Viewpoint: Reducing Rates for Electricity in Mindanao

by David A. Tauli

Mindanao Coalition of Power Consumers

Lately, we have heard proposals, mostly foolish, coming from the Department of Energy and from the Mindanao Development Authority that supposedly will reduce the rates for electric power supply in Mindanao. Even if the proponents were wiser, none of the proposals will result in significant reduction of power rates unless the main cause for high rates in Mindanao is addressed: incompetent, if not corrupt, power supply contracting by distribution utility companies in Mindanao.

In the sordid history of baseload power supply contracting in the electric power industry in Mindanao in the past decade, the one good episode was the power supply agreement in 2013 between the Power Supply Aggregation Group Corporation (PSAGCOR) of the Association of Mindanao Rural Electric Cooperatives (AMRECO) and the GN Power Kauswagan (GNPK) of the Ayala group of companies.

All other power supply agreements for baseload power between distribution utility companies and generating companies in Mindanao have been just one form or another of moro-moro, all show and no substance.

It was only early this year 2016 (in the power supply agreements for the generation of the Malita coal power plant of the San Miguel Consolidated Power Corporation) that the electric cooperatives resumed honest-to-goodness least-cost acquisition of baseload power supply, conforming with the EPIRA requirement that “the contracting and procurement of the equipment, assets and services have been subjected to transparent and accepted industry procurement and purchasing practices to protect the public interest”.

But that was a fluke, resulting only because the electric cooperatives have become wary of continuing to flout the EPIRA requirement for least-cost acquisition of power supply, and because the SMCPC did not fear facing competition for baseload power supply for the electric cooperatives. Unless legal charges are carried out against the electric cooperatives involved in the Apo IPPA Scam and in the Coal Power Plant Scam, the errant electric cooperatives will resume their incompetent (if not corrupt) ways of “negotiating” power supply agreements without carrying out legitimate least-cost acquisition.

The power supply agreement between PSAGCOR and GNPK resulted in an effective rate of around 4.16 pesos per kilowatt-hour. All other PSAs (excepting again the Malita coal power plant of the SMCPC, but including all coal power plants embedded in the distribution systems) have an effective rate per kWh of 5.00 pesos or more. The power supply agreements for power supply from the SMCPC coal power plant in Malita also resulted in a price of around 4.16 pesos per kWh.

The Department of Energy of the government of President Rodrigo R. Duterte has placed the reduction of power rates in the Philippines as one of its key objectives. However, based on recent pronouncements of the DOE as to how they are going to attain that, there are only two chances that it will happen while PRRD is president: fat and slim. It is clear that no serious thinking has gone into the pronouncements coming from the Department of Energy concerning the electric power industry in the Philippines.

But even if the DOE seriously considered the available opportunities to reduce electric power rates, any program they will carry out will prove futile for reducing rates unless the main obstacle to having fair and reasonable prices for electricity were removed: the regulatory capture of the Energy Regulatory Commission by the corporations (mainly MERALCO and the generating companies) that it is supposed to regulate.

One day, hopefully while PRRD is still president, we may have an Energy Regulatory Commission with honest and competent commissioners. When that happens, power consumers in Mindanao can petition the ERC to bring down the rates of the power supply agreements for baseload power to the levels that could have been attained if the distribution utility companies carried out legitimate least-cost acquisition processes. Then, and only then, would we see the reduction of the rates for electricity in Mindanao.