Emergency in Power, Summer of 2015 and Section 71

By David Celestra Tan

Let us grant for the sake of argument that there could be a shortage of 200 to 500mw of power supply in Luzon this coming summer. (Mindanaoans are probably saying “welcome to the club”!)  Let us assume also that in that calculation the Department of Energy had factored in what Meralco and other DU’s had already contracted, the enhanced availability of IPP’s, and any new generating capacity that will come on line by March 2015.

The Department of Energy is saying to deal with this problem the government needs to contract 500mw of rental generators for at least two years at a cost of P6 billion for two years. It would be the largest modular generator rental deal in the world, a testament to the country’s continuing inability to properly plan and anticipate its power supply needs. And to negotiate it fast,  it needs Congress to grant Emergency Powers to President PNoy under Section 71 of the Epira Law of 2001.

I estimate that mobilization and installation costs plus the support grid connection, step up transformers, and fast tracking costs would easily cost another P2 billion. Considering the magnitude involving at least 350 modular generators, a good portion of that capacity may not even be ready and commissioned in time for the summer of 2015. And given the country’s record of renting generators, a fair amount of that 500mw will probably be extended a year or two.

We are talking P8 billion for capacity costs alone for two years.  If that 500mw run 5 hours day for 90 days, fuel costs will easily run P2.5 billion a year.  Will they be trying to mitigate these costs by trading it in a reserve market or WESM spot market? Will they be buying the gensets outright and trying to privatize it and make it part of a “reserve” market?

We try to understand the dilemma of DOE Secretary Petilla and President Pnoy. If they don’t do anything and the summer of 2015 come rolling in with brownouts, it can imperil the ruling party’s 2016 election strength. If they spend the P8 billion and the brownouts do not happen, they will be criticized and even sued for recklessly spending PSALM’s resources, which eventually will pass this on to the consumers.  They are between a rock and a hard place.

But is that all they can do for contingent planning?

How about good old fashioned energy conservation campaign for the summer? This could be led by the President himself and actually could be a welcome unifying movement for the nation which had not seen much reason to rally as a country outside the Manny Pacquiao victories and the Gilas basketball exploits. (yeah, yeah those international beauty contests victories too! But Bench’s “Naked Truth” doesn’t count!)

Levity aside, Energy conservation for the summer can reduce peak demand by 250mw especially with a voluntary “turn off your light for one hour” campaign at night.

How about a program to make the various independent power procedures insure their plants elevate their capacity availability for the summer? How about making them responsible for replacement power during this critical period?

Not a few have pointed out the existence of installed private generators totaling 3,000mw. I mean each self-respecting major buildings and establishments have one ranging from 50 to 5,000 kw. The Phil Chamber of Commerce has recommended the Interruptible Load Program (ILP) under which these large establishments can run their generators at a rolling 3 to 5 hours a night if called upon during the summer. Even if the government reimburses them for fuel differential of say P6.50 per kwh, that will only cost about P1.6 billion for 90 days.

Assuring these establishments cooperate can be a judicious use of a Presidential Emergency Power under Section 71. And if they don’t cooperate? Just turn off their power under the summer power rationing emergency during nights. Sort of making the ILP an Involuntary Load Program.

One lesson in power that we kept unlearning is “short term problems need short term solutions”.

This situation actually highlights the inadequacies of Section 71 of the Epira law that requires the government to declare an emergency and secure Congressional approval. It similarly exposes the drawback of giving the President a discretionary right to deal with a perceived power shortage which then can be misused against the public interest. This will be the subject of another article.

We are between a rock and a hard place.