House OKs Legarda son's nationwide power franchise in 4 months

MANILA, Philippines – Can a solar firm secure an unprecedented nationwide power franchise from Congress? Yes, if the owner's mother is a lawmaker, according to critics of Solar Para Sa Bayan (SPSB) Corporation owned by Senator Loren Legarda's son, Leandro Leviste.

Critics argued there was special treatment in the speedy passage of the son's nationwide “mega-franchise” for his firm, a subsidiary of Solar Philippines, the largest solar energy provider in the country.

Leviste, the 25-year-old chief of SPSB, has denied allegations he quickly got a "mega franchise" because of his mother's help and lawmakers' special treatment. Independent power producers, solar players, and rural electric cooperatives, however, mantained he does not need and deserve a franchise.

SPSB's 25-year franchise application in the House of Representatives is already up for final approval, just 4 months after it was filed in August. Under the rules, a franchise bill must first be passed in the House before it is transmitted to the Senate.

According to the Department of Energy, the firm seeks to secure a “super franchise” to go into all 4 power sectors: generation, transmission, distribution, and supply through the use of mini-grids to electrify unserved and underserved areas in the country.

But in House Bill 8179 under committee report 848, there was no explicit mention that SPSB could only enter these areas – prompting fears SPSB would be able to enter any place it wants and distribute not just solar power. It was later included during the period of amendments but still not as an outright limitation. Instead, such areas were mentioned in the bill as part of the "areas to be determined by the DOE."

Under the Electric Power Industry Reform Act of 2001 (EPIRA) – considered the bible of the industry – only two sectors, transmission and distribution, require a congressional franchise. Solar firms usually do not need to get a franchise to install panels in businesses and houses. 

Only the National Grid Corporation of the Philippines has a nationwide franchise, as it is the sole operator of the country’s power transmission network. No distribution company has the same privilege. Private distribution utilities, like Meralco and Davao Light, and non-stock, non-profit rural electric cooperatives have franchises that are limited in scope and area.

Lawmakers and power players, including independent power producers that are the big guns in the generation sector, solar players, and rural electric cooperatives, opposed the bill, citing violation of the law and the equal protection and non-impairment of contracts guarantees in the 1987 Constitution.

Solar groups also said there is no need for a franchise as they are able to distribute power under existing 3rd party rules.

Power groups also slammed the hasty passage of the bill and the alleged political connections of Leviste, the son of President Rodrigo Duterte’s ally, Senate finance committee chair Legarda, and former Batangas governor Jose Antonio Leviste. (READ: Senate inaction on China: No inquiry amid militarization)

Rappler repeatedly tried to reach Leviste and his camp but they have yet to respond. But in an interview with House reporters on Tuesday, December 6, Leviste denied allegations that the bill is bound to create a monopoly.

"The allegations being thrown are completely false…The Constitution itself says no franchise should be exclusive so even if it were, it would be stricken down in courts…There is no legitimate argument against depriving Filipinos of choice,” he said.

Bill's timeline: ‘Apparent haste’?

Bohol 3rd District Representative Arthur Yap filed HB 8013 on August 6, 2018. Yap, together with Compostela Valley 1st District Representative Maria Carmen Zamora, filed another bill HB 8015 on the same day.

Traditionally, it is the chairperson of the House committee on legislative franchises who sponsors such measures. But for SPSB, it was Yap.

In just less than a month, the panel led by Palawan 1st District Representative Franz Alvarez released a report consolidating the bills into HB 8179, recommending the grant of the franchise.

The panel held only one public hearing and one executive session, with no other stakeholders from the power and solar industries invited.

The bill passed 2nd reading on December 4 after 3 days of interpellation. It is already set for 3rd reading likely before Congress adjourns for the Christmas break before December 15.

“Can you imagine, it was just reviewed for 3 days in the franchise committee. It's good we caught it. It was really fast," Philippine Solar and Storage Energy Alliance (PSSEA) president Maria Theresa Capellan told Rappler.

At least 15 lawmakers also questioned the "apparent haste" and filed House Resolution 2182, which called for further deliberations on the bill even after the committee report.

Time now is considerably important as the 17th Congress will soon end. While it would officially end on June 2019, senators and lawmakers would already be busy starting January 2019 with the campaign. There would be sessions only from January 14 to February 8 and May 20 to June 7.

Yap denied there was railroading of HB 8179. He also denied it would lead to a monopoly.

"They should be welcomed. They should be celebrated because along the way, they are showing us how the private sector, without any tax breaks, without any subsidies, can power isolated, underserved communities at no cost to the government," said Yap in his November 14 speech during plenary session.

In August 2017, President Rodrigo Duterte attended the inauguration of Solar Philippines factory in Santo Tomas, Batangas. He praised Leviste, who, he said, could be president someday.

Too good to be true?

Power players, however, deemed this promise too good to be true. PSSEA and the Philippine Rural Electric Cooperatives Association (Philreca) questioned the real motive of SPSB. The franchise is meant for commercial purposes – as with others and as indicated in the bill – yet SPSB said it is eyeing unviable areas.

“If you are a businessman, will you go there? Who wants to lose money? Solar is just their front. Why are they getting a special privilege?" Presley De Jesus, Philreca president, said in FIlipino.

"Once they enter unserved areas, it's really unviable. They can't make money. The purpose of which is to enter the city near the unserved areas so they can say, 'We're losing money because we are serving unserved and underserved areas because of the total electrification program, so now give us the outside areas to augment our expenses...' For them to recover, they would get a city in the franchise area of ECs, that is what they plan to do with their super franchise,” he alleged.

PALUAN TOWN. This is reportedly the largest solar-battery micro-grid in Southeast Asia. With two megawatts of solar panels, two MW batteries and two MW diesel backup, it is designed to supply reliable power 24 hours a day at a lower cost.

Photo from SPSB website

Lawyer Gloria Corrales, president of the board of directors of the Ilocos Sur Electric Cooperative (Iseco), said something is “suspicious.”

“That is the US$100 question because if you're a businessman, you will not engage in a business if it is a losing proposition. So what are the intentions? That's what makes it very suspicious...That is why for the ECs, we are bothered with the real agenda of this bill. Is this something to sabotage us? Because they saw how profitable the power industry is but ECs are non-profit," Corrales said.

For PSSEA, Confederation of Solar Developers of the Philippines Inc, Renewable Energy Association of the Philippines, and the Organization of Socialized and Economic Housing Developers of the Philippines, the granting of franchise to SPSB would “threaten consumers’ welfare.”

Senate energy committee chairman Sherwin Gatchalian, an ally of Legarda in the Nationalist People’s Coalition, also opposed the franchise, saying it would lead to higher power costs.

Asked by Rappler, Gatchalian said that utilities by nature are a “natural monopoly” because “the investment needed to connect every household to the grid is enormous.”

“Having two utilities operating in the same location will create negative disruptions that will lead to higher electricity rates for the consumers,” Gatchalian told Rappler.

“Solar Para sa Bayan should just focus on its original intention – bringing electricity to unserved and underserved areas of the country,” he added.

Leviste vs solar industry: Franchise not the solution

In defense of the bill, Leviste said it is non-exclusive, meaning, other power firms could also apply for a franchise if they wish.

But for PSSEA president Capellan, it is unnecessary because solar firms have been distributing power technologies, as what Leviste wants in his bill, without a franchise.

NOT THE ANSWER? PSSEA president Maria Theresa Capellan says third-party rules should be simplified and improved instead of giving a special privilege to just one firm.

Photo by Camille Elemia/Rappler

Firms could also enter isolated areas, she said, through the qualified third-party program (QTP) in the EPIRA law.

Section 59 of Republic Act 9136 or the EPIRA states that “the provision of electric service in remote and unviable villages that the franchised utility is unable to service for any reason shall be opened to other qualified third parties.”

Firms have to coordinate with private distribution utilities or electric cooperatives covering the specific area, ask them to waive their franchise rights there, and then apply with the DOE.

Another avenue for private participation in off-grid areas is through the New Power Producer (NPP) program. Basically, both require coordination and collaboration with ECs and local government units.

That is exactly what Leviste wants to avoid, as he said in an interview. After all, the process is complex and difficult.

“What we want to apply for, a franchise, is not just for solar but also for mini-grid, which serves not just one house but municipalities and larger areas with its own integrated systems," Leviste told reporters in Filipino.

"If you want to establish such now, you have to get the permission of existing service providers even if they have no or poor service in that area. They would not allow private companies to enter their provinces. Now with this, we can build solar mini-grids," he added.

Capellan admitted that the QTP and NPP processes are indeed complex and expensive. She said electrifying an isolated or unserved area with a demand of 50-kilowatt entails the same long processes and high costs as a 10-megawatt area.

But everyone in the industry undergoes, and is subject to, this process. Why exclude Leviste from the rules, she asked.

“We are all governed by EPIRA. Those of us in the power sector, be it generation, transmission, distribution, or supply, we all follow the rules. We are governed by one regime, that is our bible, if there is anything wrong, the industry talks about it, we dialogue, we debate, we fight. But in the end, we reform the system…not that one person will benefit,” Capellan said.

“He just wants to do anything that he wants without permit. He does not want control and oversight,” Capellan said.

Instead of a SPSB franchise, PSSEA proposes amending third-party rules to promote fair and healthy competition. After all, the group said the solar industry has had “healthy competition” in the last 15 years, allowing for lower costs for all consumers.

“Our position is that instead of enacting a law that gives a franchise to only one, open it for everybody so everyone can help solve the unenergized areas," she said.

Besides, no single entity could solve the electrification of the whole country, said PSSEA, Philreca, and other organizations. 

“Napocor [Natonal Power Corporation] is the government agency responsible for lighting all these islands, it's a huge organization and yet they were unable to do it because of the required resources, time, effort. How much more just one solar firm?" Capellan said.

Leviste vs rural electric cooperatives, big power players

Rural electric cooperatives are the most vocal oppositors of the SPSB franchise because for them, it is a threat to their existence. They alleged it would “violate” their franchise areas, which, they said, is against EPIRA.

ECs cited at least two main reasons for opposing the bill: SPSB, or its mother company Solar Philippines, “lacks track record as a corporation and an energy provider” and has allegedly made “deliberate misrepresentation and deception” about its prices.

During the lone public hearing on August 29, 2018, SPSB said that it could offer electricity at an equal or lower cost than ERC-approved rates. SPSB said they are charging P8 per kilowatt hour in the municipality of Paluan in Occidental Mindoro.

Philreca also presented copies of billings, which supposedly show SPSB charging rates from P10.40 kwh to P15.31 kwh.

Leviste denied this and called it a lie. He claimed that when other parts of the province lost electricity during a typhoon, the town of Paluan enjoyed continuous power supply.

“That is an absolute falsehood. The 12 out of 12 barangay captains of Paluan, Occidental Mindoro have participated in a fourm with Congressman Art Yap and Congressman Lito Atienza, who have brought the group of electric coops. The barangay captains not only affirmed we are charging P8 per kwh for the first 40kwh of consumption for all of the customers in Paluan, moreover that we have been giving much better service than previous service providers in the area,” Leviste told reporters.

Philreca also showed photos of SPSB’s facility in Cabra Island in Lubang, Occidental Mindoro, where “substandard materials,” such as bamboo poles for electric posts and supposedly rusty solar panels, were allegedly used.

Rappler reached out to Leviste's camp for comments on the photos but they have yet to respond.

Rappler asked an electrical engineer and a lawmaker privy to energy matters. Both said the materials are of low quality but such is "normal" and "common practice" in poor areas.

Leviste said instead of spreading misinformation against his company, other firms should just focus on improving their services.

He found an ally in Energy chief Alfonso Cusi. He called SPSB's franchise "a positive" disruption and criticized ECs, especially the "inefficient" ones.

"We cannot let Filipinos wait forever; there are efficient cooperatives, there are inefficient cooperatives, are we going to allow Filipinos to suffer because of inefficient cooperatives? I don’t think that is right,” Cusi was quoted as saying in The Manila Bulletin.

Philreca slammed Cusi, saying only less than 5% of the total ECs in the country have problems. Besides, they said ECs could not electrify all far-flung areas and islands in their areas because of many factors: political intervention, lack of resources, peace and order, and terrain, among others.

This is a recognized reality, they said, that's why the law allows for private firms' intervention through QTP and NPP, which Leviste does not want to follow.

Legarda hand?

FATHER AND SON. Former Batangas governor Antonio Leviste (in black) joins son Leandro in Congress.

While Leviste said other firms could apply for a franchise, it is easier said than done. It is unfair to small industry players, Capellan said.

Instead of just following QTP and NPP rules by the DOE and the Energy Regulatory Commission, the process would be more difficult because not everyone has the resources as SPSB.

“The problem instead of having QTP rule, which is just a process that will take time, you have raised the bar to a congressional franchise. Madali ba mag-apply kung wala kang connection? (Is it easy to apply if you don't have connections?) That requires political muscle, that requires massive financial input. Kung hindi ako anak ng senador, 'di ko makukuha 'yan (If I'm not a child of a senator, I won't get that),” Capellan said.

With the hasty passage of the franchise bill, groups could not help but point to the political influence of Leviste’s mother, veteran Senator Legarda. After all, she is a key Duterte ally in the chamber and holds a powerful post as chairperson of the Senate finance committee and member of the rules committee that decides on the agenda and bills.

At least one lawmaker and one officer said their offices got calls from Legarda’s office several times asking them to become co-authors of HB 8179. Both refused to be identified.

The official said a “senior staff” of the senator called their office “around 3 months ago.” The lawmaker said the same thing.

Asked what was discussed, the official said the senior staff informed them that a member of the staff would go to their office to have them sign the bill as co-author. At one point, the source said the senior staff called again to inform them of the change of plan: Leviste himself would instead visit the office and bring the document.

However, another lawmaker, who refused to be identified, countered this. This representative, who hails from Mindanao and who signed the bill's co-authorship, said there was no call from anyone from Legarda’s office.

“I hope I did but none…[I’m for] whatever can bring quality and dependable power,” the lawmaker said.

Rappler also repeatedly sought Legarda's camp for comment but has not received any response as of posting.

Leviste denied his mother’s involvement and said the bill’s approval was based on the firm’s “own merits.”

Ang masasabi ko lang (All I can say) is, the projects we have already completed out of our own merit should be able to speak for themselves, if anything. The sensitivities that have been raised have made us more conscientious that we need to earn the privilege that Congress is deciding to grant... Walang kinalaman kung sino man kamag-anak ninuman dito (This has nothing to do with relatives of whoever). This is purely on the basis of merit,” Leviste told reporters in an interview on Tuesday, December 4.

After the House approves the bill on final reading, it will be transmitted to the Senate for the consideration of the public services committee, chaired by Senator Grace Poe. Power industry players vowed continued vigilance. – Rappler.com

Camille Elemia

Camille Elemia is Rappler's lead reporter for media, disinformation issues, and democracy. She won an ILO award in 2017. She received the prestigious Fulbright-Hubert Humphrey fellowship in 2019, allowing her to further study media and politics in the US. Email camille.elemia@rappler.com

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