Ratings agency Moody’s Investors Service has expressed concerns over the slow progress of power sector reforms and continued regulatory uncertainty in the Philippines.

“The pace of reform remains slow more than three years after the introduction of the Electric Power Industry Reform Act in 2001,” Moody’s energy analyst Kasemsak Charoensiddhi said in a report, adding, “The main reason behind the weak state of the [power company] finances is the non-transparent and unpredictable state of tariff regulation.”

Major players such as National Power Corp (Napocor), the Manila Electric Co (Meralco) and independent power producers (IPPs) continue to face pressure over finances. Meanwhile, regulators are reluctant to instigate rate increases on political grounds and even cut tariffs in 2004.

Moody’s took notice of the courts’ ability to overrule tariff increases approved by the Energy Regulatory Commission and said that this had inhibited the regulator’s function. The study concludes that the regulatory risk in the Philippines is high, adding that while the growth in energy demand will help support utility and distribution companies such as Napocor and Meralco, uncertainty of tariff regulation will continue to overshadow their finances.