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

“Do not provoke DOE, with connivance of shet power producers, they can make the shortage happen.” (Teddy Locsin Jr. – Broadcast Journalist of ABS-CBN News Channel, via Twitter handler @teddyboylocsin)

“Thank you Dave. Always a nice read with plenty of information. Mabuhay ka!” (Gus Adi via email)

On Emergency in Power, Summer of 2015 and Section 71

From Mr. David A. Tauli

Thank you for this excellent post, Mr. Tan.

The officers of the Mindanao Coalition of Power Consumers have not been reacting to the news and commentaries about the Philippine Power Crisis that Sec. Petilla is shouting about because we know that none of the actions being proposed by Sec. Petilla is going to mitigate the Mindanao power crisis that has been devastating the economy since 2010, when the PNOY administration took office. (Note that the Mindanao Grid is not connected to the Luzon Visayas Grid, so all the emergency power measures identified by Sec. Petilla will not add a single kilowatt to the Mindanao Grid.)

It bears pointing out, however, in reaction to your latest post, that when Sec. Petilla replaced the disgraced Sec. Almendras (for not having solved the Mindanao power problem after two years as DOE secretary), the major measures he advocated to address the Mindanao power crisis were: (a) to get the NEA to make available billions of pesos for the electric cooperatives to use to purchase modular generating sets; and (b) to put the Interim Mindanao Electricity Market into operation, purportedly to make available to other distribution utility companies the existing power capacity of generating plants embedded in the distributions systems of the DU’s.

Plan A of Sec. Petilla was a failure because only 3 or 4 of the EC’s borrowed money from the NEA for use in purchasing modular gensets, and the consumers of the EC’s that followed the orders of Sec. Petilla saw a significant increase (two pesos or more per kWh) in the rates of electric power. Plan B, the IMEM, was scuttled by the electric cooperatives in Mindanao who did not pay the power bills (for something like 400 million pesos) that the Philippine Electric Market Corp sent to them for the operations of the IMEM in the month of December 2013. (The PEMC and the DOE submitted an application to the Energy Regulatory Commission petitioning for the resumption of operation of the IMEM; the next hearing for this will be held in Davao City on Oct. 7. The MCPC and the AMRECO submitted their opposition to the resumption of operation of the IMEM, with the AMRECO asking for amendment of the IMEM Rules before it can be operated again, and the MCPC absolutely opposing operation of a competitive power market in Mindanao while there is still a large shortfall in the power supply capacity compared with the actual demand of consumers.)

My questions are: (a) Why is Sec. Petilla insisting on an emergency measure (purchase of modular gensets) for Luzon-Visayas that failed in Mindanao? (b) If the WESM cannot in fact be used to address the power crisis in the Luzon-Visayas Grid, why does Sec. Petilla and the PEMC insist that the operation of the IMEM would help solve the power crisis in Mindanao; and why is the ERC abetting them in their apparently nonsensical plan to resume operation of the IMEM instead of dismissing their petition for the worthless paper it is that is wasting everyone’s time and money?

David A. Tauli

President, MCPC

From Mr. Teddy Casino

Please find below a press statement issued today by the People Opposed to unWarranted Electricity Rates (POWER) on the issue of emergency powers to address the power shortage. Thanks.

POWER says no need for emergency powers but gov’t needs to build power plants to solve shortages

Insisting that emergency powers are not necessary to address the projected power shortage in 2015, consumer group People Opposed to unWarranted Electricity Rates (POWER) urged Congress to focus on bringing back government’s capacity to build and run publicly-owned power generating plants.

POWER says the projected shortage in the summer of 2015 can very well be addressed by upgrading existing government power plants, properly managing the scheduled shutdowns of other power plants and facilities, tapping the embedded generation capacities of the private sector as well as aggressively implementing energy conservation and efficiency programs

“To do these things the President needs political will and competent managers, not emergency powers,” says POWER Convenor Teddy Casiño.

“The bigger problem that Congress should address is the government’s lack of ability to address the chronic shortages in the long term. Palagi na lang knee-jerk at panandalian ang solusyon, tapos mauulit nanaman ang problema. Kaya pamahal ng pamahal ang presyo ng kuryente pero palagi pa ring kulang” said Casiño.

Instead of granting the President emergency powers to enter into expensive, short-term contracts with private suppliers, POWER wants Congress focus on bringing back NAPOCOR’s strategic role in power generation and transmission. 

“Because of the Electric Power Industry Reform Act (EPIRA), the power industry has been delivered to the hands of private monopolies who make windfall profits every time there is a shortage. If we want to decisively address the shortage, there is no other way but for government to build the plants to create excess supply and keep prices low for all consumers,” stressed Casiño.

“We agree with the emerging consensus in Congress against emergency powers for the President. With respect to the interruptible load program (ILP), Congress should make sure that it does not lead to profiteering from the owners of private power generating facilities,” he said.#

From Mr. David A. Tauli

Another question related to the issues touch upon in the latest post of David Celestra Tan: Why is Sec. Petilla trying to use Sec. 71 (Electric Power Crisis Provision) to abrogate the provision of the EPIRA mandating the distribution utility companies to ensure that their customers are provided with adequate, reliable and affordable electricity?

The EPIRA removed from the National Power Corporation the responsibility for providing adequate capacity of power plants to meet the requirements of electric power consumers, and transferred this to the distribution utility companies, with the DOE mandated to provide oversight to ensure that the distribution utility companies (investor-owned DUs and electric cooperatives) will meet their obligation to provide adequate, reliable and affordable electric power to their consumers. The main provision in the EPIRA concerning this social obligation of the DUs is as follows:

SEC. 23. Functions of Distribution Utilities:

“Distribution utilities shall provide universal service within their franchise, over a reasonable time from the requirement thereof, including unviable areas, as part of their social obligations, in a manner that shall sustain the economic viability of the utility, subject to the approval by the ERC in the case of private or government-owned utilities. To this end, distribution utilities shall submit to the DOE their plans for serving such areas as part of their distribution development plans.  Areas which a franchised distribution utility cannot or does not find viable may be transferred to another distribution utility, if any is available, who will provide the service, subject to approval by ERC.”

(In the electric power industry, universal service refers to providing every consumer within the franchise area with adequate electric power to meet all the consumers’ requirements for electricity. Providing universal service requires the DUs to contract for enough power supply from generating companies to meet the demands of all their customers.)

Sec. Petilla is now using as excuse for invoking Sec. 71 of the EPIRA the spurious contention that the DUs in Luzon and the Visayas have not contracted for adequate power supply for their consumers. In his reasoning, the national government should make up for the failure of the DUs to carry out their responsibility under the EPIRA to ensure adequate, reliable, and affordable electricity for their consumers.

In Mindanao, it was the failure of the electric cooperatives to contract for adequate power capacity that directly resulted in frequent and extensive brownouts among the ECs since 2010. Although the inability of electric cooperatives in Mindanao to contract for adequate power supply for their consumers is primarily the fault of the ECs, it is equally the fault of the DOE and the NEA because they allowed the PSALM-NPC to coerce the electric cooperatives into signing Power Purchase Agreements that violated provisions of the EPIRA and its IRR, particularly the provision in the IRR that: “The sale, transfer or disposition of NPC assets shall not affect existing NPC contractual obligations”.

This is not the case in the Luzon-Visayas Grid. The Luzon and Visayas DUs, including MERALCO, have contracted adequate long-term power supply for their consumers, and the DUs are supposed to be able to anticipate and provide for short-term failures of contracted generators to supply power contracted by the DUs. Otherwise the DUs customers would petition for the revocation of the franchise of the DU for non-fulfillment of its primary responsibility.

Why is Sec. Petilla using the sledge hammer of Sec. 71, purportedly to address a problem that could be solved by hammering on the DUs to fulfill their obligations to their customers, on threat of having their franchises revoked?

David A. Tauli

President, Mindanao Coalition of Power Consumers