Yellow and Red Power Alert, Things to Ponder, The Outdated and Onerous Genco Contracts, and Permanent Solutions (Part 1)

part 1 of 2

David Celestra Tan, MSK
11 April 2019

Everyone is again scrambling on what to do in the face of the power shortage alerts. It is yellow, it is red, WESM prices spike, and the always inevitable fears of collusion. Of course there is the predictable, which is “we told you so, we need our new power projects”despite the legal and negotiated rate and terms issues. A supposed “group of consumer welfare advocates” are even incongruously chiming in by blaming ERC for its “indecisiveness” evidently on approval of Meralco’s 7 midnight contracts.

Anyway, let us ponder some aspects of this yellow and red alerts.

1. Whose Power Plants are down now?

According to newspaper reports, the following power plants have been mentioned. Sual Unit 1, SW Luzon Masinloc Unit 2 344mw, Pagbilao Unit 3 382mw, SLTEC Unit 1 150mw, Calaca 2 of DMCI 100mw, Malaya 2 350mw. A total of approximately 1,500mw.

a. Things to Ponder No. 1
The power plants in question (except Malaya) are owned by Aboitiz Group, San Miguel, EGAT of Thailand, DMCI, all members of the Meralco chosen 5 and partners of MeralcoPowerGen that controlled all the project companies in the seven (7) midnight contracts that the Meralco power oligopoly is trying to ram through the system.

b. Things to Ponder No. 2
Meralco’s power suppliers using coal have mind boggling rates from September to December 2018. AES in Masinloc charged P16.4591 per kwh in September, P13.7889 in October, P10.3589 in November, P8.7697 in December, and 6.9598 in January. It is now partly owned by Meralco Mauban partner EGAT of Thailand.

The Aboitiz owned Pagbilao charged P7.0179 per kwh in September, P7.04 in October, P6.7847 in November, and P7.5231 in December.

San Miguel Sual charged P7.8325 per kwh in September, P9.7960 in October, P8.0332 in December, and 7.4205 in January.

For February 2019, Masinloc rate was 11.51, Quezon Mauban of EGAT 7.76, SMEC Sual 6.91, and Aboitiz Pagbilao 6.33.

Comparatively, other coal generator rates were only P5.50 per kwh and natural gas plants approximately P5.28 per kwh during these periods.

(see matuwid.org website)

The reasons for these high coal generators rates were not because of high coal rates but evidently due to the guaranteed capacity payments to these power generators even if they were not generating full power. That means they have been down for maintenance for those months of September to December 2018 and some in January and February. So why are they still down for maintenance now that consumers needed their power during these summer months of March to May 2019?

(By the way, your organization MSK had filed a petition with ERC asking that these high rates from September to December 2018 be investigated. We have yet to hear from them).

2. Collusion

There could be collusion but it is unlikely that the government can pin anyone down. Power plant operators know what they are doing…and they are sisters with one of the supposed victims, Meralco. (Other one is the consumers)

Even when there are market evidence, our regulatory and justice system will be such that anyone found guilty will not even pay the penalty. Remember the market failure of 2013 when WESM went up to P62 per kwh and resulted to a P4.15 per kwh jump of 80% in generation costs? And even if they pay, it is only a total of P500 million compared to the damage to the consumers of P9 billion.

It is the motuproprio job of the ERC to investigate and penalize but so far they have been quiet.

We cannot expect too much from the Philippine Competition Commission who by their young lawyers’ mindsets will not call harmful “cartel” or “oligopoly” and “collusion” even if they are staring them in the eyes, unless they get the perpetrators to sign a document of admission. (good luck with that!) The young PCC seems have yet to find itself as a watchdog for the consumers and an institution to install preventive and preemptive rules against collusion, market monopoly, and etc. Too early to expect much consumer protection from them.

3. DOE’s Decisive Action

A shining armor in this dark times is the decisive action of the Department of Energy in containing further damage to the community and consumers. Beyond the predictable call for extensive investigation, per media reports they have been actively meeting with electric power industry participants for a concerted remedial solutions. They activated the “interruptible load program” that mobilizes the self-generators. It may only be 200mw but it helps in rotating brownouts.

The terms and conditions of the power supply agreements between these Genco’s and Meralco are being looked into specially their outage allowances, replacement power. Secretary Alfonso G. Cusi is quoted to say “the DOE recognizes that short-term answers are not enough. We are taking a holistic approach that focuses on the establishment of institutional solutions that would benefit consumers in the long term. The DOE fully intends to pursue policy directions to create permanent solutions to the otherwise temporary yet recurring challenge of red alerts.”

These are good take charge responses to avert a possibly disastrous power situation. However, the country needs a permanent monitoring of the plant availability performance of these IPP’s and a proactive management and coordination of power plant maintenance schedules specially during critical seasons like summer and Christmas holidays. The Department of Energy can make this maintenance scheduling part of the tasks of its Electric Power Industry Monitoring Board, instead of just passively tallying the power generation projects being pursued by the private sector.

The Senate Energy Committee under Sen Sherwin Gatchalian is expected to similarly try to conduct an investigation and let us hope they do and get to the bottom of these power shortages. More importantly, let us hope those investigations will result to change in rules for permanent solutions.

Actually it should be the job of Meralco if they are truly looking after the interest of their customers to manage and synchronize the scheduling of the downtimes of their contracted power suppliers. We don’t hear them doing this proactive scheduling that not only can avoid surprise brownouts but also to protect their customers from the price spikes that are consequences of power shortages.

Next: The Onerous Power Supply Contract Provisions and Permanent Solutions

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
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For private Comments send to david.mskorg@yahoo.com.ph