Meralco’s Lower Rate Temporary, Due to Luck Not Rate Reform

David Celestra Tan, MSK
16 October 2016

We Meralco consumers have been enjoying lower electric rates for more than a year now and it has been God-sent albeit temporary. The current reduction of P1.54 per kwh in generation rates have been due to the opportune drop in world oil prices and can change in cycles. We can achieve a more permanent and enduring P1.50 per kwh reduction through systemic reforms by banning self-negotiated contracts. The MVP Group is cartelizing 100% of Meralco’s power requirements and one day Luzon consumers will wake up with a price shock. Remember Dec 2013?

There is a concerted media campaign touting that Meralco’s rate is now low, that the Philippines is now the 3rd highest rate in Asia and no longer 2nd to Japan. Australian International Energy Consultants once again said it is because the other Asian countries are subsidizing their power. And while IEC is quoted to be saying it is due to the drop in fuel and coal prices, it also gives credit to a claim that Meralco has been aggressively negotiating competitively priced power supply agreements (PSAs) with new suppliers.

The IEC press release is evidently designed to convince President Digong, the DOE and ERC, and consumers that Meralco’s rate is fair and reasonable and that part of it is Meralco’s “aggressive negotiation of competitively priced power supply agreements”.

Let us get past the chaff and go to the grain of Meralco’s rates.

A. Generation Rate

1. It is true, as IEC studied, that between January 2012 and January 2016, Meralco’s generation rate had come down by 28%. MSK’s research showed P5.4643 per kwh in 2012 and down to only P3.9238 per kwh, a reduction of P1.5405 per kwh.

2. It is also true that the major reason is the drop in world oil prices and coal. MSK’s research showed that from 2012 to 2016 world oil prices dropped from $90.72 per barrel to only $34.13, a reduction of 62%. Indonesian Coal prices went from $105.61 per ton to $52.32 in the same period or a drop of 50%.

We dare to say that the ONLY reason for the lower Meralco rates is due to the lucky and opportune drop in world oil prices that also cause reductions in coal prices. A major columnist of Phil Star asked MSK why Meralco’s generation rate is not dropping as much as the big drop in the world oil prices. Good question but the answers were not printed.

B. Systems Loss

1. Since Meralco’s systems loss is a percentage of generation charge, it went down from P0.6594 per kwh to P0.4173. In percentage, 12% in 2012 (0.6593/5.4643) and 10.63% (0.4173/3.9238). Let us grant that the difference of 1.37% can be attributed to Meralco’s operating efficiency.

2. Is the glass half full? Meralco is supposed to have a limit of 8.5% in systems loss. The excess systems loss charge in 2012 was P0.1949 per kwh and in 2016 it is P0.0837 per kwh. Since we already have lowered expectations, yes it is an improvement. As in the generation charge, if the fuel prices go back up, systems loss will also go up. ERC needs to correct the systems loss rules by limiting it to maximum 8.5% to all consumers and by making the computation transparent.

C. Transmission Charge

This is something we are curious about in IEC’s choice of periods to compare. In January 2012, NGCP’s transmission charge was P0.9840 per kwh. In April 2016 it was P0.9549 per kwh. However, for some reason NGCP’s rate dropped unusually to P0.8361 per kwh in that month of January, a difference of 0.1188 per kwh. IEC’s study of the improvement in Meralco’s rate looked much better with its choice of January as the comparison months and this additional reduction of 0.1188 per kwh. We guess IEC serves its master. If they want to do a study in the future, it will be more helpful to see comparative April rates when supply and demand of power will show the true rates.

D. Distribution Charges Plus Supply and Metering Charges

Meralco’s distribution, supply, and metering charges came down by 7% or 0.17 per kwh as a result of the expiration in June 30, 2015 of an P0.1888 per kwh recovery of an under-recovery in 2011. Let us not forget that Meralcos distribution charges are results of the PBR rate setting methodology that we believe is irregular and must be modified. Meralco customers should not be charged profits or advance recovery until the utility actually incur the investments, not projections, not promises.

E. Universal Charges

Various universal charges for missionary subsidy, environmental, RE FIT, and PSALM Stranded Costs totaled 0.4764 in 2016, an increase of P0.36 per kwh from the P0.1188 per kwh in 2012. Watch for Renewable Energy subsidies and PSALM’s stranded costs to rise further. RE is now proposed to be 0.24 per kwh from 0.12 and PSALM has a lot of losses to recover from the people.

Back to the Issue of Meralco’s rate reductions.

1. It is clear that the reduction of P1.54 per kwh in generation rate was due to the lucky drop in world oil prices. OPEC and Iran are inching towards agreements on oil production controls and oil prices are expected to rise sooner than later. Coal and Natural gas will follow suit. Let us enjoy the current lower Meralco rates because it is only temporary.

2. Meralco’s supposed “aggressive negotiation of competitive power supply contracts with new suppliers” sounds good on the surface but since they negotiated exclusively eight (8) coal power supply contracts totaling 4,100mw with their own majority owned new generating companies, it is hardly credible to believe that they would negotiate aggressively with their own selves. (And yes, Meralco continue to claim in its public pronouncements that it does not make money on the generation charge because “it goes to the suppliers”, who will eventually be all “Meralco PowerGen”.)

3. Let us remember that the published rate of these self-negotiated contracts is only what we see now. Tucked in those negotiated contracts are escalators in various provisions that can eventually bloat the actual rate and sock it to the unsuspecting public down the road. Meralco even has the temerity to ask the ERC to make key financial information and formula confidential and not disclosed to the public. This is something that even the Lopez group never tried in their time.

4. MSK Ibaba ng P3 Campaign

On October 8, 2014 the Matuwid na Singil sa Kuryente Consumer Alliance (MSK) shared with the Department of Energy’s Multi-Sectoral Task Force to Find Ways to Reduce Electricity Prices our recommendations on how to reduce Meralco’s power rate by Php 3.00 per kwh. Nothing came out of those months of supposed multi-sectoral meetings in search of reducing rates but the then Energy Secretary Petilla bravely passed a DOE Policy mandating Competitive Selection Process.

Of MSK’s P3.00 per kwh target reduction. 87% or P2.60 will not even come from Meralco’s pockets but from various pass-on charges on which Meralco had been claiming for many years they don’t make money and only act as collectors. Generation charge, transmission charge, systems loss, VAT, universal charges. Only 13% or P0.40 per kwh will come from Meralco’s excess distribution charges due to the questionable “performance based ratemaking” or PBR.

MSK believe that by stopping the anomalous self-negotiation of power supply contracts the generation rate can be reduced at least P1.50 per kwh. Meralco generation had dropped P1.5405 per kwh but that is due to the fortuitous drop in world fuel prices and not due to changes in the regulatory system. For generation, it is the introduction of Competitive Selection Process to replace negotiations. If this were adopted, Meralco’s generation rate would have dropped by about P2.25 to P2.50 per kwh

As part of the Ibaba ng P3 campaign, MSK had filed with the ERC more than a year ago a petition for rules change to modify its Performance Based Rate making system (PBR) for distribution charges. We have yet to hear from the ERC on the public hearings to assess this very important concern of the consumers. We believe the distribution charges of Meralco can be reduced by about P0.40 per kwh by eliminating the improper profits of Meralco on forecasted investments instead of incurred investments as required by Section 25 of the Epira Law.

IEC Studies

As they have done in 2014, the Perth-based International Energy Consultants study as commissioned by their client is to show that Meralco’s generation rate is fair and reasonable.And the Meralco press release is apparently timed to sway public resistance to the seven (7) midnight contracts that the MVP Group hurriedly signed with various new generating companies all majority owned by Meralco PowerGen. So far two columnists have sung the same tune.

We wonder what IEC’s basis was for declaring that Meralco’s lower rate is partly due to Meralco’s “aggressive negotiations for competitive power with new power suppliers”. It must have been a sight to see IEC, being present in the negotiations, watching Meralco negotiateaggressively with its sister company Meralco PowerGen! IEC by the way lists among its major clients EGCO of Thailand and Quezon Power its Philippine subsidiary, EGCO is Meralco PowerGen’s strategic partner for the 460mw Mauban coal expansion called San Buenaventura.

Let us enjoy Meralco’s low power rates now while they last. Let us hope the government will do something now while it still can to stop Meralco’s monopolization, cartelization, and self-negotiated contracts. Let us correct ERC’s anti-consumer rate setting methodologies and systems loss rules. Low world oil and coal prices will not last forever.

We are just currently lucky. What we need for sustainable lower rates are systemic and regulatory reforms.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

Congratulations to the Philippine Daily Inquirer for its impressive and updated new layout. Tasteful and effective in delivering and emphasizing news. Kudos.

P41.8 Billion Reaons Why We must Distinguish Clean Energy from Renewable Energy

David Celestra Tan, MSK

12 October 2016

Solar lobby groups continue to push for the Philippines to adopt Renewable Energy as a national energy policy target. Many Legislators and policy makers automatically mouth Renewable Energy as a sacred goal for the country.

Do they really mean Renewable Energy or it is Clean Energy and Climate Change that they are trying to address?

Are they one and the same? Why is there a need to distinguish Renewable Energy from Clean Energy? There is a 41.8 billion reason.

Technically, Renewable energy is generally defined as energy that is collected from resources which are naturally replenished on a human timescale, such as sunlight, wind, rain, tides, waves, and geothermal heat.

 In many countries including the USA, Renewable Energy is used interchangeably with Clean Energy. But in the Philippines it is important to distinguish Renewable Energy from Clean Energy in establishing energy mix policy.

The RE lobby groups including some senators have been pushing for as much as 30% of the country’s energy mix to come from RE. And many other senators and congressmen including some business leaders and policy makers are jumping on an RE bandwagon in the name of climate change. If we don’t watch it, the country and congress will pass policies to try achieve that “noble” goal of 30% renewable energy and feel like they are saving the world.

In the Philippines “Renewable Energy” refers to subsidized energy under the Feed In Tariff law as defined under the Renewable Energy Law of 2008 or Republic Act 9513. There are six (6) RE technologies. Solar, Wind, Biomass, run of river hydro, Ocean Thermal, and something called Hybrid. Note that under this law, geothermal is not covered by the Feed In Tariff subsidy program although technically geothermal is considered “renewable”.

The FIT subsidies on these technologies range from P1.00 for biomass and run of river hydro to P3.80 per kwh for solar and wind. If the Philippines adopts a 30% renewable energy target as defined by the RE law of 2008, it means 4,500mw of RE nationwide. Considering the number of powerful lobbyists pushing for solar, fully 75% of this will be solar and wind. 75% of 4,500mw will be 3,375mw which can produce energy of about 11 billion kwh a year. At a P3.80 per kwh subsidy, solar and wind would require a consumer subsidy of P41.8 billion PER YEAR. We estimate that the country uses 46 billion kwh a year, about 30 billion kwh in Meralco area. Solar and wind subsidy alone will cost P0.91 per kwh. At the 20 year typical contract of Solar, P41.8 billion a year totals P836 Billion in consumer subsidies.

Climate Change

The mother objective of all these green energy movement is climate change. And climate change actually requires clean energy or zero carbon. Clean energy means renewable energy PLUS big hydro, geothermal, and natural gas, and even nuclear energy. It even includes energy efficiency programs. All these clean energy technologies are grid competitive and do not require any consumer subsidies. Big hydro and nuclear can even be lower than the current coal energy price of P3.75 per kwh and be infinitely cleaner than coal.

There is therefore 41.8 billion reasons why the Philippines should not be lured and misled into adopting a “renewable energy” target instead of the enlightened “clean energy”. It is critical that the policy and objective must be CLEAN ENERGY and not Renewable Energy.

If our policy objective is clean energy, there will be more attention to the encouragement of hydro projects in Mindanao, in Luzon, and in the Visayas. It means more exploration in geothermal energy. It means more enlightened holistic studies on a rational nuclear option. It means putting a reasonable limit on the heavily subsidized solar and wind. It means more government support for run of river mini-hydro’s and biomass projects.

Let us not be hoodwinked into adopting renewable energy in the name of climate change. Let us adopt CLEAN ENERGY instead. There is a world of difference.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

Why are power generation rates in Mindanao going up? What can consumer groups do to bring down the rates?

By David A. Tauli, Mindanao Coalition of Power Consumers

06 October 2016

The rates for bulk power generation in Mindanao from incoming coal plants will go up to 5.40 pesos per kilowatt-hour starting in 2017.

In order to bring down the rates of these coal plants to around 4.00 pesos per kWh, power consumer groups should: (a) carry out massive and persistent lobbying of the government of President Rodrigo Duterte, (b) advocate reforms in the Energy Regulatory Commission, and (c) file legal suits against the electric power generating companies and distribution utility companies in Mindanao who have conspired to generate the high rates.

This note sets out briefly the why and the what.

There are two main reasons why the rates for bulk power generation from coal plants in Mindanao are high:

1. Distribution utility companies have entered into power supply contracts without carrying out least-cost acquisition of their supply of electricity, in violation of the laws that govern the electric power industry, particularly the EPIRA, and contrary to generally accepted practice in the governance and management of distribution utility companies.

2. The Energy Regulatory Commission has been captured by the electric power corporations that it is supposed to regulate, and consequently has adopted uncritically the procedures and data of the generating companies in the determination of the rates for bulk power generation.

Power consumer groups should lobby the Duterte government to carry out the following:

1. Direct the distribution utility companies to strictly carry out least-cost acquisition procedures for the power supply of their consumers, and boot out the officers, or revoke the franchises, of the distribution utility companies who do not comply. Non-implementation of least-cost acquisition should provide adequate legal grounds for such penalties.

2. Allocate to the residential consumers the generation of the hydroelectric power plants in the Agus and Pulangui rivers. This will ensure that households will enjoy low rates (a reduction of more than one peso per kWh) for electric consumption despite the machinations of the gencos and the distcos.

3. Direct the National Grid Corporation of the Philippines to carry out economic dispatch of all generating plants in the Mindanao Grid, disregarding the power contracts between distribution utility companies and the power generating corporations (many of which were fraudulently entered into anyway).

A study of the petitions for approval of electric power supply agreements that were submitted to the ERC by electric power companies in Mindanao will show that the ERC has been uncritically following the procedures of the gencos and adopting the data provided by the gencos (with superficial revisions to show that it is being critical in using the data) in the determination of the true costs of generation. While the ERC has been following the letter of the law in the proceedings for these petitions, it is evident from the records of the proceedings that the ERC has entirely lost the spirit of fairness, reasonableness and transparency in the determination of rates for bulk power generation. This may be true also in the case of applications for rate increases in distribution and transmission, but a study of those applications still need to be carried out.

This problem is matter of the personalities in the ERC rather than the rules and procedures, so its correction could be done only through the reformation of the ERC organization.

The filing of legal suits against the gencos, distcos, and the regulators and government agencies is a last resort, mainly because of the fundamental problems (to say the least) in jurisprudence in the Philippines. And because consumer groups do not have the money to pursue legal suits all the way to the Supreme Court. Before going the way of the courts, consumer groups should work with friends in the House of Representatives and in the Senate to carry out investigations of government agencies and regulatory bodies involved in the electric power industry in Mindanao.

Money being stolen from power consumers in Mindanao as a consequence of corruption and venality in the electric power industry goes into the hundreds of billions of pesos, greater than the profits of those involved in the illegal drug industry and in gambling. Which leads to the idea that maybe we should get the Duterte government to carry out tokhang in the electric power industry in Mindanao. God forbid.

MSK Petitions ERC for Meralco Refund of P2.39 Billion Overrecovery

David Celestra Tan, MSK
3 October 2016

Your consumer advocacy group, Matuwid na Singil sa Kuryente Consumer Alliance had filed a petition with the Energy Regulatory Commission to compel to Meralco to refund to the consumers an estimated overrecovery of at least P2.39 billion.

The overrecovery can actually be as high as P5 billion and was discovered by MSK during its crossexamination of Meralco’s rate setting experts on the computation of the recovery from 2011 to 2015 of an underrecovery from 2007 to 2011.

It might be recalled that Meralco offered to reduce its distribution charge in July 2015 from P1.59 per kwh by P0.188 which was the component of the rate intended to allow them to recover an under recovery from a previous regulatory period. Actually Meralco’s authority to charge that extra P0.188 expired on June 30, 2015 and it would have been illegal for them to continue charging that beyond that date. Nice media spin on their part to announce it as a voluntary reduction.

The P0.188 per kwh was computed by assuming an energy sales level in kwh for the years 2011 to 2015. That forecasted energy sales was based on an annual growth rate of 3%. Meralco itself had been announcing that its energy sales growth actually has been 6 to 7% per year.

MSK had filed for intervention to determine that the P0.188 per kwh reduction that Meralco volunteered and publicized was actually correct and sufficient.

Evidently Meralco had recovered almost double the amount it was authorized to recover. We believe that Meralco should not be allowed to profit from recovering an under recovery that was authorized by the ERC. It could be as high as P5 billion.

MSK had petitioned the ERC to compel Meralco to submit the true figures for the amount of the authorized underrecovery for 2007 to 2011, the amount they have recovered in 2011 to 2015, and to submit a refund schedule for the excess recovery plus interest.

During MSK’s cross examination, Meralco’s rate setting expert said that if Meralco’s, actual sales are higher, like when its sales grew 6% instead of 3.7% per year, that ERC rules allow them to keep the difference as profit.

This if true is a very dangerous rate setting methodology and exposes the Meralco consumers to rate abuse and manipulation. This also means Meralco, as a regulated distribution monopoly is effectively no longer regulated in its net profit as most people still believed. Is this really now the policy? The more we learn about the schemes between the ERC and Meralco the more we see the abuse of the consumers and the total lack of safeguards.

Meralco’s lawyers responded to the ERC that MSK’s request is irrelevant to the petition and that these issues must be included in the rate setting for the Fourth Regulatory Period of July 2015 to June 2019.

With these kind of rate methodologies, Meralco consumers continue to be overcharged and abused.

Let us hope the new ERC will demonstrate more caring for the electric consumers. Let us see if they will act to correct this overcharge immediately by ordering a refund.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

Let’s Be Realistic on Nuclear and Solar Power Options

David Celestra Tan, MSK
23 Sept 2016

The new Department of Energy has floated the idea of nuclear power and the reviving of the never operated 600mw Bataan Nuclear Power Plant (BNPP) as a lower cost and cleaner power supply solution as opposed to coal and natural gas. Additionally people are intrigued by the claims of solar developer Solar Philippines of the Leviste and Legarda families that solar has achieved grid-parity. That means solar power being low enough to compete with the P4 and P5 per kwh of coal and natural gas. This contrasted with the P7.70 to 9.60 per kwh that the Solar Alliance lobby group and the government owned NREB continue in pushing as the consumer FIT subsidy level.

First things first though. Even if nuclear offers a really good option and solar is as competitive as claimed, all these will not really happen because there will be no major buyers of power. Why? Meralco would already be contracted for most of its base-load power requirements until 2035 if they get away with their seven (7) midnight coal power supply contracts totaling 4,100mw. And they are all on Luzon island, same island as the BNPP and of the 7,000mw of existing power plants. Unless of course the government agrees that nuclear will also be majority owned by the MVP Group.

That said, lets start with nuclear power.

There is no question that properly operated nuclear power is for now potentially the cleanest and cheapest power generation technology outside of large hydro. Well at least until fusion technology comes around. We can probably get a rate of P3.00 per kwh. It is also true that there are countries like Japan and South Korea who have long years of successful experience in operating and maintaining nuclear power plants using the same technology as the BNPP. The other truth is the Filipinos have just about paid for the Billion dollars that the government borrowed to finance it.

The question is can the 620mw BNPP technically still be operated after it has never been operated and mothballed for 30 years since 1987? The South Koreans, as pushed for by Cong. Mark Cojuangco of Pangasinan, are interested in studying the BNPP’s revival and estimated that it will cost $1 billion (P47 billion pesos) to revive and operate. We believe the study alone with cost $2 million.

Assuming that the government is willing to explore the revival of the plant, should the Filipinos be asked to pay for the attempt? What happens if the plant, after spending $500 million will cost another $1 billion to finally operate. Let us remember that a lot of the equipment and installations have either been pilfered or deteriorated the last 3 decades. We believe that what would be rational and fair for the consumers is if the government wants to do it and KEPCO of South Korea are sure that they can make it work, it should be done on an ROM basis, “rehabilitate operate and maintain”. An agreement can be signed so that the DU’s are willing to buy the nuclear power output at say P3.25 per kwh and if the Koreans are successful they are assured of a market for the output. But surely it would be unreasonable for the government to spend or borrow a single cent for this adventure and to make the taxpayers take the risk if the concept does not pan out.

As pointed out by columnist Boo Chanco, there are other newer, safer, and cheaper nuclear options that are even smaller in size that fits the archipelagic landscape of the Philippines.

We bet that the Koreans will not go for a “no cure no pay” arrangement like ROM because they must know there would be a lot of headaches and risks. Most power generation professionals will tell you that it is actually cheaper and predictable to build a new plant instead of reviving an old one using old technology.

If we add nuclear to our energy mix, lets go for the smaller and safer technologies in the 200 to 300mw range. Spread it out in several islands. As to the BNPP, lets not do it. It is too risky and will not save much. Just charge it as part of our price for regaining democracy and liberty from martial law.

How about Solar?

Young Leandro Levistes Solar Philippines came into the solar scene carrying a pedigree and lobbying power. His focus had been roof top solar and people are giving him the benefit of the doubt since theoretically roof-top solar specially on the expanse of mall and school rooftop would be viable specially if Meralco cooperates in implementing it under the Net Metering program of the ERC.

In the recent months Leviste went on a media blitz announcing that solar has achieved grid-parity. If he means rooftop solar, maybe. If he means grid connected solar we are not sure. And it seems he is referring to large scale solar because he was talking about 1,000mw in Batangas and the low prices in the bidding in Dubai where it is down to $0.04 or P1.92 per kwh.

Before we get too excited, let us consider a few things.

1) What conditions in Dubai allow foreign bidders to bid that low for 300mw of solar? For one the solar irradiance level of Dubai (and the middle east) is almost double that of the Philippines so they get more energy out of their installation by 25% to 40%. Some reports also say Dubai offers attractive project financing support with negligible interest rates.

2) The lesson of Dubai for the Filipinos is actually not they got lower rates but that they did by holding an open competitive bidding or CSP. Our Department of Energy while admitting that the cost of solar panels have gone down by 70 to 80% is still insisting on doling out high Feed-In Tariff to their chosen RE developers. The government paid NREB (National Renewable Energy Board) recently recommended a subsidized rate of P7.70 ($0.16!!) per kwh for the 3rd round of Solar FIT’s.

Cannot President Duterte order these people to hold a competitive bidding instead?

3) When Leviste talks about grid-parity, we are wondering if he also means grid-compatibility? The lesson of the Visayas is that these solar farms cause grid interruptions every time there are passing clouds. And who buys and pays for the regulating reserve that is needed by the grid to stabilize the system? NGCP who then passes it on to the consumers. We doubt that Solar Philippines is referring to self-regulating solar farms. If they are and the rate is in the range of P4.50 per kwh, let’s go!

Let us be realistic. And be realistic that if Meralco and the MVP Group are allowed to evade the mandatory CSP policy for power supply contracts, all these talk for nuclear and energy mix are moot.

Just saying!

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

Can there Still be A truly competitive CSP with 5 Major IPP’s Partnering with Meralco PowerGen in a Cartel?

David Celestra Tan, MSK

Meralco PowerGen’s cartel has currently proposed 4,100mw of coal projects with five (5) major erstwhile independent power generators that on their own also control about another 5,000mw of power plants. That’s 80% already of the country’s power generation supply and 90% of Meralco’s power market.

Erstwhile rival San Miguel is now partners with the MVP Group in two 528mw coal projects and may have entered into partnership in the 1200mw Ilijan natural gas plant. EGAT of Thailand is in a 49% partnership in the San Buenaventura 455mw coal project in Mauban. EGAT also has acquired a significant interest in the 460mw Masinloc plant controlled by AES. MVP Group has acquired 56% of GT’s Global Business Power and GT bought a 15.6% interest in Metro Pacific. Maynilad water partner DMConsunji is also now a partner of Meralco PowerGen for the 400mw Semirara coal project in Calaca. The Aboitiz group for its part is partners with Meralco for the 300mw Redondo Peninsula Coal project in Subic.

With so much concentration and cross-ownership of power generation in one aggrupation how can true competition still exist in the generation market place, both in competing for bilateral contracts and bidding for the WESM spot markets?

Let’s assume that the government realizes the importance of maintaining or restoring a truly competitive generation market and the devastating impact of cartelization, negotiated contracts, collusion to the people and national competitiveness. And it also decides to stop this crime against consumers and evasion of the CSP policy, can there still be a truly competitive bidding given the dominant concentration of generating capacity in the country in the Meralco group? Would they not just collude among themselves and bid even higher just to prove that their negotiated prices were the “least cost”?

The government should not be afraid. Luckily there are enough remaining independent players both local and foreign who can be the core of a truly robust bidding, the kind that will be least cost for the consumers.

Ayala Energy, Filinvest of the Gotianuns, TeamEnergy of Japan, Kepco of Korea, AES of the USA, Energy World of Australia, First Gen and EDC of the Lopez Group, and more local groups TransAsia, GNPower, Conal of the Alcantara Family of Mindanao, and PeakPower Group of the Ng Family. Not to mention additional Japanese, Korean, and Canadian companies who are actively looking at Philippine projects. If Ayala and GNPower end up the partner of Meralco in the 1200mw Atimonan Energy One, then they also lose their independence.

These are highly qualified power generating companies with the kind of resources to offer truly competitive energy supply packages and innovative ideas and technologies. They have not yet been conflicted by a partnership or cozy relationship with Meralco PowerGen or the MVP Group.

The Aboitiz and San Miguel Groups participation in the Meralco cartel is not beyond repositioning and they may still be genuine players in a truly competitive bidding.

Only three serious bidders are needed for a healthy competition as long as at least two of them are not from the Meralco cartel.

We don’t believe potential independent bidders will be the problem in trying to hold a truly competitive CSP. It would be administering properly the bidding so that Meralco cannot tilt the playing field and favor their partners.

These still independent companies need to be assured and see that this type of open and competitive bidding will be implemented by the government at least through the 6 year term of President Duterte. Otherwise they will hesitate to offend the Meralco group if there is a chance that down the road they will need to beg for power supply contracts with them. It costs million dollars to prepare a good bid for major projects.

These independents will be looking for signals that it will be truly open, competitive, and transparent.

1. The government must reiterate a commitment to the CSP policy and the ERC must send the signal that it is honestly implementing it.

2. There must be an independent Third Party bid administrator to assure a proper bidding of proper capacities.

3. The winner must be objectively determined and truly awarded.

4. The CSP is the opportunity for the DOE to put an imprint on the nations power supply with its energy mix strategy.

For all its loopholes, the Epira Law is clear in its mandate that the generation sector shall be “competitive and open”. When we do that, we are able to achieve the twin goals of the Epira Law. 1) adequate power supply in the country for the long term is assured by keeping the market open to new and competitive investors. No barriers to entry. and 2) to achieve fair and reasonable rates supplied in the least cost manner through the maintenance of healthy competition in the market.

In addition to the Epira Law, Let us hold true to the spirit of the Philippine Competition Act, a landmark milestone for maturation of the Philippine government and society. It took us decades to get this far in anti-trust protection of consumers. Let us show that we are mature enough to implement seriously such an enlightened law.

Let us not be afraid in preventing Meralco and the MVP Group from monopolizing and cartelizing the power generation sector. If that is allowed to happen the EPIRA law would be for all intents thrashed as a law and aspiration. Let us not kid ourselves anymore. The millennials? They are still unaware because we the parents are paying for the monthly electric bill. It is supposed to be up to us adults who should try protect their generation. And we are failing. Ironically it can happen under an era when we are supposed to be determined to fight crime and corruption.

Franchise holders of public utility services must be expected to serve the public interest and not be exploitive. There are still enough highly qualified power generation players comfortable with the Philippines who can participate in an honest to goodness bidding. It is not yet very late!

Do we have what it takes? We owe it to our people.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

It’s Time for a Permanent Energy Planning Commission

David Celestra Tan, MSK
4 September 2016

All these confusion in the energy development strategy for the country happens because the Philippines does not have a long term energy development plan. Every time there is a new government, new energy committee chairmen in the Senate and in the House and everytime there is a new energy secretary we tinker with an energy mix, power cost reduction, power supply procurement for pass on charges to consumers, clean energy, renewable energy, climate change, grid system reliability.

It is time that we learn the realities of power, its development, and rates.

1. Power Development and Strategy is so important to the country, its industry and economy, and well being of consumers that it needs focused attention and clear direction from a very qualified government agency with consistent stewardship.

2. Power projects and solutions require advance planning and implementation. Economical and clear power require 3 to 4 years to build and quick power sources are both dirty and expensive.

3. Power supply is imbued with public interest and the people will hold the government responsible, regardless of privatization and deregulation, whenever there are power problems: shortages, rates spikes, environmental damage. The government cannot cop out and wash their hands and say it is sorry it cannot do anything because the sector is privatized and deregulated. The sooner we all realize this the better.

4. It cannot be left totally in the hands of the private sector that naturally will gravitate towards what’s faster and what’s more profitable and investment safe.

Power Planning and the Department of Energy

Currently the task of preparing a Philippine Energy Plan, the closest we have in terms of energy planning, is with the Department of Energy as mandated under Section 37 of the Epira Law.

The DOE is required to “prepare and update annually a Power Development Program and integrate the same into the Philippine Energy Plan. The PDP shall consider and integrate the individual or joint development plans of the transmission, generation, and distribution sectors of the electric power industry which are submitted to the Department.”

The DOE will also “develop and update annual the existing Philippine Energy Plan. It shall include a policy direction towards the privatization of government agencies related to energy, deregulation of the power and energy industry, and reduction of dependency on oil-fired plants.

Said Plan shall be submitted to Congress not later than the fifteenth day of September and every year thereafter.

Annually the Department of Energy goes through the ritual of complying with this mandate. Every year it dutifully submits a beautiful and colorful glossy book bound Plan.

The DOE even goes on a road show in various regions of the country to present their plan, actually their hopes and dreams. The DOE Secretary for his part uses the plan for his policy statements. Everyone including the local government officials come away from those presentations expecting that these are the direction for the future and what they should be expecting including energy mix. The precepts of the plan are even used as the justification by the DOE and ERC for the approval of projects.

However, by this time, power industry practitioners know two realities of this plan:

1) The proposed power projects were nothing more than a tally of projects that are being pursued by the private sector;

2) The Department only use persuasion and has no real enforcement teeth to force the private sector to follow the plan.

As an example, the DOE has been announcing that it targets an energy mix of 30% coal, 30% natural gas, 30% clean energy, and 10% others. In total disregard of this energy mix, Meralco signed 4,100 mw of coal projects that will tie up the largest distribution utility of the country for the next 25 years. That means coal will be about 90% of the Energy needs of Meralco and that’s easily 56% of the coal energy for the next 25 years. If we add the coal projects outside the Meralco area in Mindanao and the Visayas, the national share of coal would be easily 80%.

The Competitive Selection Process (CSP) policy of the DOE and ERC that was supposed to be implemented starting on November 6, 2015 was going to give the DOE its long missing opportunity for enforcement of its energy mix policy. Until the CSP was inexplicably postponed by the implementation agency the ERC, paving the way for the signing and filing of seven (7) midnight contracts that will evade the CSP.

Some parts of power development planning specially transmission development is performed by the Grid Management Committee of the ERC that is staffed with power professionals. But then their work and ideas are limited to grid issues and not much in power supply development.

Power Development is a three-legged tower. Adequate supply, fair and reasonable rates, and environmentally responsible. We also need an archipelagic generation and transmission strategy that is best suited for our 10 major islands. Lastly, the country must decide whether low cost power would be a national policy as part of our industrial and commercial strategy. Remember Asian integration is here and import tariff barriers are coming down. Our industries will be slaughtered by foreign competition because all of Asean has lower costs by as much as 40% than the Philippines. We don’t even have a national economic plan to give Philippine companies chances versus the incoming foreign competition. Such neglect.

The drug problem is important but there are so many areas in the country with even larger and urgent implications that need government attention.

Ironically, a lot of sensible power and energy development plans have been donated to the Philippines by the World Bank and the Japan International Cooperation Agency and maybe even by the Asian Development Bank. They are just on the shelves, drawers, and archives.

When government officials and the private sector only talk about adequate supply and when threats of power shortages are emphasized, you know that the other two will be jettisoned. It requires a well thought off long term plan that is implemented consistently by competent and incorruptible people to create a truly sensible and holistic power development.

It is time now that the country remedies the short term and revolving nature of energy policy and planning at the DOE and create a Philippine Energy Planning Commission. We can use as models the Energy Planning Commissions of California and other American states and adopt it to Philippine conditions.

Energy Planning has been a crying need for the country.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.