POWER GENERATIONFirst Gen seeking tenders for gas supply delinked from   oil First Gen Corporation of the Lopez group is soliciting tenders for gas supply – preferably those de-linked with oil prices – to cater to the long-term fuel needs of its gas-fired power project expansions.

For the 414-megawatt San Gabriel power project, First Gen president and chief operating officer Francis Giles B. Puno noted that they are still looking at firming up a gas sale and purchase agreement (GSPA) with the Malampaya consortium if there would be additional gas that can be extracted from the field.

But for the next phases, the company is certainly placing itself on safer grounds with its planned liquefied natural gas (LNG) terminal proximate to its power plants so it can bring in the gas from international sources.

The facility will not only serve the requirements of its new gas plants, but also the existing Santa Rita and San Lorenzo generating units because of the lapse of their gas supply deals by 2023-2024 and due to the forecast decline in gas supply from the Malampaya field.

“What we’re doing is looking at that opportunity and buy gas from the international market,” Puno has noted.

He expounded that “we are in discussion with a number of suppliers of replacement gas, including the portfolio players who may even source it from North America or directly contracting it from North America itself … that is a possibility.”

The North American jurisdiction is considered the domain of ‘shale gas revolution’, which so far changed the gas pricing landscape from the typically global oil-connected to a more regionalized or jurisdictional setting.

The contracting strategy that First Gen has been exploring is on having a gas price decoupled with oil, or whatever that may eventually come closer to the envisioned regional spot pricing for gas in the Asian market.

“We are hoping that at some time down the road, we will have a regional spot price…they are doing that in Singapore and Japan…so the idea possibly is, that will be the source of gas for the future,” Puno stressed.

If anchored on market realities, he noted that the gas price must already be de-linked with oil compared to the traditional gas supply that were inked in the 1990s – including the GSPAs that they have with Malampaya.

“Right now, we are talking with suppliers. And the suppliers are actually giving us partially-linked to oil; and partially-linked to US gas prices,” the First Gen president noted.

He stressed that if their option will be to source gas from North America, “there’s a possibility of de-linking that with oil.”

For the consumers, that eventually may redound to cheaper electricity rates because prevailing gas prices had been pushed lower compared to the previous oil price-anchored contracts.

 

by Myrna VelascoAugust 15, 2014Source: First Gen seeking tenders for gas supply delinked from oilPosted in Power Generation

Tagged First Gen, Malampaya, Power Generation

Higher solar installation to hike Meralco ratesPower utility giant Manila Electric Company (Meralco) has cautioned regulators over a proposal to increase solar installation to 500 megawatts saying this will result in rate hikes that will be passed on to customers.

In its comments submitted to the Energy Regulatory Commission (ERC), Meralco stressed the higher installation for solar will compel it to make additional investments to prepare its network for such massive technology incursion, on top of anticipated swell on its operating costs.

“These capital and operating costs incurred by a DU (distribution utility) would be recovered from its load customers. As a result, distribution rates to load customers would go up, with the increase in rates becoming more pronounced as the penetration of RE (renewable energy) generation increases within a DU’s system,” Meralco stressed.

Its costs will similarly jack up because it will be managing “increased system volatility,” noting that “the entry of RE will affect the forecasting of power supply and demand within the DU systems, given the ‘intermittent’ or ‘variable’ nature of RE and how these RE connections will be embedded among DU’s end-users.”

Meralco thus requested the Department of Energy (DOE) to provide data as to the magnitude of added charges as a result of the solar installation adjustment, primarily on the feed-in-tariff allowance (FIT-All), which will start showing up in the consumers’ electric bills next year.

The utility firm has also been apprehensive of the March 2015 timeframe cast by the DOE as to when the additional 450 megawatts of solar capacity would be coming on stream – given the scale of adjustments that have yet to be done at the DUs networks. The original installation cap set for solar was just at 50MW.

Specifically, Meralco said it will need to increase the capacity of some of its substations or substation equipment, such as breakers, to accommodate the solar load increase.

The proposed additional capacities will cover not only ground-mounted but rooftop installations, and it is expected that many of the projects “will connect and utilize the distribution system.”

Among the needed supplementary investments cited by Meralco are metering facilities and their operations, as the rules prescribe that “all FIT-eligible plants, including those embedded within the DUs systems, will need to become WESM (Wholesale Electricity Spot Market) members.”

Taking off from that, Meralco said there is a need to deploy WESM-compliant meters; incur communication costs to read the meters remotely on a daily basis; incur operating costs to validate daily meter readings and upload them to the WESM’s systems; as well as the need to deploy corresponding information systems for meter data storage and analysis.

 

by Myrna VelascoAugust 17, 2014Source:  Higher solar installation to hike Meralco ratesPosted in ERC, Meralco, Power Generation, Power Rate

Tagged ERC, Expensive Power Rate, Meralco, Power Generation, Solar Power

Aug 18

CLEAN COAL TECHNOLOGY ANSWER TO POWER WOESTAIPEI. —  The use of clean technology in coal-fired power plants remain as a “very viable” solution to the Philippines’ looming power crisis, Taiwan-based Formosa Heavy Industries Corp. (FHIC) said.

 

Jovy Manrique, local FHIC business development head, said in a briefing with reporters that there are a lot of opportunities in the Philippine power sector given the need for more electricity in the country.

 

FHIC strongly believes that with current advances in technology, coal-fired power plants can live in harmony with host communities.

 

Two of the company’s coal-fired power facilities, specifically the Hwa-Ya and Zin Shin power generation facilities in Tao Yuan, Taiwan, are in the middle of a bustling metropolis.

 

Manrique said clean coal technology is a very viable solution to the Philippines’ power problem,  then same technology that  keeps Taiwan fully energized to support its soaring investments.

 

Recent controversies regarding the acceptability and environmental impact of power plants and the price of electricity have been hounding the local power sector.

 

To date, Taiwan has 48,000 megawatts (MW) of installed capacity compared to the Philippines’ 17,000 MW. A large portion of this capacity comes from coal-fired power generation facilities. 

 

However, Taiwan’s population is only 23 million compared to Philippines’  100 million.

 

“We hope that the advances made in Taiwan in as far as the power industry is concerned will also be enjoyed in the Philippines,” Manrique said.

 

He assured Filipinos of the company’s continuing support in ensuring a more robust Philippine power sector.

 

Manrique admits  the timeframe within which the expected power crisis may be too short but that the  long-term solutions involving power plants are  necessary.

 

He said the stalled 600 MW Subic power project of Redondo Peninsula Energy (RP Energy) that was supposed to go online next year to boost the power supply in the Luzon grid could have plugged the reported 500 MW deficiency forecasted by the government.

 

RP Energy is a consortium composed of Meralco PowerGen Corp., Aboitiz Power Corp., and Taiwan Cogeneration International Corp. FHIC was formerly involved in the project.

 

The power project has yet to push through until the Writ of Kalikasan case pending with the Supreme Court is resolved.

 

“Filipinos must remember that the most expensive kind of power is still no power,” Manrique said.

 

FHIC said the Taiwan government monitors the operation of all their plants by having direct access to their computerized control panels to ensure that the plants do not exceed the required standard for emission levels.

 

“These facilities validate our belief that there can be harmony between power plants and the community,” Manrique said.

 

 

By ANGELA CELIS 

August 18, 2014

Source: CLEAN COAL TECHNOLOGY ANSWER TO POWER WOES

 

Posted in Power Generation, Power Rate

Tagged Expensive Power Rate, Power Generation

Aug 18

Korean firm poised to win Malaya dealSTX Marine Service Co. Ltd. of Korea submitted the lowest bid of P302.149 million for the operation and maintenance of the 650-megawatt Malaya thermal power plant in Pililla, Rizal.

STX Marine, a leading global marine service provider, topped SPC Power Corp.’s bid of P428.777 million for the operation and maintenance service contract.

SPC Power is the current operator and maintenance provider of the Malaya plant, but its contract is set to lapse in October this year.

“Award will be made after completion of the post qualification of the lowest bidder. This process may take a while but it should be completed before the expiration of the existing OMSC of Malaya on Oct. 25,” Power Sector Assets and Liabilities Management Corp. president Emmanuel Ledesma Jr. told reporters.

SPC Power has been operating and maintaining the Malaya facility since October 2011, after winning the bidding for the contract three times.

PSALM offered the one-year operation and maintenance contract for the Malaya thermal power plant on Aug. 6.

The Malaya procurement has an approved budget of P451 million which shall be sourced from PSALM’s corporate operating budget.

The Malaya power plant is being managed by PSALM while it awaits privatization. The Energy Department has yet to decide whether to privatize the Malaya plant.

The facility is now being used as a “must-run unit” which could add capacity to the Luzon grid.

 It consists of a 300-MW unit, with a once-through type boiler and a 350-MW unit fitted with a conventional boiler.

It was rehabilitated in 1995 by the Korea Electric Power Corp. under a 15-year rehabilitate-operate-manage-maintain agreement.

PSALM is set to overhaul the 300-MW unit and aims to make it operational by summer next year.

 

By Alena Mae S. Flores 

Aug. 15, 2014 at 12:01am

Source: Korean firm poised to win Malaya deal 

Posted in Power Generation

Tagged Power Generation, PSALM, SPC Power

Aug 15

Aboitiz seeks recall of Naga plant awardThe Aboitiz firm which was originally declared the highest bidder in the privatization of the 153-megawatt Naga thermal power facility is seeking the nullification of the asset’s award to SPC Power Corporation.

In a letter to asset-seller Power Sector Assets and Liabilities Management Corporation (PSALM), Therma Power Visayas Inc. (TPVI) of the Aboitiz group asked that the notice of award to SPC be recalled due to lingering questions on the validity of the ‘right to top’ exercised by the latter in the facility’s recent bidding.

TVPI noted that the award be temporarily withheld until a ruling on the petition for certiorari filed by Senate energy committee chair and Senator Sergio Osmeña III on the matter be rendered with finality.

“TVPI has asked PSALM to review its decision, as it questions the validity of SPC’s right to top the winning bidder,” the Aboitiz company has noted in a statement to the media.

Whatever the outcome of the legal proceedings, however, TVPI has emphasized that “it will abide by the Supreme Court’s final verdict.”

Aboitiz Power executive director for business development Raymond Cunningham averred that “frankly we are amazed and deeply disappointed by the manner and haste in which the PSALM Board of Directors decided to award the contracts for the privatization of the Naga power plant complex to SPC Corporation despite the myriad of contentious issues that remain unanswered and also pending with the Supreme Court.”

Osmeña’s petition is questioning “the right to top provision as it discourages interested bidders considering the unfair advantage given to SPC.”

The winning price offer of the Aboitiz group had been at P1.088 billion, but SPC resorted to its ‘right to top’ option.

The process thus warranted SPC to make an offer of P1.143 billion, which eventually became the basis for PSALM’s decision to finally award the facility and purportedly conclude its privatization.

SPC was given a 25-year lease arrangement under the final privatization package, and a leeway also for the plant site’s purchase.

 

by Myrna VelascoAugust 14, 2014

Source: Aboitiz seeks recall of Naga plant awardPosted in Power Generation

Tagged Naga Power Complex, Power Generation, PSALM, SPC Power

Aug 15

Post-qualification process for Malaya power plant under way

THE POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORP. (PSALM) HAS STARTED THE POST-QUALIFICATION PROCESS FOR THE ONE-YEAR OPERATION AND MAINTENANCE (O&M) CONTRACT OF THE 650-MEGAWATT (MW) MALAYA THERMAL POWER PLANT. 

 

The Malaya thermal power plant in Pililla, Rizal. — BW File Photo

PSALM President Emmanuel R. Ledesma, Jr. said the company received two offers during the auction held last Aug. 6.

“Two proponents submitted bids. A bid was declared lowest as read but this is still subject to an ongoing post-qualification evaluation,” he said via text message on Wednesday.

Mr. Ledesma, who refused to identify the bidders, said the company will announce the winning firm as soon as the notice of award and notice to proceed are issued.

SPC Power Corp. confirmed its participation in the bidding but likewise declined to name its competitor.

SPC has been operating the Malaya facility since Oct. 2011. The O&M contract is being auctioned off every year and the current one will lapse this October.

PSALM, according to Mr. Ledesma, will award the new contract before the existing one expires.

Last month, the state-run power firm allotted P451.301 million for the one-year O&M of the power facility located in Pililla, Rizal.

PSALM was formed under Republic Act 9136, or the Electric Power Industry Reform Act of 2001, to assume ownership of and manage all National Power Corp.’s (Napocor) assets, liabilities, contracts with independent power producers, real estate and other disposable assets.

The state firm is also in charge of privatizing and disposing of these assets to liquidate Napocor’s financial obligations.

 

Source: Post-qualification process for Malaya power plant under way

 

by Claire-Ann Marie C. Feliciano

August 13, 2014 11:17:00 PM

Posted in Power Generation

Tagged Power Generation, PSALM, SPC Power

Aug 14

DOE expects 560-MW capacity addition before 2015 summerThe Department of Energy (DOE) is expecting generation capacity addition of aggregate 560 megawatts that will be synchronized to the Luzon grid until February or before the strike of full summer next year.

Based on the Power Supply Outlook of the department, new power plants will be coming on-line starting August 2014 until February 2015; and the next ones will be getting on stream from March until November also next year.

In fact, the DOE outlook indicated that the 100-megawatt Avion plant of First Gen that it has been expecting to save the grid from summer brownouts will only be on-line around September 2015.

The energy department’s outlined capacity additions will likely add to the muddle as to whether there will be capacity shortages to be experienced summer of 2015, especially so since Energy Secretary Carlos Jericho L. Petilla just estimated capacity shortfall of 240 to 270MW vis-à-vis the anticipated additional capacities of more than 500MW.

Stakeholders in the power industry reckoned that the feared brownouts are anchored only on ‘artificial shortages’ that may be triggered by forced outages of big generating units of power plants. The DOE has been citing historical data on such assumptions.

For this year alone, the department noted that 383MW of new capacities will be added to the grid starting with the 18MW expansion phase of the Northwind power project in Northern Luzon.

Around October and November, the department is eyeing grid synchronizations of the 135-MW coal plant of the Trans-Asia and Ayala joint venture; plus the phase one 150-MW capacity expansion of the Calaca coal plant of the Consunji group. A biomass plant of 20MW is also expected coming on-line before year end.

By February 2015, the 87MW Burgos wind power project of the Lopez group is expected on stream; plus the 150-MW phase 2 of the Consunji group’s coal facility expansion.

Given realities that wind power facilities can just be relied upon on November to February window for electricity generation, it will be the coal capacity additions that could expectedly beef up grid supply.

Around March, the capacities that will add to grid supply will be another 18MW biomass facility and the 81-MW Caparispisan wind power project in Ilocos Norte.

By June next year, the department is expecting the first 200-MW unit of the liquefied natural gas (LNG) facility of Energy World Corporation, but this is seen not reliable due to implementation hurdles being encountered by the project sponsor.

The 135-MW second unit of the Trans-Asia and Ayala coal plant is also scheduled for synchronization to the grid around November 2015.

 

Source: DOE expects 560-MW capacity addition before 2015 summerby Myrna VelascoAugust 13, 2014Posted in DOE News, Power Generation

Tagged DOE, Power Generation

Aug 14

MPIC goes into renewable energyMANILA, Philippines – Pangilinan-led Metro Pacific Investments Corp. (MPIC) is venturing into

renewable energy for the first time through a waste-to-energy project that will address

issues on solid waste management and increased demand for electricity.

The infrastructure conglomerate is looking at creating a portfolio of waste-to-energy facilities

with a generating capacity of 300 megawatts (MW) in the coming years, company

executives said.

MPIC president and CEO Jose Ma. K. Lim said the company has partnered with technology

provider Global Green International Energy, an affiliate of a US entity that has built

numerous waste-to-energy plants in Korea and smaller countries in Southern Pacific.

Lim said MPIC will invest up to P700 million for its first plant in Tagum, Davao del Norte. The

facility will be able to produce two MW of power and 10,000 liters of biodiesel per day, with

an option to expand it to six MW.

“Waste is an ongoing problem. We have been studying solid waste management in the last

several years and the problem is always political: not handling waste in an efficient manner

and the municipality receiving waste will not receive [waste] from other areas,” Lim said.

“It will help especially at the local level on the power and certainly on the waste side. It is

something the board of MPIC felt the company should do,” said MPIC chairman Manuel V.

Pangilinan.

Lim said the first waste-to-energy facility will allow the company to test the efficiency and

operational requirements of the business venture before investing in a big scale for facilities

that can produce a combined 300 MW and 500,000 liters of biodiesel, Lim said.

Construction of the waste-to-energy plant, which will use the pyrolysis technology, is seen to

start late this year and completed in six months.

“There are other large cities that are ready to enter into similar agreements,” Lim said.

MPIC is into power generation and distribution through Manila Electric Co. (Meralco). The

country’s largest power distributor targets to build a power generation portfolio of up to

3,000 MW of fuel-efficient and reliable baseload and mid-merit plants that will help assure

adequate supply of cost-competitive power to customers.

Betty Siy-Yap, chief financial officer of Meralco, said the company initially looked at a wind

energy project but it was scrapped.

Aside from the wate-to-energy project, MPIC’s parent firm First Pacific Co. Ltd. is also

pursuing power production using the bagasse in Roxas Holdings Inc.’s La Carlota sugar mill

in Negros Occidental, Pangilinan said.

By Neil Jerome C. Morales 

August 13, 2014 – 12:00am

Source: MPIC goes into renewable energyPosted in Power Generation

Tagged Power Generation

Aug 13

SPC mulls expansion of Naga power complexMANILA – SPC Power Corp is keen on constructing a new coal plant within the Naga power

complex in Cebu.

Alfredo Ballesteros, SPC senior vice president, today told reporters that the company is in

discussions with Korea Electric Power Corp (Kepco) for the construction of a 200-megawatt

(MW) coal plant.

The proposed facility will be “similar to the existing KSPC (KEPCO SPC Power Corp) plant in

Naga at approximately $450 million project cost,” he added.

KSPC owns the 200-MW Cebu coal plant within the Naga power complex. The power facility

was completed in 2011 under a build-operate-own agreement with the government.

Earlier, state-run Power Sector Assets and Liabilities Management Corp (Psalm) awarded to

SPC the privatized 153.1-MW Naga power complex after the latter exercised its right-to-top

the highest bid for the facility submitted by the Aboitiz Group.

The power complex, through a number coal and diesel plants, is only able to produce 50 MW

due to deterioration.

Ballesteros said SPC “is still evaluating the technical and commercial viability of the rehab of

two thermal power plants” within the power complex.

SPC, however, has opted to rehabilitate the power complex’s diesel plants.

“Target completion of rehab is end of 2014 and is expected to generate 36 MW,” Ballesteros

said.

 

By: Euan Paulo C. Añonuevo

August 12, 2014 4:20 PM

Source: SPC mulls expansion of Naga power complexPosted in Uncategorized

Tagged KEPCO, Naga Power Complex, Power Generation, SPC Power

Aug 13

DOE eyeing 2,000 private power plants to avert shortage in 2015

The House of Representatives energy committee is now studying a proposal from the

Department of Energy (DOE) to tap more than 2,000 private power facilities in Luzon to

address the looming power crises projected to occur in the summer of 2015.

 

In a press conference, energy committee chairman Rep. Reynaldo Umali said that based on

the report submitted to the committee by the Energy Regulatory Commission (ERC), as of

July 22, 2014, there are a total of 2,975 self-generating power facilities in Luzon that could

generate a total of 3,642.06 megawatts.

These plants are registered with the ERC.

 

Umali said they are looking into the possibility of tapping the help of these facilities during

the summer months of 2015 under the DOE’s proposal to implement the Interruptible Load

Program (ILP) in Luzon.

 

Under the ILP, big businesses such as malls and hotels will get paid by Meralco if they use

their own generating facilities during peak hours, allowing Meralco to serve other customers.

 

The same program has been implemented in Mindanao late last year during the power crisis

in the region.

 

“We have to first determine if these self-generated capacities are all-existing and how much

power can be really generated from these self generating capacities,” Umali said.

 

Umali said that based on the DOE computation about 115 megawatts can be generated in

Luzon if the ILP will be implemented.

 

He said his committee will meet again with the officials of the DOE and the ERC next week to

further discuss the DOE proposal.

 

“Rotating brownout in the summer months if 2015 is not an option. We also have to ensure

that the consumers should not carry the burden,” Umali said.

 

The House energy committee had an executive meeting with the officials of the DOE

Tuesday morning to discuss Energy Secretary Jericho Petilla’s proposal to give an

emergency power to Pres. Benigno Aquino III to address the looming power crisis.

 

Umali said that though his committee has no problem with giving emergency power to the

President if the Palace would ask for it, parameters and limitations would have to be set.

 

“First, we must determine whether or not there is really a shortage, and then yung different

approaches available…We have to satisfy ourselves first of the parameters. We don’t want

to give a blanket power here,” Umali said.

 

“Please remember that there are embedded capacities not accounted for that we have to

determine in the coming days…Baka naman if we can tap these capacities ma-address na

ang shortage without resorting to emergency power,” Umali added, citing that the ERC also

reported that there are 3,500 diesel plants in the country whose potential for power

generation may also be tapped.

 

Umali, however, admitted that the emergency power of the President might be needed to

compel the self-generating facilities to comply with the ILP in case it would be implemented.

 

“We may need the emergency power to make it mandatory for the self-generating facilities

to comply with the ILP, because as of now, it is only voluntary. If the self-generating facilities

would comply voluntarily then we don’t need emergency power,” Umali said.

 

Umali said that apart from implementing the ILP in Luzon, the DOE officials, during the

executive session, also proposed two more options to address the power crisis – the

implementation an energy saving policy under the DOE’s Energy Conservation Program and

the renting of companies that have existing capacity to generate power.

 

“Unfortunately yung sa energy conservation we cannot make anything out of it yet, because

there is no target. The DOE should define what the target should be on an energy

conservation program. Say if they want to target 10 percent (of power) to be conserved,

then that should amount to probably about 1,000 megawatts,” Umali said.

 

“When it comes to the third option, I’m happy to hear that this is only a last resort,” Umali

added.

 

He said that renting private companies for additional power generation might be a

disadvantage for the government due to higher costs.

 

Meanwhile, in a separate interview, Bayan Muna party-list Rep. Neri Colmenares urged the

government to consider constructing a government-run power plant.

 

“Walang provision sa EPIRA (Electric Power Industry Reform Act of 2001) na nagpapabawal

sa gobyerno sa pagtatayo ng planta. Bakit ayaw nila? Ang gusto ng gobyerno ipaubaya sa

private sector, which is dangerous, kagaya ng nangyari during the time of (President Fidel)

Ramos kung kailan ang daming private power plants ang itinayo,” Colmenares said.

 

It the 1990s then President Ramos was given emergency power to address the nationwide

power crisis.

 

In an earlier statement, Kabataan Partylist Rep. Terry Ridon said giving emergency power to

the president is not a solution in addressing the power crisis.

 

“But the same [emergency powers] were used instead (by Ramos) to allow the entry of

favored independent power producers (IPP) to construct power plants within 24 months.

Ramos also approved onerous supply contracts that guaranteed the government would buy

whatever power the IPPs produced, forcing consumers to pay for electricity they did not

even use,” he said.

 

Source: DOE eyeing 2,000 private power plants to avert shortage in 2015

August 12, 2014

Posted in Uncategorized

Tagged DOE, Power Generation

Security of Power Supply and The Futility of Sec. 71

Posted on: Oct 31, 2014David Celestra Tan 

31 October 2014 

While a lot of attention is on invoking Epira Law’s Section 71 to grant emergency powers to the President of the Philippines to deal with an “imminent power crisis” this coming summer, there are many larger issues that have become evident on the drawbacks of this power crisis provision and its futility in dealing with a power shortage, much less for assuring timely and cost effective solutions. 

Section 71 of the Epira Law of 2001 is called “Electric Power Crisis Provision” says “upon determination by the President of the Philippines of an imminent shortage of power, Congress may authorized through a Joint Resolution the establishment of additional generating capacity under such terms and conditions that it may approve.” 

The reason for this is under the Epira Law that prescribed the privatization and deregulation of the power industry, the government is no longer allowed to own power plants or enter into new power supply agreements. The private sector is supposed to do that and meet all the power requirements of the country at fair and reasonable costs. Section 71 was supposed to be a fall back position to allow government to get into power generation if there is going to be a power crisis. 

Now Thirteen (13) years after the Epira Law was passed and its Implementing rules and regulations passed in 2002, the Filipino consumers have the worst of both worlds, high power rates and unreliable power supply. The Department of Energy has predicted that there will be a power shortage for a few hours in a few days in the summer of 2015 and Secretary Carlos Jericho Petilla had broached the idea of asking Congress to grant President PNoy emergency powers to rent 300mw of rental generators for two years at a cost of more than P10 billion. Later, that shortage prediction was increased to 1,200MW in a worst case scenario. 

The debate is on- going but the drawbacks and futility of Section 71 have become evident. 

1. Declaring an imminent power crisis is easier said than done. We need solid numbers. Foreseeing one in sufficiently ahead of time is not easy. 

2. Getting congressional approval is contentious, political, and time consuming that by the time the President and DOE gets one, it may be too late for a timely solution. 

3. Quick and temporary solutions are both limited and very expensive. 

4. The private sector cannot be counted upon to provide a comprehensive solution on their own. They seek profit opportunities but not necessarily, as a group, undertake a total solution. 

5. Despite privatization the electricity is a public service that the government must still assure and the people expect it to step up and be responsible. 

6. The public is leery and suspicious of negotiated contracts and any government official overseeing it cannot escape being smeared. 

7. Section 71 is not an adequate mechanism to assure security of supply for the country. 

When The Epira law was still being framed in 2000, Section 71 was supposed to be a “Security of Supply” provision that designates the government, specifically Napocor as the generator of last resort. That was in recognition of the fact that in the end the people still expect the government to solve any problems in power supply and high rates in this very essential public service. The vested interests and their Congressional allies won’t hear none of it because they were so afraid that if the law opens a window for the government to hold on to some power generating assets, some of Napocors power plants that they so craved might not be privatized. (well, the rest is history). 

As long as Congress is hot on the issue of Section 71 and emergency powers, it is an opportune time to look at the broader issue and the larger interest of the country by recognizing these drawbacks and the futility of Section 71 and pass instead a Security of Supply amendment, albeit belatedly. The government through Napocor should be allowed to retain and establish strategic power generation assets with specific grid roles both to assure supply and even to intervene in the market if the prices are going unreasonably and painfully high for the consumers. 

If the government is to be expected to step in anytime and do it cost effectively, it needs ready capability to Maintain and build strategic power generating capability for the long term with appropriate planning and strategy. Napocor practically gave away some key power plants that could have been strategic in securing power supply. The only reason it still has the 600mw Malaya power plant is there have been no takers. They could also have retained the Naga power complex and the 100mw Dingle power plant for the Visayan grid. They could have retained the diesel plants in Mindanao which provides strategic reserve capacity. They did not even privatize those. They allowed them to be foreclosed by the LGU! What an anomaly! 

In any case, at this stage Congress can establish limits of generating capacity to say 15% of installed dependable capacity. They can even be assigned to be the provider of reserve capacity and ancillary services. Napocor still has very capable technical people and organization. 

And because it is government, it doesn’t mean it has to be a losing proposition. Costs can still be recovered from the rates but this time it can be kept at a minimum because the profit margins don’t need to be there. 

Things are clear on the futility of Section 71. Things are clear on the inevitability of the government stepping in to solve any power problem. Let us hope Congress will recognize reality, step up to this patriotic duty, and do what is clearly essential to assure power supply and lower rates for the country’s industrial competitiveness. 

Let us turn Section 71 into a Security of Supply provision (or Law). It is a bigger and long term Emergency! 

Have a safe All Saints Day weekend. 

Matuwid na Singil sa Kuryente Consumer Alliance Inc. - See more at: http://matuwid.org/security-of-power-supply-and-the-futility-of-sec-71/#sthash.Jl8wzTwl.dpuf

Archipelagic Nation Needs Archipelagic Generation

Posted on: Feb 24, 2015David Celestra Tan 25 January 2015 

Should a country generate its power from larger power plants far away from the load center or should it build smaller power plants closer to where they are needed? 

This article is a continuation of our previous posting on Locational Strategy for power development. 

The debate on distributed generation versus centralized generation dates back to the time of Thomas Alba Edison, the inventor of electricity, when he built the Pearl Street Station in New York in 1882. 

The idea is generating power is cheaper from larger centralized though farther power plants even if we factor in the cost to transmit them by HV power lines to the load center. Land costs in remote areas are cheaper and the sparsely populated surrounding communities that can use the large investment, tax, employment, and general contribution to the community economy, would be not as resistant to environmental risks. Large coal power plants also need to be located close to the coastlines for coal fuel handling and plant water cooling. 

This debate is very relevant to our beloved Philippines, an archipelagic country with 7,107 islands (okey in low tide), at least 15 of them are major, occupied by 85% of our 97 million population. Do we build big and bigger power plants and string the islands with a network of long and longer submarine power cables and overhead transmission lines? Or do we build island-centric generating plants and only build medium voltage and strategic inter-island submarine connections for supplementary peaking and reserve power. There is a big jump in technology and cost from a 69kv submarine system to 138 and 230kv. Major high voltage lines of 138 and 230kv can be built for strategic reasons like connecting the major island of Mindanao to the Visayas and Luzon grid. 

In power sector parlance, distributed generation means generating power close to the distribution centers. It is also called embedded generation when a power plant is located close to the load center and power is delivered directly to its distribution substations and feeders without going through long high voltage transmission lines. The deciding factors should be power reliability and the total cost of delivered power to the electricity consumers. This means including the cost of transmission lines. Embedded generation is embodied in our Philippine Grid Code. 

Napocor's Philosophy of Centralized Generation 

The policy of distributed generation got lost in the Philippines power development strategy when the government nationalized under Martial Law the power generation and transmission functions under the government owned monopoly, National Power Corp. One thing that Napocor’s and the old Ministry of Energy’s strategy got confused on was while it may be sensible for building bigger power plants in the large Luzon island, that centralized generation philosophy was adopted also in the Visayas and Mindanao. Consequently, under Napocor there were no major power plants built in Negros and Panay islands. Instead, they relied on the 700mw geothermal fields in Ormoc, Leyte and built overhead power lines to Cebu and connected Leyte, Cebu, Negros, and Panay with submarine power cable systems. 

Meralco under its original American owners (from New York) and visionary Lopez patriarch Eugenio Lopez Sr. was building power generating plants close to the load center of Manila. Remember the Rockwell power plant in Makati, the Gardner Snyder station in Sucat, Tegen Power Station in Sta.Ana, and Malaya? These were feasible in their locations in Laguna Bay and Manila because they run on bunker c which can be barged. 

Even the last big power project under Martial law, the 600mw nuclear plant in Morong, Bataan was not unreasonably far (120km) from the Metro-Manila load center. There was already a 230kv transmission line built from Morong to Hermosa Bataan. When this power project was aborted under the Anti-Marcos frenzy of 1986, there were no power projects undertaken to replace it despite having a supposed power guy appointed by President Cory Aquino to the presidency of the power monopoly Napocor. 

Power Development in the Philippines was neglected during the political upheaval of 1980’s and caught up with the country just as it was starting to economically recover after the people power revolution. A five (5) year power crisis ensued with 12 hour rotating brownouts 1990 to 1995. The

power projects undertaken under the Power Crisis Act giving new President Fidel V. Ramos the absolute power to negotiate urgent power projects, saw the building of power plants in places where coal unloading is feasible, where power barges can be moored, and where big power investments are politically convenient. 

From a transmission planning and system balancing point of view, many wondered why a 1,200mw power plant, the country’s largest, was built way in the North in Sual, Pangasinan, which is 210 kilometers away from Meralco’s nearest power substation feeder. It necessitated the building of an equal length of 230kv transmission line whose cost is passed on to the consumers. 

If we decide that the Bataan Peninsula is a good strategic generation area, it may be sensible to build a submarine cable system from Bataan to the Manila and Calabarzon load centers instead of going around Pampanga and Bulacan with overhead power lines that tend to run into right of way problems in building them. 

An archipelagic and island-centric generation strategy is most critical for the Visayan islands because of the high cost of continually building submarine power cable systems. Its major islands of Panay, Negros, Cebu, and Leyte, are seeing booming economies. Of these islands the weak link in generation is the 250mw Negros where there has not been a major power plant built for 40 years other than the ill-fated 80mw Northern Negros Geothermal project of PNOC EDC in the Mt. Kanlaon area which PNOC, after investing billion pesos, turned out to be a 10mw area. Currently most of Negros power comes from a coal plant in Cebu and eventually a coal plant in Panay islands to the West which will both require the expensive expansion of the submarine cable systems from those islands to Negros, adding to the transmission charges to consumers. We heard this is budgeted at P5 billion to bring about 100mw of Panay generated power to Negros. 

One of the emergency power projects in the 1990’s was the 700mw geothermal of Cal Energy in Ormoc, Leyte, built with a full off-take guarantee by the national government through PNOC. For many years it was being dispatched only 50% because its power cannot be delivered efficiently through the Visayan Grid which relies on submarine cables. During this period, Panay island and Negros had been suffering from power shortages including Boracay. In August of 1998, Leyte was connected to Luzon by a 440mw HVDC submarine cable system. 

For power reliability in each island there has to be sufficient on-island generation. There is an esoteric term in the power sector called “N-1” which roughly means an island must be able to maintain normal power supply even if its largest power source like a generating unit or largest transmission system is down. This is embodied in the Philippine Grid Code as part of power reliability formula. The Code also encourages embedded generation. 

NGCP as the system operator and planner of the power grid does not push for on-island generation. In fact their behavior suggests they are against it. They push for more revenue generating transmission line projects. And those will continually add to the transmission charges to the consumers. 

At some point, the major islands of Mindoro and Palawan will need to be connected to the main grid. However, the scale and cost must be sensible. NGCP’s proposal to connect Mindoro island with a

P11.9 billion 230kv submarine cable is an overkill and ignores the need to maintain on-island generation. Had they proposed a more sensible 69kv connection line to provide supplementary power it would have been more viable. Of course, they have to address how to protect Mindorenos from the loss of the missionary subsidies. 

The same with the 250 kilometer long Palawan island, cited for being one of the most beautiful islands in the world. It may eventually be connected to the Luzon grid because of its sheer size and load potential. For now the major task for at least the next 5 years is building as much on-island generating capacity as possible to meet its 40mw demand. Palawan is a wonderful place for the government to aggressively push for Renewable Energy. It has hydro, solar, biomass, and wind potential. Why are they insisting on building a coal plant that the Palawenos are against? It can sabotage the clean and pristine image that the island needs for its tourism, the most logical driver of economic development of the island. 

For power reliability and lower total cost of delivered power, we need on-island generations not only in small islands. Building expensive submarine cables is part of the cost to the consumers. Our archipelagic country needs an archipelagic generation philosophy. 

Matuwid na Singil sa Kuryente Consumer Alliance Inc. - See more at: http://matuwid.org/archipelagic-nation-needs-archipelagic-generation/#sthash.rqy6OsaY.dpuf

Congress urged: Overhaul EPIRATUESDAY, 27 JANUARY 2015 18:10

Consumer network People Opposed to unWarranted Electricity Rates (POWER) yesterday called on Congress

to overhaul the Electric Power Industry Reform Act (EPIRA), saying the law has failed in providing cheap,

adequate, and stable electricity to the public.

In yesterday’s hearing of the House Committee on Energy, POWER Convenor and former Bayan Muna Rep.

Teddy Casiño called on Congress to “radically amend or, even better, totally repeal EPIRA in favor of a law

that would strengthen regulation over the power industry and gives back to government the authority and

capacity to build and run power plants and related facilities.”

Proof of EPIRA’S failure, said POWER in its position paper presented to the Committee, was the

“unprecedented and artificial” spike in power rates of December 2013 which they said “was foreseen but not

prevented by an inutile Department of Energy (DOE), taken advantage of by colluding industry players, and

then given an imprimatur by an inept and beholden Energy Regulatory Commission (ERC).”

POWER said among EPIRA’s many flaws are: Sections 6 and 29 declaring power generation and supply as

non public utilities and therefore not subject to regulation; Section 30 creating the Wholesale Electricity Spot

Market (WESM); Sections 32 and 33 allowing the National Power Corporation (NPC) and distribution utilities

to pass on stranded costs and stranded debts to consumers; Section 45 allowing for cross ownerships

between power generators and distributors; Chapter V privatizing the National Power Corp.; Section 21

privatizing the national grid; and Section 71 limiting the government’s power to directly intervene in the

power industry.

“The end result of all these are high power rates, constant supply shortages, and a government that is

helpless in the face of a crisis,” Casiño told the Committee. 

Stressing that “Congress made EPIRA. Thus it can also unmake EPIRA,” Casiño said a new law was needed to

establish a responsive, sustainable and state-led power industry. Among the steps that would have to be

taken are: 

1. Categorize power generation and supply as public utilities

2. Re-establish Napocor’s role as power generator

3. Regain control of the national grid

4. Reinvigorate the electric cooperatives

5. Strengthen ERC’s regulatory capacity

6. Abolish the WESM

7. Further develop indigenous, clean and renewable energy sources.

http://www.edgedavao.net/index.php?option=com_content&view=article&id=19520:congress-urged-overhaul-epira&catid=34:the-economy&Itemid=81

Congress asked to repeal EPIRAby Charissa Luci

January 28, 2015

Read more at http://www.mb.com.ph/congress-asked-to-repeal-epira/#LGgv0MABdJRfJx8M.99

Congress has been urged to totally overhaul the 13-year-old Electric Power Industry Reform Act (EPIRA).

Consumer network People Opposed to unWarranted Electricity Rates (POWER) pushed for the “total repeal” of the

supposed “anti-people and pro-corporation” Republic Act 9136.

POWER Convenor and former Bayan Muna representative Teddy Casiño said it is about time for Congress to

“radically amended or, even better, totally repeal EPIRA in favor of a law that would strengthen regulation over the

power industry and gives back to government the authority and capacity to build and run power plants and related

facilities.”

Citing his group’s position paper on the 20 EPIRA bills and resolutions pending before the House Committee on

Energy, he said EPIRA caused “unprecedented and artificial” spike in power rates as of December 2013.

Such spike “was foreseen but not prevented by an inutile Department of Energy (DOE), taken advantage of by

colluding industry players, and then given an imprimatur by an inept and beholden Energy Regulatory Commission

(ERC),” according to the position paper the group submitted to the House panel, chaired by Oriental Mindoro Rep.

Reynaldo Umali.

The group said among the provisions of the EPIRA that must be scrapped include  Sections 6 and 29 declaring

power generation and supply as non-public utilities and therefore not subject to regulation; Section 30 creating the

Wholesale Electricity Spot Market (WESM); Sections 32 and 33 allowing the National Power Corporation (NPC) and

distribution utilities to pass on stranded costs and stranded debts to consumers; Section 45 allowing for cross

ownerships between power generators and distributors; Chapter V privatizing the National Power Corp.; Section 21

privatizing the national grid and Section 71 limiting the government’s power to directly intervene in the power industry.

“The end result of all these are high power rates, constant supply shortages, and a government that is helpless in the

face of a crisis,” Casiño told the Umali panel.

He stressed that Congress should come up with a new law “to establish a responsive, sustainable and state-led

power industry.”

Read more at http://www.mb.com.ph/congress-asked-to-repeal-epira/#LGgv0MABdJRfJx8M.99

It Will Take a Village to Reduce Meralco’s Rates

Posted on: Jan 15, 2015

By David Celestra Tan 

MSK has studied and identified the various charges that have been adding up to high electricity rates for Filipinos in the Meralco franchise area that serves 72% of the electricity needs of Luzon island. These are the basis for our Ibaba ng P3 Campaign. Essentially what we have done is get past the justifications of Meralco and unravel the mystery out of these high rates line by line. We have taken the first small consumer step by filing a petition with the ERC to pass a resolution mandating the open competitive bidding for power supply contracts that will be passed on to the consumers. There will be more rule-change petitions that MSK will file. 

We have a long way to go however before those small steps become giant leaps for consumers, who have long been ravaged by the power industry system that is supposed to serve them well. Obviously, MSK cannot do it by itself. It can only act as catalyst for reform and show the way. It will take a village to reduce Meralco’s rates. 

First, the Meralco’s residential and commercial consumers, its captive customers, must want the reduction and be willing to go beyond complaining and to take action. The ERC must take cognizance and pass the competitive contracting resolution, improve the transparency of systems loss charges, and the reasonableness of the PBR rate making methodology. So far it appears indifferent. 

The Department of Energy will have to provide enlightened policy direction and energy mix strategies. Most urgently it needs to improve the trading rules of the WESM specially the “market settling price”, the must run unit (MRU) policy, and market manipulation safeguards. The DOE must further recognize and work to close the loopholes in the law that have been allowing the monopolization and domination of the generation sector specially Rule 11

Section 4 of the Implementing Rules and Regulations of the Epira Law. 

Our Senators and Congressmen must rise up to the challenge and amend the law to close the loopholes and amend the IRR accordingly. They must be willing to cleanse the Epira Law of 2001 of its anti-consumer flaws. They must rectify the consumer betrayal of Republic Act 9511 which erroneously threw in the Systems Operator authority to NGCP as part of its transmission line concession. We must rationalize transmission line charges while we still can. NGCP’s P0.95 per kwh charge includes P0.36 per kwh for ancillary services that have been of doubtful benefit to consumers. 

The BIR and Department of Finance must be willing to rationalize the VAT taxation of power. The E-Vat Law of 2004 added P1.30 per kwh to our electricity bill. The DOE and JCPC must give Napocor a longer term missionary electrification mandate so that it can adopt more cost effective solutions to island power generation. Costly Temporary Rental generators are proliferating all over the islands. The DOE must be judicious in administering the missionary subsidies and discourage unscrupulous competitive biddings and power supply contracts. All these result to high Missionary subsidy that has added P0.19 per kwh to Meralco consumers and rising. So are the stranded contracts and assets of PSALM. They too will be hitting the consumers with more universal charges. 

The big players in the industry, who are mostly diversified conglomerates, must similarly cooperate and recognize that it is to their long term interest to help the country become energy competitive, strengthen the economy as a whole, and improve the purchasing power of the consumers. They cannot strangle the geese that lay the golden eggs for their various businesses in shopping malls, real estate, telephone services, water, transport and etc. 

Malacanang will have to provide the leadership and set the tone for a national resolve to reduce power costs. We are aspiring for Asian Economic Community integration but our power cost will be a big handicap. High power cost is an Achilles’ heel of the BPO and Call center industry which drives professional employment, middle class demand and the real estate boom. It is still two years before a new leadership comes in after the May 2016 elections. Let us hope the current government will not let the consumers down and do enough to put the country on the road towards rationalized power cost and competitive rates, a lasting patriotic legacy. 

And there is the most important which is Meralco itself. It must embrace least cost power as its mantra as a public service utility. It is within its right to

develop a cost efficient energy mix and subject its purchases of power to competitive bidding instead of negotiating with itself and monopolizing the power generation supply of Meralco. It must rid itself of this conflict of interest and do business in arms-length basis. It is within its capability to shepherd and manage the contractual obligations of its power suppliers specially the uptime and reliability obligations of their power plants. Meralco only needs to want to. 

In the P3.00 per kwh feasible reduction in Meralcos power cost, fully P2.20 or 73% is within Meralco’s own control and capability to initiate and achieve. (generation cost, systems loss and distribution charges). They only need to find it in their hearts to be true to their mandate as a public service provider. Meralco’s Filipino management and executives must view this as a patriotic duty. Least cost is part of its public service obligation. In the power cost reduction village Meralco is the center. 

Reducing the Philippine power cost especially in the Meralco area by P3 per kwh is an achievable dream. We however as a people must want to and cooperate and row in the same direction. MSK hopes it is showing the way towards rectifying this unintended conspiracy against the Filipino consumers. 

We have identified eight (8) varied areas for reform. It will take some doing even for all of us working as a village to reduce Meralco’s power rates. 

If not us, who? if not now, when? Otherwise we have no right to complain, bear the consequence of our own apathy, and reconcile with the unkind deed of consigning our own children and country to a future of overpriced power. Sad. 

Maybe we all can find enlightenment, courage, and epiphany in the Pope’s visit. 

--- 

David Celestra Tan is a CPA and a founder and former president of the Philippine Independent Power Producers Assn. He is a co-convener of Matuwid na Singil sa Kuryente Consumer Alliance Inc. (MSK) which is dedicated to working for reforms and rule-changes in the power sector to reduce power cost and make the country energy competitive. Follow the issues in the matuwid.org website. Comments can be sent to david.mskorg@yahoo.com.ph.

4 Comments

eirons1043 January 21, 2015 at 3:17 am

Almost nothing changes in this country unless there is a mammoth demonstration (the size of a Papal Visit) at the Luneta to move any Sitting President, Congress and the Judiciary to action. Complaining verbally, thru the internet, and newspaper columns is entirely useless. It is irresistible to conclude that only a bloody Revolution (or anything near it) can change the gross abuse of the government on excessive taxes and permits, GOCCs increased fees and penalties plus the non-stop price increases of Monopolized products and services by the Oligarchs like electricity, water, toll fees, construction materials, processed foods and even transport/airline fares..- taken from PDI, January 16, 2015

- See more at: http://matuwid.org/it-will-take-a-village-to-reduce-meralcos-rates/#sthash.nd7zemSX.dpuf

Amendments to EPIRA still hangingby Charissa Luci

October 15, 2014

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The fate of the measures seeking to amend the 13-year-old Electricity Power Industry Reform Act (EPIRA) remains

hanging in the Lower Chamber as the country’s business sector continues to oppose it.

House Committee on Energy Chairman Oriental Rep. Reynaldo Umali said they are wooing the business groups to

reconsider their stance against the lawmakers’ proposed amendments to the EPIRA or Republic Act 9136. “We have

to reassess strategy because the private sector is still not supporting measure. We need it so we can obtain support

of President to certify bill as urgent to ensure its passage,” he said in an interview.

Umali said after the House passes the joint resolution granting President Aquino the authority to contract additional

generating capacity, his panel would start tackling the bills amending the EPIRA. “I am not sure how to convince the

private sector,” he explained. “We need to reassess and strategize, but I am focused now on emergency powers,” he

added.

In August, Speaker Feliciano “Sonny” Belmonte Jr. reminded the Umali panel to expeditiously consolidate the EPIRA

measures, saying that Congress should step in to address the chronic precarious power supply situation.

It would be recalled that during the opening of the second regular session of the 16th Congress, the House Chief

directed the House Energy panel to consolidate the measures “to address the need for competitive bidding of bilateral

contracts, and of establishing a genuinely competitive power market that fosters a level playing field for all

stakeholders in the industry.”

Read more at http://www.mb.com.ph/amendments-to-epira-still-hanging/#0ur3qMLLhMJTBWll.99

Belmonte pushes EPIRA amendments

July 28, 2014

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House Speaker Feliciano “Sonny” Belmonte Jr. on Monday urged the House committee on energy to expeditiously

consolidate measures seeking to amend the the 13-year old Electricity Power Industry Reform Act (EPIRA).

The House chief urged both houses of Congress to thoroughly review the implementation of the supposed “anti-

people, pro-corporation” law.

“Our country’s growth momentum is now put at risk by the chronic precarious power supply situation,” he said in his

opening remarks during the opening of the second regular session of the 16th Congress.

“The House Committee on Energy must now consolidate proposals to address the need for competitive bidding of

bilateral contracts, and of establishing a genuinely competitive power market that fosters a level playing field for all

stakeholders in the industry,” Belmonte said.

He maintained that there is a need to amend the EPIRA to “prevent the cross-ownership of the generation,

transmission and distribution sectors.”

“While, the Executive is empowered by the EPIRA to ensure power supply security, it is incumbent upon Congress,

exercising its oversight powers through the Joint Congressional Power Commission, to conduct a thorough review of

the implementation of EPIRA, the rules and regulations of the Energy Regulatory Commission, and the Wholesale

Electricity Spot Market (WESM),” he said.

Belmonte earlier expressed optimism that the EPIRA measures could be passed this 16th Congress. (Charissa M.

Luci)

Read more at http://www.mb.com.ph/belmonte-pushes-epira-amendments/#ckptkKitbzyVDxLi.99

POSITION PAPER ON THE NEED TO AMEND OR REPEAL THE ELECTRIC POWER INDUSTRY REFORM ACT (R.A. NO. 9136)January 28, 2015 by Blog Administrator Leave a comment

https://powertothepeoplenow.wordpress.com/2015/01/28/position-paper-on-the-need-to-amend-or-repeal-the-electric-power-industry-reform-act-r-a-no-9136/

Prepared by the People Opposed to unWarranted Electricity Rates (POWER)

for the Energy Committee of the House of Representatives

January 27, 2015

In a comprehensive report on the impact of EPIRA on the power industry

presented to select members of Congress last 2011, the People Opposed to

unWarranted Electricity Rates (POWER) came up with the following striking

observations:

– Power rates doubled since EPIRA was implemented, with Meralco increasing its

rates by more than 112 percent and National Power Corporation (NAPOCOR) by

more than 95 percent in 10 years. Power rates in the country are among the

highest in the world and more increases are yet to come when consumers start

paying for Napocor’s stranded debts and stranded costs;

– Supply remains a big problem with hardly any additional capacity

implemented under EPIRA;

– An oligopoly exists and monopolistic practices abound, with only three groups

controlling 52 percent of generation capacity – San Miguel Corporation (SMC),

Aboitiz and Lopez and Meralco controlling 70 percent of distribution in Luzon;

– Despite selling its major power plants and assets to pay for its debts,

NAPOCOR remains mired in debt. From 2001 to 2010, it shelled out $18 billion to

service its financial obligations yet its debt hardly decreased from $16.4 billion

in 2001 to $15.8 billion.

Such factual observations are totally the opposite of the stated objectives of

EPIRA.

Of late, the unprecedented and artificial spike in power rates of December 2013

should serve as the final proof that the twin policies of privatization and

deregulation mandated and implemented under the Electric Power Industry

Reform Act or EPIRA have failed. The incident was foreseen but not prevented

by an inutile Department of Energy (DOE), taken advantage of by colluding

industry players, and then given an imprimatur by an inept and beholden

Energy Regulatory Commission (ERC). If Congress and the Supreme Court did

not step in, our people would have suffered the highest rate hike in history that

would have made Philippine electricity the most expensive in the world.

That something like that could happen is a testament to how EPIRA and its

implementing agencies have failed in its promise of providing consumers with

cheap and stable electricity.

Problem of policy

Proponents of EPIRA’s neoliberal policies of privatization and deregulation say

this is basically a problem of implementation. They point out, for example, that

the government dilly-dallied in selling our state-owned power plants, resulting in

additional debts and stranded costs. That the WESM rules are flawed and its

requisites have not been met, leaving the system vulnerable to gaming. That

the ERC is incompetent and corrupt. That the DOE is short-sighted and refuses

to take on a more pro-active role. That bureaucratic red tape is still making it

too difficult for investors to put up much needed power plants.

We agree to a certain extent. But more than a mere implementation issue, the

basic problem is one of a flawed policy. Like most textbook, first world solutions

to peculiar, third world problems, EPIRA and its neoliberal prescriptions ended

up with contrary results. Privatization and deregulation were supposed to entice

new investors leading to more competition, increased supply and decreasing

prices. To protect the system from anti-market behavior and monopoly

practices, an independent ERC was supposed to police the industry.

Alas, it was too good to be true. Privatization practically transferred on a silver

platter the entire power industry to a class of conniving oligarchs and foreign

investors whose lust for profits were unbridled by deregulation. Meanwhile,

government found its hands tied in protecting consumers and the national

interest. It became content with the proceeds of Napocor’s fire sale and the

assurances of EPIRA’s proponents that the free market would take care of the

people’s welfare.

Tailor fit for abuse

Among EPIRA’s many flaws, the following stand out:

– Sections 6 and 29 declaring power generation and supply as non public

utilities and therefore not subject to regulation. This is the basis for the dreaded

automatic generation rate adjustment (AGRA) mechanism that allows Meralco

and other distribution utilities to automatically pass on generation costs

however onerous;

– Section 30 creating the Wholesale Electricity Spot Market (WESM), a psuedo

spot market easily manipulated by industry players to jack up power rates;

Sections 32 and 33 allowing the National Power Corporation (NPC) and

distribution utilities to pass on to consumers the burden of their past mistakes

via recovery of stranded costs and stranded debts;

– Section 45 allowing for cross ownerships between power generators and

distributors, institutionalizing connivance and anti-competitive behavior;

Chapter V privatizing the NPC, Section 21 privatizing the national grid, and

Section 71 limiting the government’s power to directly intervene in the power

industry. This has led to an inutile government held hostage by private power

corporations.

The end result: high power rates, constant supply shortages, and a government

that is helpless in the face of a crisis.

While we consumers bear the brunt of EPIRA’s failures, industry players make a

killing. From its reported net income of Php2.6 billion in 2008, Meralco saw its

profits grow by more than six times to an all-time high of Php17 billion in 2013.

For 2014, the power distributor expects its net income to further grow to

Php17.8 billion – or almost seven times its profits in 2008.

Meanwhile the estimated average Return on Equity (ROE) of 15% in the

Philippine power industry is higher than in most industries.

Power industry too important to be left to the mythical free market

The importance of electric power to national development cannot be

overemphasized. From ordinary households to large industries, electricity is a

necessity; its cheap and adequate supply a requirement for the achievement of

various social, economic and even political goals.

This is the reason why, in most countries of the world, power is highly regulated,

owned by the state to a substantial degree, and subsidized by public funds. The

logic is that for such strategic public utilities, not only should prices be kept low

and stable but government itself, as protector and promoter of the public

interest, should have a direct hand in its planning and operation.

EPIRA repudiates this tried and tested formula. Its success is premised on the

existence of an efficient free market, uninhibited by government, where many

buyers and sellers transact to arrive at an optimum price that is both affordable

to the buyer and profitable to the seller. In such a market, government’s only

role is ensuring a “level playing field.” Unfortunately, there is no such market in

the Philippines, at least as far as electricity is concerned. What we have is a

market controlled by a rich and powerful oligopoly that commands an

overwhelming influence over politicians and government officials.

Given the nature of power utilities as natural monopolies with immense market

power, abuse and anti-competitive behavior is expected. The 2013 incident

involving Meralco’s unprecedented P4.15/KwH rate hike is a case in point.

True enough, 12 years after EPIRA, the power industry is not only concentrated

in the hands of a local oligopoly but worse, is effectively owned and controlled

by foreigners. Take Meralco, which is now controlled by the Salim group of

Indonesia and the National Grid Corporation of the Philippines (NGCP), which is

40% owned by the State Grid of China Corp. This has grave economic and

security implications for the country, to say the least.

What can Congress do

Congress made EPIRA. Thus it can also unmake EPIRA.

We in POWER feel strongly that Congress should radically overhauled or, even

better, totally repeal EPIRA in favor of a law that would strengthen regulation

over the power industry and gives back to government the authority and

capacity to build and run power plants and related facilities.

To establish a responsive, sustainable and state-led power industry, Congress

should pass a law that would:

1. Categorize power generation and supply as public utilities

EPIRA redefined power generation and supply as ordinary private enterprises

not subject to government regulation. This has opened the door to onerous

pass-through charges and unconscionable rates of return. Just like transmission

and distribution utilities, power generators and suppliers are imbued with public

interest and should be strictly monitored and regulated. A mechanism for

subsidies should also be put in place to ensure competitiveness with

neighboring countries that do likewise.

2. Re-establish Napocor’s role as power generator

EPIRA relegated Napocor to the fringes as an operator of decrepit and

unprofitable plants in far-flung missionary areas. This has severely restricted

government’s role in ensuring an adequate supply of cheap electricity where it

is needed most – in the urban areas and industrial belts. Unlike private

companies that would rather wait for a supply shortage before coming in to

maximize their profits, Napocor plants can be built and operated at break even

to serve strategic national objectives.

3. Regain control of the national grid

The National Transmission Corporation (Transco) was the crown jewel of the

state-owned power industry, earning revenues prior to privatization. As a natural

monopoly and strategic infrastructure for the entire power industry, it should not

have been sold in the first place.

4. Reinvigorate the electric cooperatives

Our electric cooperatives should be overhauled and member-consumers

empowered in order to provide the best services possible. Control and

management of these cooperatives should be removed from the politicians and

vested interests in the power sector and given back to the members.

5. Strengthen ERC’s regulatory capacity

The ERC’s Performance Based Regulation (PBR) is too complex for the public to

effectively participate in the rate setting process even as it allows industry

players to unfairly charge consumers for future capital expenses. It should be

replaced by a rate setting mechanism based on a reasonable return on equity.

6. Abolish the WESM

Power distributors should be required to contract 100% of their supply

requirements via public bidding. The electricity spot market, if any, should be

limited to reserve and ancilliary services and strictly monitored and regulated by

the government.

7. Further develop indigenous, clean and renewable energy sources

Our reliance on imported, fossil fuel-based technologies sould be reduced to a

minimum. Considering the wealth of renewable energy sources in the country, it

will be cheaper and more sustainable in the long run to develop biomass, hydro,

geothermal, solar, wind and other renewable energy technologies.

8. Remove VAT and reduce other taxes on electricity

EPIRA alreay exempts the power sector from the value added tax but was

superseeded by the EVAT Law in 2005. There is a need to remove VAT and

reduce other taxes because lower prices benefit all consumers and the country

at large.#

Solving Phl energy woes? More power plants – DOEBy Iris Gonzales (The Philippine Star) | Updated March 23, 2014 - 12:00am

MANILA, Philippines - How do you solve the country’s power problem?

Energy Secretary Carlos Jericho Petilla, without hesitation, said the solution rests on the private sector building more power plants.

“It’s really the private sector that must build more plants,” Petilla told The STAR. And they have to build plants fast to keep up with rising demand.

“It is the private sector that can make EPIRA work by building more plants,” said Petilla, referring to the landmark power reform law, the Electric Power Industry Reform Act of 2001.

“I keep on telling them, if you want to make EPIRA work, build more power plants,” Petilla said.

Headlines ( Article MRec ), pagematch: 1, sectionmatch: 1

To illustrate, data from power distributor Manila Electric Co. (Meralco) showed that in the period 2001 to 2013, the Luzon peak demand had grown by 2,659 megawatts or 47 percent, from 5,646 MW to 8,300 MW.

Yet, no new major base load plant has been constructed and added to the Luzon grid other than the coal-fired plant of GN Power in Mariveles, Bataan with a reported installed capacity of 652 MW and current dependable capacity of 495 MW.

Accordingly, demand has outgrown new base load capacity addition by around 2,000 MW during this period.

It was on June 8, 2001 that then President Gloria Macapagal-Arroyo signed into law Republic Act 9136, or the EPIRA, after more than seven years of public hearings and floor deliberations on various versions of the measure in Congress.

EPIRA promised many things but its biggest promise was to bring down electricity rates and to improve the delivery of power supply to end-users by encouraging greater competition and efficiency in the electricity industry.

“Consumers will be assured of adequate and reliable power supply at lower rates,” the Department of Energy (DOE) said in a briefer on the power reform law.

“There will be competition between and among generating companies where prices will be market-driven and competitive. There will be long-term contracts and a spot market where the trading of electricity between buyers and sellers will be undertaken,” the DOE paper said.

The signing of EPIRA came at a time when the Philippines depended largely on the National Power Corp. (Napocor), the state-owned power company, and its monopoly of the energy sector.

Thus, the restructuring of the energy sector called for the separation of the different components of the power sector such as generation, transmission, distribution and supply.

“The strategy is to put an end to monopolies that breed inefficiency, encourage the entry of many more industry players, and generate competition that will benefit consumers in terms of better rates and services,” the DOE said in the briefer.

It was the same scheme that worked in other countries, and was touted by the DOE to work just as well in the country.

“In other countries, a restructured and competitive power sector has provided consumers with lower power rates. We look around us and find that the same pattern can be seen in local industries that have been de-monopolized and deregulated like telecommunications and inter-island shipping,” it also said.

Under EPIRA, the government had envisioned that privatization would allow it to shift the burden of ensuring continuous financing for the construction, operation and maintenance of hugely capital-intensive, power-generating plants to the private sector.

Thirteen years later, however, electricity consumers are still reeling from high electricity cost. Things came to a head in December 2013 and January 2014.

Last December, the generation charge of Meralco rose to a record high of P9.10 per kilowatt-hour and to P10.23 per kwh in January 2014.

This was in contrast to the November 2013 rates of P5.67 per kwh and the monthly generation charge before that which hovered around the P5 per kwh level.

Acting on a petition from militant groups, the Supreme Court issued a temporary restraining order on the planned rate hike.

Market failure

After 13 years, EPIRA did not only fail to fulfill its promise, it also created an environment that led to market failure.

In a March 6 order issued after months of investigation, the Energy Regulatory Commission (ERC) said there was market failure at the Wholesale Electricity Spot Market (WESM) because some participants did not offer their full capacities, thereby affecting supply and pushing prices higher. WESM is the country’s trading floor for electricity.

“One reason that supply was low was because market participants did not offer their available capacity so there was market failure,“ said ERC executive director Saturnino Juan in a briefing on March 11 explaining ERC’s order.

A total of 2,035 MW in average capacity were not offered at the WESM during the one-month maintenance shutdown of the Malampaya natural gas plant, the ERC said.

Thus, the ERC declared the WESM prices during the period as void and ordered the Philippine Electricity Market Corp. (PEMC), operator of the WESM, to re-calculate the prices and issue revised bills to Meralco and other concerned distribution utilities.

The ERC said prices in WESM during the November and December 2013 supply months “could not qualify as reasonable, rational and competitive” and that in the “exercise of its police powers,” it was ordering the voiding of the Luzon WESM prices.

The ERC had ordered the PEMC to determine if generation companies violated market rules when they did not offer their full capacities in the market.

The WESM’s “must-offer rule” requires companies to declare and offer their maximum generating capacities to prevent supply shortage.

It was not the first time that inefficiencies in the market were spotted. In 2006, PEMC also found out that the Power Sector Assets and Liabilities Management Corp. (PSALM) committed anti-competitive behavior.

PSALM not blameless

The PEMC, through its Enforcement and Compliance Office (ECO) and Market Surveillance Committee (MSC), conducted an investigation into PSALM’s conduct at the WESM for the third billing month or in August 2006. PSALM is the government agency created by the EPIRA to privatize Napocor’s generating assets.

The MSC, in a memorandum report dated Nov. 20, found PSALM guilty of anti-competitive behavior and abuse of market power.

“PSALM, acting as one through its three trading teams, exercised market power. They were able to set the market price to a level that they wanted during peak hours. Since the production costs were well below the P10,000 per megawatt and above offered during the third billing month, they abused market power during the peak hours which market power would not have been there had the three trading teams acted competitively and independently with each other,” PEMC’s MSC said in its report.

At the time, PSALM’s three trading teams or the most frequent price setters in the market were KEPCO Ilijan, Pagbilao and Sual power plants. Three different teams but all under PSALM were trading all these plants.

However, the ERC eventually voided the findings of PEMC, saying there was no prima facie evidence to conclude that PSALM had indeed engaged in anti-competitive behavior.

But ERC warned Napocor and PSALM to refrain from engaging in conduct inimical to the objectives of free competition.

The STAR columnist Boo Chanco, who had worked for the then Ministry of Energy, said regulatory failure and not market failure was to blame for the problem.

“If you ERC guys were more alert in defense of the public interest, you would have seen market failure about to happen and would have taken steps to stop it from happening,” Chanco said.

EPIRA author Sen. Serge Osmeña said the law is a good one but lamented that the ERC has not been able to implement it well because it is full of political appointees.

The Philippine Chamber of Commerce and Industry, the country’s most influential business organization, submitted last month a list of proposed EPIRA amendments. It particularly urged Congress to strengthen the role of the ERC.

World Bank senior energy specialist Alan Townsend said ERC “in general is probably a bit too legalistic and process oriented and not driven enough (nor capable enough) by core economic aspects.”

(To be concluded)

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3. Epira revisions worry investors

Epira revisions worry investorsBy Alena Mae S. Flores | Jun. 18, 2014 at 12:01am http://manilastandardtoday.com/2014/06/18/epira-revisions-worry-investors/

New power plants in the Philippines are facing funding delays as foreign banks weigh their options amid calls to revise the Electric Power Industry Reform Act of 2001.

Lawmakers have called for an amendment to the Epira following an unprecedented spike in power prices in the November and December supply months last year, after the Malampaya gas production facility in Palawan was shut down.

Management Association of the Philippines energy committee chairman Ernesto Pantangco told reporters with the economy growing at a rate of 5 percent to 6 percent annually, power plants needed to be built to address the demand.

Many companies are still keen on building new power plants but some projects cannot take off because of funding concerns. He cited the the expansion of the 460-megawatt Quezon power plant in Mauban, Quezon that faced funding difficulties.

Some companies interested in expanding or putting up additional capacities could not yet select an engineering, procurement and construction contractor because of failure to close financial deals and regulatory risks.

“They [power generators] will come in but not in time. They [power generators] are watching how this regulatory uncertainty will pan out… If you look at the foreign banks, they are

concerned [about] political risk, which falls under regulatory risk. That’s why it is important for us to show consistency,” Pantangco said

He said the Philippines must put up an additional capacity of 300 megawatts every year and the country was already two years behind the projection.

“If you introduce uncertainty, nobody is going to build,” Peter Wallace, MAP governor, said

Asif Anwar Ahmad, British Ambassador to the Philippines, meanwhile, urged the government to relax the foreign ownership rule, especially on renewable energy projects.

“For the longer term, we would look to congressman and legislators to liberate the market so that foreign investments which can be over the 30-year period, where ownership is not always restricted, where we can partner with greater confidence than we already have,” Ahmad said.

“Not from a political point but from an economic point... any big project which is billions of dollars needs certainty of ownership, you need certainty of investment return, you need to convince bankers and financiers that you have a project that is sure over the long term and the shareholders that take the risk can be repaid, and that is not always possible if your are in a minority shareholder position,” he said.