Business Mirror: Emergency powers and other options
By Edgardo Angara, September 20, 2014
Business Mirror
BETWEEN 1987 and 1992, the Philippines suffered a severe power crisis, experiencing brownouts that average 8 to 10 hours a day. Faced with a 3,000-megawatt (MW) shortfall, the nation endured nearly 500 days of power outages.
In April 1, 1993, at the height of the crisis, then-President Fidel V. Ramos certified as urgent the Electric Power Crisis Act, which would grant him authority to negotiate power projects. Eleven days later, Congress swiftly granted that authority. Ramos did not waste time, consummating many independent power-producer (IPP) agreements.
By November 1993, the Naga Thermal Complex was approved, making it the 28th IPP contract signed since the authority was granted. The power shortfall had been met by then, with about 3,856 MW of capacity already contracted.
However, more contracts were signed, despite the World Bank having sounded the alarm in December 1994 that the Ramos administration was overcontracting, resulting in oversupply. By then, the country had up to 3,800 MW in insurance capacity—extra electricity-generating capacity held in reserve and deployed during emergencies. This insurance capacity was some 43 percent above installed capacity, well over the standard 30 percent.
All the contracts had “take or pay” provisions that assured payment to the IPPs, even if their power plants did not actually deliver electricity to consumers. The result was an anomalous situation, in which millions of Filipino consumers were billed and paid for electricity they did not actually use.
To be sure, President Aquino’s request for emergency powers comes at a time and under circumstances that are far different from those in 1987. And while inaction will be damaging to the country’s rising economy, our record shows that emergency powers can actually make things worse.
In a recent Senate public hearing, officials of the Power Sector Assets and Liabilities Management Corp. revealed that buying or leasing five 200-MW generator sets would cost P12.5 billion, with operation costs amounting to about P13 per kilowatt-hour. If utilized, the sets will run for four months, seven hours a day, resulting in extra costs for consumers already burdened with soaring prices.
The Department of Energy (DOE), its main proponent, pointed to a power shortfall of at least 400 MW next summer. If granted, the emergency powers will be used to negotiate and consummate power-generation contracts without any public bidding.
Other options exist, though. For instance, overall demand can be curtailed and brought down to more manageable levels. The DOE has in place an Interruptible Load Program (ILP), under which large power users volunteer to draw electricity from their embedded generator sets, instead of from the grid.
During the hearing, Makati Business Club (MBC) Chairman Ramon del Rosario reported that some MBC members have already signed up for the ILP, effectively freeing up as much as 180 MW to date, with another 200 MW to 245 MW outside of the Manila Electric Co. franchise area that may be added to that amount.
Dan Lachica, president of the Semiconductors and Electronics Industries in the Philippines Inc. (Seipi), said that some Seipi members have embedded generators that could produce up to 190 MW. Del Rosario also said some from the private sector, particularly Shell and Petron, have existing power-generating assets that could be contracted through a power-supply agreement.
With such options available, Congress has to carefully weigh on whether granting emergency powers to President Aquino is the best way of dealing with the looming power shortfall. Meanwhile, the public must closely watch Congress and ensure that it chooses the most prudent course of action.
