First of two parts
Editor's note: Arnel Casanova is yielding his column space for this week and the next to this article on the Epira by Laurence R. Rogero, a prominent energy lawyer.
By Laurence R. Rogero
JUNE 26 this year marked 25 years since Republic Act 9136, or the Electric Power Industry Reform Act (Epira), took effect. It is worth recalling the crisis it answered. By the late 1990s the Philippine power sector had become a textbook case of institutional failure. The National Power Corp. (NPC) was carrying debt of roughly P900 billion, nearly half the national government’s total, accumulated through chronic underinvestment, distorted pricing and the fiscal wreckage of the never-commissioned Bataan Nuclear Power Plant. Blackouts ran eight to 12 hours a day. Economists warned that unreliable electricity was choking industrial growth just as Thailand, Malaysia and Vietnam were taking off. The conclusion was stark: The most expensive power of all was no power at all.
The plant’s legacy ran deeper than its balance sheet. It left a lasting wariness of large-scale state intervention in energy — an institutional scar that shaped the choices to come. When Epira’s architects leaned toward market mechanisms in 2001, they were answering not only fiscal necessity but an environment in which the credibility of state-led alternatives had been badly damaged.
Development economists would recognize the reform’s ambition as a big push — a coordinated intervention on several fronts at once. It privatized the NPC’s generation assets and moved transmission into private operation, absorbing the stranded debts left by the NPC’s plants and contracts. It unbundled a vertically integrated industry into generation, transmission, distribution and supply, and opened the contestable segments to competition through a wholesale electricity spot market, or WESM. And it replaced the old energy board with an Energy Regulatory Commission (ERC) of broader powers. No single measure would have sufficed; together they were meant to break the sector out of a low-investment trap that piecemeal reform could not.
What forced the settlement was less ideological conviction than fiscal reality: The NPC’s obligations had grown into one of the largest quasi-fiscal liabilities in Southeast Asia, and reform became unavoidable. The resulting statute is what institutional economists would call a negotiated equilibrium — rules that survived not because they were optimal but because they marked the outer boundary of the politically feasible. Judging Epira against a first-best market design misses the point. The relevant counterfactual is not a perfectly competitive market but the continuation of a fiscally insolvent, politically captured monopoly. Against that baseline its achievements are real: Some 90 percent of generation capacity is now privately owned, the fiscal hemorrhage is contained, and the recurring blackouts are gone.
But success in one dimension can expose weakness in another. The big push worked in generation; the institutions it required were left to develop sequentially, under different pressures, at their own pace. They have not caught up. Four tensions reveal the gap.
The first is price. Despite two decades of private investment, Philippine households now pay more than 20 cents per kWh — the second-costliest electricity in Southeast Asia after Singapore, nearly triple China’s and well above Vietnam, Indonesia and Malaysia. The 2026 oil shock only sharpened the point. When war in the Middle East sent crude to multiyear highs, the government declared a state of national energy emergency in March, and the rate increases that followed had, by the utilities’ own admission, not yet absorbed the full fuel pass-through. The WESM reveals costs transparently, but transparency is not affordability. Part of the explanation lies upstream: Fuel dominates Philippine generation costs, and a liberalized market passes those costs through with minimal friction — the very efficiency the reform was designed to achieve. Competitive generation did not make electricity expensive; it merely exposed the true cost of fuel. Conflating the two has let the harder question — why the country remains so dependent on costly imported fuel — go unanswered for 25 years.
The second is regulatory credibility. The ERC was meant to insulate rate-setting from political interference, performing what economists call a commitment function. In practice that insulation has been inconsistent. Independence matters because it is a promise — that a rate set on transparent principles today will not be reopened tomorrow under political pressure. Investors who doubt the promise do not walk away; they price it. Regulatory risk becomes a premium folded into the cost of capital, built into the rate base, and paid in the end by the households the regulation was meant to shield. A commitment device that is only intermittently credible can cost more than none at all, because it charges for a certainty it cannot deliver.
To be concluded on July 7, 2026
Lawyer Laurence R. Rogero has over 30 years of experience advising international and local project sponsors, private and multilateral lenders, and government agencies on power and infrastructure projects. He lectures at Ateneo de Manila University and is pursuing graduate studies in economics. He earned his LL.M. (with distinction) from Georgetown University as a Fulbright scholar and holds BS Business Economics (magna cum laude) and Juris Doctor (Academic Excellence Medal) degrees from the University of the Philippines Diliman. His research focuses on law and economics, energy regulation, taxation, international investment and project finance.