DOE’s Power Shortage Prediction Needs to Regain Credibility in a Hurry

By David Celestra Tan

20 October 2014

Despite all the technical and econometric considerations that go into projecting the country’s power demand and supply, it is still in the end not an exact science. There are many assumptions that may or may not happen six (6) months hence. Will it be an extremely hot summer? Will it unseasonably rain? How many power plants will go down or de-rate when they are needed the most? Will Malampaya be available? Will the economy grow abruptly? Will the expected new power projects really come on time and beat the summer? Or even whether Manilans will go on summer vacations and leave town in droves?

It is a leap of faith and must be based on solid convincing and sure-footed data from a credible authority especially when the contingent solutions (reserve power) will cost the consumers in tens of billions as the electric payers or as taxpayers in case the government dips big time into the Malampaya fund.

The problem with the DOE’s current efforts to justify emergency powers and essentially get congressional permission to dispense with competitive bidding and negotiate emergency generating capacity is that its figures and projections had been wobbly and not convincing.

Department of Energy Secretary Jericho Carlos Petilla had gone from estimating a power supply shortage of 200 to 300mw of peaking power in the summer of 2015 a couple of months ago when he first broached the idea of needing emergency powers under Section 71 to what he reportedly claims now as a potential 1,000 to 1,200mw shortage.

Despite a Congress apparently predisposed to granting Presidential emergency powers to install additional generating capacity as requested by Sec. Petilla, the numbers remain to have doubts that do not deserve the benefit.

Sec. Petilla’s problem is he may not be realizing that by going for emergency power from the get go to negotiate power supply contracts when he was still projecting 300mw, he looked like a politician trying to pull a fast one on the public. When the power and business sector made him realize that a 300mw temporary shortage a few hours in some days in the summer can be managed by a well-organized ILP program from the private sector that has more than 3,000mw of emergency generators, he progressively increased his projection of the shortages to now about 1,200mw. So now he is starting to look like a guy determined to justify emergency powers so he can negotiate contracts using tens of billions of Malampaya money. Now the public is thinking, is this the PNoy administrations version of PDAF and Fertilizer scams all dipping into the 100 billion Malampaya funds?

It appears the DOE’s strategies and approach to what they are trying to accomplish could have used better fine tuning based on a deeper understanding of the inner workings and dynamics of the power supply sector.

This perception of Sec. Petilla by the public and Congress has to change hurriedly. They can start by bringing credibility into their numbers. They must reconcile their numbers with NGCP whose numbers say otherwise. Sec. Petilla must go beyond telling the public, and expecting them to take his word for it, that the dependable capacity in the summer will only be 10,000mw instead of 11,469 and publish the basis for such pessimistic numbers. Let the public know which plants told DOE they will be down during the summer. The public is aware that there is 12,790 mw in installed capacity in Luzon, 11,469 in dependable capacity and only 9,000kw demand during summers. What gives? They are looking for the missing capacities before they become sympathetic to the need for emergency powers to spend P15 billion in replacement power.

There is probably more to this 1,200mw shortage than meets the eye. Is it really because, as is officially being implied, the DOE took a plant by plant survey and discovered the bad news that many of the supposed dependable capacities of the Luzon power plants will be out of service in April and May 0f 2015? Or is it a result of backroom negotiations between Congress and the DOE where Legislators had asked the DOE to raise the target additional generating capacity so that some of the proposed coal power plants can be fast tracked to implementation through the Presidents emergency power? (Redondo, Pagbilao, Avion, Etc.)

The 1,200mw shortage obviously does not jibe with the realities of a rental generators solution. The country can only expect about 200 to 300mw of rental generators by March 2015 if they contract like in the end of November. A good portion of that will not even be ready to supply power by the summer deadline. 300 units of rental generating units would be a logistical nightmare to move and install from abroad to Luzon in 90 days. Step up power transformers would be needed to enable those units to deliver power to Luzon electric coops at probably 69kv and at 115kv to Meralco area. It is unrealistic to think that we will contract 1,200mw of rental generators.

The 900 to 1,000 mw of additional capacity will be most likely new coal plant projects that are stalled in the permitting process and they are looking at the magic wand of a Presidential Emergency Power to make the roadblocks disappear. But that is not for the coming summer. This new baseload plants are not necessarily bad because Luzon does need those additional capacities in the medium term but that’s another story.

The Department of Energy must first be controlling the controllables.

In balancing supply and demand, it should be trying to control the demand side. Energy efficiency, demand side management, and rooftop solar deployment. How about a grassroots voluntary turnoff your electricity for one hour campaign?

Even the Interruptible Load Program (ILP) is actually a form of demand side management.

Then there are the controllables on the supply side. Make the power generators insure that they will be available during those critical months. Take an inventory of their compliance with the downtime limits of their bilateral contracts. Make them responsible for replacement power at no additional cost to consumers.

In the supply side mitigating measures, the DOE must lean on the DU’s specially the big ones like Meralco, who actually is in a better enforcement position because they are the counter-party to the bilateral contract with power generators specially their sister companies.

Come summer we need to see the DOE in the forefront of rallying the consumers to control the controllables. Saving electricity, cooperation for ILP, shifting demand.

While we are trying to solve power supply problems, let us keep an equally watchful eye on the cost of the chosen solutions to the already reeling electric consumers. Every time a “power crisis” is created, our country’s aspiration for lower rates goes out the window.

If they are going to make way for the fast tracking of those new power projects (Redondo and Pagbilao) can President PNoy and Sec. Petilla at least exact from these big local players to commit to public scrutiny the generation rates that they will pass on to the consumers for these negotiated contracts and to cooperate in putting the country on the path towards open competitive bidding as envisioned in Sec. Petilla’s DASAP proposal? Emergency powers can be used not only to negotiate contracts and rates from the rental generators but also from the large new power projects that will seek assistance to unclog their permitting problems. How about asking them to commit a reasonable portion of the Luzons hydro power to bilateral contracts at P3.50 per kwh. Hydro plants fuel is water that belongs to the public. Why sell that at an atrocious P13 to 33 per kwh through the WESM? I mean, if there is going to be an emergency power, let us leverage it for the benefit of the consumers.

Future implications

Meanwhile, Sec. Petilla hurriedly needs to solidify the credibility of his numbers or even their supporters in Congress might not be able to justify granting the right to negotiate these power supply contracts. If the DOE’s hunch on power reserves in the summer is on the right track, then they would have done a disservice to the consumers by not being solid in their justifications and numbers. If it turns out that there is really nothing in their alarm bells, then they would have done damage to the long term credibility of the DOE as a power planning agency. What happens if they cry wolf again the next time?

Predicting power sufficiency may not be an exact science but they can be sure and consistent with their methodology, and honest and transparent with their assumptions. Credibility is an essential element of predictions……and the underpin that justifies spending tens of billions of the governments and taxpayers Malampaya funds.

I guess we will find out in the coming summer.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

Email david.mskorg.com.ph