba don yung kopya ng sale and purchase agreement?

LOTILLA: Let me just check if there are any, if it fits the agreement between the parties themselves, usually there are confidentiality provisions but let me look into that. But as far as those which formed the basis of approval then we can provide it to the commission.

SRH: Medyo allergic ang congress ngayon sa confidentiality, na-dedeja vu sa non-disclosure agreements e sa vaccines naitanong ko rin kanina kay COA chair. That will do for now, ifa-follow up ko na lang ang Secretary through the chair. Importante ring makuha namin dito sa CA yung kopya ng Sale or Purchase Agreement mismo. Maraming Salamat.

SRH: More than twenty years ago since 2001, we were promised cheaper electricity, sufficient, and reliable power supply and the addressing of the financial burden of the singlemost indebted government agency which is Napocor in exchange for electricity reforms in the much-heralded EPIRA law.

More than two decades have passed -- it's clear that such promise has failed our nation's expectation. Electricity prices have shot up more than inflation. The cruel truth is, from the start, the Electric Power Industry Reform Act was never about bringing down electricity rates. It's about financialization - sale of government assets to settle debts, including some onerous contracts, and unjust accumulation for new owners, the big powers, upon privatization - as electricity governance, our government power agencies performed in its weakest form.

The time is now not only to revisit and review EPIRA but also to acknowledge the bitter lessons in order for us to move forward. And as we move forward, let us always remember the majority of our people, workers, peasants, and other working people shouldering the past and present mistakes of EPIRA while many of their children especially in the far-flung areas struggle to find light at night just for them to study. Women, too, are heavily burdened both by lack of access and costly power, many even depriving themselves of modern and efficient electricity services to allocate their tight family budgets for food and other essential needs.

What we need is Energy Democracy and government power agencies must always perform at the highest level in order to protect the public interest and uplift the lives of all Filipinos.

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