ERC’s Reasons for Postponing CSP Implementation Weak and Not True.

Evelyn VirayJallorina, Alyansa Para saBagongPilipinas

16 July 2017

The justifications being given by the Commissioners of the Energy Regulatory Commission for their postponement by six months of the implementation of the Competitive Selection Process, or CSP bidding policy,  are weak, not true, and only shows that the ERC abused their discretion. Effectively they deprived the consumers the protection from the sweetheart prices and terms from negotiated power supply contracts between sister generators and distribution utility.

In their recent press statements, Commissioners Taruc and Non of the ERC claimed that “the extension of the CSP implementation was not intended to benefit any electric power industry participant, but to give time to those who have already completed their power supply agreements [PSAs] but failed to submit the same to the ERC prior to the effectivity of the CSP,”

They further claimed “The ERC, soon after its promulgation of the CSP in November 2015 until April 2016, received letter-inquiries from DUs and gencos assailing the legal implications of the CSP to the PSAs that are currently existing, due for renewal, submitted to the ERC for approval, or otherwise already executed.”

These Meralco statements are not truthful.

ABP has documents to prove that the ERC received only seven requests for reconsideration from distribution utilities who had signed power supply agreements as of the November 6, 2015 but had not yet filed their ERC applications. The total was less than 500mw. Meralco itself had one request for an interim supply for the summer of 2016. Instead of addressing these specific requests for additional time to file during a transition period, the ERC Commissioners inexplicably deferred the implementation of the CSP effectivity by six months from November 6 2015 to April 30, 2016. This is serious abuse of discretion.

The biggest beneficiary of the six month postponement was Meralco and its sister company MeralcoPowerGen who on April 26, 2016, just four (4) days before the new deadline of April 30, 2016, signed four PSA’s totaling 2,656mw and the following day on April 27, 2016 signed two more totaling 670mw. Only one contract of the seven (7) midnight contracts signed by Meralco was signed on April 20, 2016. It was for 225mw with Redondo. The ERC applications of the seven (7) midnight contracts were all filed at 7am on April 29, 2016, the day before the new April 30, 2016 deadline set by ERC. All seven contracts are with joint ventures owned 49 to 51% by MeralcoPowerGen.

These seven Meralco PSA’s effectively circumvented the CSP policy with the assistance of the ERC who conveniently postponed the implementation of the deadline. This denied the consumers the benefit of true bidding with a minimum higher generation charge of P12 billion a year.

The Alyansa Para saBagongPilipinas had filed a criminal and administrative complaint with the Office of the Ombudsman against the ERC Commissioners.

Meralco

Meralco for its part claims that they are not one of those who wrote ERC asking for the CSP postponement. “there is absolutely no factual basis to claim that these are  ‘midnight contracts’,” Lawyer William S. Pamintuan, Meralco first vice president and head of legal and corporate governance, cited that in fact, negotiations on one of the contracts “started way back in 2012 and was only concluded and signed in 2016.” Meralco negotiated these PSAs in utmost good faith and the resulting rates and other terms and conditions that were filed before the ERC are very competitive and favorable to consumers,” he stressed.

Meralco further noted that “each of the PSAs had undergone a very rigorous, lengthy and at times, contentious negotiation process with the generation companies which actually took many months and years before these agreements were signed and filed with the ERC.”

Meralco’s half truths

Meralco’s assertions are self-serving claims.We can grant that Meralco’s contract negotiations with its sister company MeralcoPowerGen were “very rigorous, lengthy, and contentious” but they cannot credibly claim that they did so for the least cost interest of the consumers. The only way to really do that is to open the contracts to true competitive bidding.
As to Meralco’s claim that they were not one of those who wrote ERC for consideration on CSP deadline. This might be technically true. But it is a matter of record and media that Meralco had been asking for a delay of the implementation of CSP. They also asked for voluntary CSP.  They don’t want a Third party to oversee the CSP. Their Chairman said the CSP is illogical and will work against the consumers. They even threatened ERC with a lawsuit.

Meralco is also reported to have been informally lobbying in the months of October 2015 to February 2016 with ERC to be allowed to do “swiss challenge” bidding which is clearly intended for them to control the process and the awards.

In the American TV show “law and Order”, one of their tricks in finding the motive for a crime is to “follow the money trail”. Who will benefit most from the crime?  In the mysterious ERC postponement of CSP by six months, the party who would most benefit was Meralco who had  been busy negotiating for months with “strategic partners” who are willing to be Meralco’s minority partner.

But the fact of the matter is as of November 6, 2015 they were not even close to signing an agreement with these partners. As of April 30, 2016, they don’t appear to even have a partner for the 1200mw Atimonan One.  Aboitiz was identified as the partner months after.

Meralco spokesmen claim that one of the contracts started negotiations in 2012. He is referring to Redondo. But the delay was not because of contract negotiations but because of the writ of kalikasan environmental opposition to the Subic coal plant.

The ERC Commissioners are not being truthful on the postponement and it is borne by their weak argument and evidence. Both ERC’s and Meralco’s alibi’s are contradicted by evidence…..and simple logic.

Alyansa para saBagongPilipinas (ABP)

 

Power Crisis Would be Coming If We don’t Act Now!

David Celestra Tan, MSK

4 July 2017

The National Capital Region, the nerve center of the country’s economic activity, will soon be facing a “power crisis” sometime between October 2017 to March 2018. Or there would be a big spike in the WESM prices that will be blamed on lack of power supply.Or both.

All it will take is a confluence of events like several coal plants declaring downtimes due to “boiler leaks”, hydro power being low, NGCP power grid problems, Malampaya shutdown, and etc.

Then the media campaign will go on the high gear for the fast approval of pending MeralcoPowerGen projects (remember the seven (7) midnight contracts totaling 3,551mw). The energy family, the power committees of Congress, the DOE, the ERC, PEMC, NGCP, and DENR will also rise in unison to “protect the public and consumers” and call for the urgent approval of power generations projects, conveniently 80% of which are Meralco’s negotiated power supply projects.

Conveniently they will blame the consumers groups specifically ABP, Bayan Muna, and MSK for causing the delay in these negotiated projects. ABP for filing cases at the Supreme Court and Ombudsman.Bayan Muna for launching a congressional investigation.All effectively freezing the Energy Regulatory Commissions processing and approval of the negotiated contracts. The DOE itself is ominously silent on the issue.

MSK for its part feel that these 3,551mw of midnight contracts, all with project companies controlled by MeralcoPowerGen, the 480mw of Mauban expansion called San Bernardino Power, and the Metro Pacific’s purchase of controlling interest in the 1,000mw Global Business Power, which also now purchased 50% of the Alsons coal projects in Mindanao,will result to evident and alarming monopolization and cartelization of the power generation sector, something that the Epira Law had mandated the ERC to guard against as part of its motuproprio duty. MSK had accordingly petitioned the ERC to suspend the processing of these Meralco project applications and hold hearings first to determine if these projects will create harmful monopolization, market power abuse, and cartelization. ERC seems not interested in making that determination or they are too busy dealing with the convolutions of their suspended Chairman.

The Calm Before the Storm

All these could be part of the orchestrated calm before the storm. Meanwhile, the Meralco coal projects and their strategic partners continue to announce the pursuit of pre-construction activities like DENR and BOI approvals, award of EPC contracts, project finance packaging.

Why is everyone so quiet? This is the calm before the storm.

If the ERC is unable to act because they were the ones who extended the CSP implementation deadline that allowed these Meralco contracts to sneak in just days before the new deadline of April 30, 2016, it is curious why the Department of Energy whose job it is to assure power supply development, is staying clear of the subject. Instead they are saying the DOE is technology neutral or the cuter word “technology agnostic”. The Supreme Court also had not acted.

Power Crisis Syndrome

The power generation oligarchy saw it worked wonderfully during the power crisis of 1990’s. A power starved or threatened nation will beg for power supply at whatever cost or at whatever shortcutting of competitive processes. That’s the “power crisis syndrome” that now, 25 years later, is still being used again and again whenever they want to ram power projects through the throat of the hapless consumers.

The consumers can only continue to hope for a savior. Meanwhile we are down on our knees praying or begging.

 Let us brace for the coming power crisis. real, imagined, or staged.

Let us act now before it is too late!

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
Matuwid.org
david.mskorg@yahoo.com

Dominant Power Generators Bat to Keep EPIRA Law with only minor changes.

Posted on: Jun 28, 2017

David Celestra Tan, MSK
25 June 2017

Should the EPIRA Law of 2001 be Implemented fully with only some minor provisions? Or should it be totally amended or even repealed as called for by the Party-list group Bayan Muna and various consumer groups?

On one end of the spectrum are the lucky vested interests that benefited handsomely from the massive transfer of government generating assets at firesale prices to a chosen few who were in the position to take advantage under the rules of the Epira Law. The same groups are profiting handsomely from the high electric rates resulting from self-negotiated rates, porous rate setting regulation, unbridled cross ownership, and  loosewesm rules.

On  the extreme opposite are the Filipino people either as taxpayers or electric consumers who are shouldering the heavy load of the unpaid debts of the PSALM after they ironically have fully paid for the take or pay BOT contracts of those power plants. As electric consumers, they are paying the resulting high electric rates.

The answer to the question of whether the EPIRA law must be amended or retained as is depends on which end of the cost-benefit spectrum you fall since the implementation of the Epira Law  16 years ago.

Let the EPIRA Good times roll!

As offshoots from a recent “Powering the Philippines” forum, the dominant power generators have comeout pushing for urgent and continued implementation of the current EPIRA to assure power supply for the future, calling for faster implementation of projects.

A technology supplier to the power generators is claiming P51 billion a year in savings from more investments in power. These “industry stakeholders observed more private-sector involvement in the energy industry, ushering in new power projects that boosted the country’s power supply, ultimately benefiting consumers.”

“ There is a lot of power projects that came on stream for the last three or four years and a lot of capacity still coming on stream.”  (no argument there).

Another dominant group said “Epira has been very effective. The government is no longer guaranteeing take or pay contracts. It also has freed balance sheet so it can use resources for other areas of development. PRICES HAVE COME DOWN. We now have ample supply. Plants that were privatized have now been rehabilitated and now more efficient and reliable” (mostly true except the dubious claim that “prices have come down”.)

Another conglomerate said “Epira has demonstrated how open competition helps lower power prices”. Epira should be fully implemented soon, especially the WESM in Mindanao and RCOA at household level”

The country’s dominant coal conglomerate said “some of the goals of the Epira cannot be felt now. Regulatory bodies like Energy Regulatory Commission are not stable, electricity prices yet to be optimized due to effect of take-or-pay contracts still in effect, SPUG areas need accelerated program of development”

Meralco for its part predictably chimed in “the Epira has encouraged competition especially in the power generation business. The law also increased efficiencies in distribution as evidenced by all-time low systems loss levels”.  

(Can you believe these guys saying these with a straight face? We mean, Meralco just negotiated without competition 4,000mw of power supply with five chosen generators as strategic partners, committing 80% of their energy needs for the next 20 years).

The power generation association PIPPA  had been espousing that the “EPIRA law should be allowed to stay the course and prove its benefits”.  Never mind that 16 years after the generation sector is consolidated to a chosen few revolving around the two main power distribution utilities group, Meralco and the Aboitiz Group of Cebu and Davao. The three metropolitan areas distribute 70% of the national electricity consumption.

If you are one of these blessed groups, obviously you would not want the gravy train upset. You control the distribution sector and the power market that it represents. You can form your own power generating companies and negotiate long term power supply contracts with yourself or strategic partners that who also control. You get sweetheart prices and terms. All courtesy of the loopholes of the Epira Law section 45 and Epira IRR Rule 11.  When the consumers or any conscience driven person complains, you create a power shortage scenario with a few brownouts thrown in. Then your friendly legislators and government officials scamper to get your projects approved.  Never mind that they did not go through bidding. You get away with everything.  Just another day in the office and you laugh all the way to the bank.

How about the Electric Consumers?

They have been feeling the pain of the high power rates. But the power oligarchs are so powerful and make so much money, consumers are brainwashed into thinking that the rates are fair and reasonable. They are made numb to the issue by media disinformation. Consumers pay up otherwise their electric service is disconnected. 

Things will not change unless someone powerful enough will step up. So far the ERC had not done enough, choosing to carryover the anti-consumer rules adopted by the trapo-politican Chairmen despite the evident resulting disaster to the consumers.  The current good commissioners are buried in the internal strife at ERC and the challenges of digging up all the surprise deals reportedly made by their former head.  Yet these commissioners may have to suffer the fall out of the crisis in integrity at the regulatory agency that needs to have full public trust.

The EPIRA law is supposed to achieve two things: ample power supply and fair and reasonable rates.

Since the power crisis of 1990’s the power industry’s battle cry had been“assuring power supply”.  Or its variation “the most expensive power is not having power”. When that happens you know that power rate is not a priority and it certainly will be going up. Supply contracts were mostly negotiated.

The dominant distributors cum generators have been having it so good.  Now they are campaigning to preserve the status quo of the Epira law and let the good times roll.

It is time for the country to focus on achieving fair and reasonable rates. It is the turn of the consumers to benefit and be treated fairly under the Epira Law.

MSK had filed for petitions for the modification of the PBR rate making methodology that effectively deregulated the profits of the distribution sector. ERC’s rules on systems loss recovery and computations are non-transparent.  Power generation contracts that are passed on to the consumers need to undergo a resolute implementation of the CSP policy.  Why did we postpone it for six months, allowing the elephants to rampage through the gate and ravage the consumers?

The current impasse (at least on the surface) on Meralco’s seven (7) midnight contracts of 3,551mw will soon quickly degenerate into a power crisis threat to the public . The cartel of MeralcoPowerGen and their five chosen generator partners who would control 10,000mw of the country’s installed capacity of 16,000mw. Cartelization which is unequivocally abhorred by the Epira law is clearly on the horizon.

Consumer Aproar

Consumer groups are calling these as midnight contracts. The Alyansa para saBagongPilipinas (ABP) filed a petition for injunction at the Supreme Court asking that the ERC extension of the CSP be declared against the public interest and made null and void. ABP also filed an administrative and criminal complaint with the Office of the Ombudsman against the ERC Commissioners for abuse of discretion and dereliction of duty. Party-list Bayan Muna launched a congressional investigation into the seven (7) midnight contracts. The MatuwidnaSingilsaKuryente Consumer Alliance Inc (MSK) for its part petitioned the ERC to suspend hearings on the Meralco applications and investigate first whether the seven projects totaling 3,551mw plus the 480mw Meralco signed with the San Bernardino project constituted market power abuse, anti-monopoly, and will result to cartelization as is the regulatory agency’s motuproprio duty as section 43 of the Epira law.

Things are Ominously Quiet

In the face of these irregularities, neither the ERC or DOE had stepped up. Meanwhile, it is ominous that the proponents of the questionable projects continue to announce the signing of their various construction contracts.  It seems they know something we don’t. 

If we have to guess, it seems the impasse on Meralco’s mid night contracts will be allowed to degenerate into a power crisis in a matter of months and then the energy officials including the legislators will be put into a corner afraid to be blamed by the public and the media  for obstructing power development.  Same “power crisis gambit” from the early 1990’s.Now 25 years later, the old trick is still being perpetuated upon the hapless consumers.  Why is there a seeming conspiracy against the Filipino electric consumers? 

The media campaign of the dominant generators appear to be part of this gameplan.

The more things change, the more they stay the same.

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.co

15 Things I have in Common with Mr. MVP of Meralco

Posted on: May 31, 2017

David Celestra Tan, MSK
31 May 2017

We have been engaged in consumer advocacy against Meralco’s rate setting for a few years. I just started wondering what I have in common with Mr. MVP of Meralco. It turned out there is quite a few!

  1. We both have interest in how much Meralco is charging the captive electric consumers. I want it lower. He wants it higher.
  2. I also think about lawyers when arguing the issues at the ERC. I wish I can afford one. He thinks how many more he needs.
  3. We both did business with Indonesians in Hong Kong and San Francisco in our careers.
  4. I also had bum business deals early in my career.
  5. I also negotiated with bums in my career.
  6. We are both engaged in public service except he makes money and I don’t.
  7. We both think in billions. He on what to do with his. Me on how to get them refunded by Meralco.
  8. He owns Smart. My Smart phone owns me for two years.
  9. He flies his relatives to vacation in Hong Kong. My relatives fly me to HongKong and make me clean their condo.
  10. We both have a closet full of well tailored suits and a collection of neckties. He still wears his.I now only wear comfy shirts, denims, and skechers.
  11. He is laughing all the way to the bank. I am praying all the way to the bank.
  12. We are both looking for successors. He to run his empire. Me to take over paying my debts!
  13. We will soon both spend time watching the gorgeous sunset in Manila Bay. He from his Roxas Blvd penthouse and me from a Luneta Park bench.
  14. He knows Ramon Ang. Ramon Ang does not know me. But three of us actually have a monthly ritual. Meralco shocks me with its electric bill every month which then drives me to drink more San Miguel beer out of depression! Do you think these two are conspiring?
  15. I am also not interested in dating women!

Just fiddling our fingers while waiting for word from ERC on our PBR petition.

I hope you are enjoying your summer! Cheers!

David Celestra Tan, MSK
matuwid.org
david.mskorg@yahoo.com

The RE Feed-In Tariff Dream that Turned Into a Nightmare for Consumers

Posted on: May 24, 2017

David Celestra Tan, MSK
18 May 2017

How is it that whenever the government is doing something supposedly good in power, the electric consumers get screwed in the end?

Just like the rest of the world, the Philippines had this wonderful dream for a clean energy existence by promoting renewable energy instead of fossil fuel. It is part of the global concern for “climate change”. It even passed a special law called the Renewable Energy Law of 2008 seeking the encouragement of investments in solar, wind, mini-hydro, biomass, and ocean energy authored by Senator Migs Zubiri.

The law provided for tax free importation of equipment, income tax holiday for first seven years, guaranteed purchase of output, and only 10% income tax after that. On top of all these the law provided for a subsidy program called Feed-In Tariff and created a special government agency called National Renewable Energy Board (NREB) to oversee the implementation of the RE Law. It’s a wonderful dream!

Now 10 years after, it has turned into a nightmare specially solar. From a rightfully cautious target of only 50mw for solar that was asking for P19.00 per kwh subsidized rate (compared to generation rate average of P5.50 per kwh and P12.00 per kwh for bunker c plants) it ballooned to 500mw with an additional 400mw claiming entitlement to subsidies.

In July 2012, the ERC approved for the First wave of FIT the rates of P9.68 per kwh for Solar, P8.53 for wind, P6.63 for Biomass, and P5.90 for run of river mini-hydro. The initial FIT ALL rate was P0.0406 per kwh as a universal charge. In March 2015 the ERC approved a 2nd round for Solar now for an additional 450mw at a reduced rate of P8.69 per kwh. And the FIT All rate was increased to P0.12 per kwh.

Feed-In Tariff (FIT) is what the government pays the RE plants for their energy output. That energy is sold to the WESM market at whatever is the market price. Whatever is unrecovered is the loss or subsidy which is passed on to the all electricity users nationwide.

Based on the figures of Transco, the designated administrator of the FIT program, the total subsidy for 2017 would be approximately P14.9 billion a year based on national energy sales of 68 billion kwh a year and a subsidy of P0.22 per kwh chargeable to all users. So far ERC had approved about P0.18 per kwh.

On kwh subsidy basis P0.22 per kwh seems small. What consumers do not realize is the per kwh subsidy for solar power is actually P3.19 per kwh in Luzon and P4.16 per kwh in the Visayas. And those are based on the reduced FIT2. In FIT1 the subsidy for solar is P4.50 per kwh in Luzon and P5.40 per kwh in the Visayas. That is almost double the cost of coal power! Should clean energy cost this much for the consumers? Or should clean energy be solar instead of large hydro and geothermal?

The FIT program is a disaster for the consumers as much for the amount of subsidy as the confused way it was implemented. It is a comedy of errors by the DOE and NREB. Those of us observing things unfold, kept on hoping there was method to the madness.

Mad Scramble for Opportunities

The RE Law was passed in 2008 during the term of Energy Secretary Angelo Reyes. Within a span of six months the DOE issued 400 Service Contracts for these RE projects, the first step for subsidy entitlement. There were rules but it did not appear that the DOE even established qualification standards. Everyone and his uncle who are vaguely connected with some awareness of the FIT program got their own RE project mostly solar. Others speculated on wind, biomass, and mini-hydro.

When the Aquino Administration came into power, his Energy Secretaries, First Rene Almendras and then Jericho Petilla were in a quandary on what to do with the FIT program and those RE Service Contracts handed out by the previous Secretary.

A technocrat, Almendras established sensible installation targets of 200mw for wind, 250mw for hydro power, 250mw for biomass, and only 50mw for solar. Almendras did not stay long though at the DOE.

When Leyte Gov. Carlos Jericho Petilla, also a technocrat, took over the DOE, one thing they realized is that not many of the 400 RE developers really have made much progress. Most of them apparently were just speculators and amateur power developers looking to cash in. The Renewable energy program had not achieved much. Petilla’s DOE came up with a method called “first come first served”. A sort of deliver or be cancelled approach. Bowing to solar lobby pressure Petilla also increased the target to 500mw because of the claimed need to increased power supply to the country. Yes he chose solar…and later lobbied hard for P2 billion worth of rental generators. Further madness ensued. It was another gold rush! Solar developers raced against each other to beat the March 2016 deadline to get the lucrative FIT rates.

Many, including MSK, called for the DOE to hold auctions or biddings since there are so many solar developers interested in investing. Yet for some reason they kept on doling out service contracts at those generous FIT rates. Just giving money away. One well connected guy got 3 solar service contracts and sold 2 of them in Northern Negros to foreign investors and a local conglomerate. Guy got rich quick.

Remember that while all this is going on in the Philippines, bid rates for solar projects had been dropping in many parts of the world. Latin America and the Middle East. $0.04 per kwh compared to the $0.19 per kwh that the Filipinos are doling out. I mean that’s almost 500% of international rates. Yet the DOE chose to ignore these reports. Just doesn’t make sense.

While solar technology was pioneered and developed by Germany, it was the manufacturing juggernaut that is China that brought down the cost of solar panels by as much as 80% which consequently brought down the cost of solar projects. Except in the Philippines where the solar lobby up to today and the NREB are still pushing for subsidies I kid you not.

The DOE did not even pay attention to where those solar projects are being installed. Many large developers went to the island of Negros where large tracts of land can be leased making the race to DOE target completion of March 15, 2016 achievable. Except no one thought about the transmission line limits of the Negros Island. Asked later, even the NGCP only meekly called the attention of the DOE to the lack of transmission capacity on the island apparently for fear that they will instead be accused of failing to do their job of developing the transmission grid.

Negros Island only has 300mw in electricity demand. Most of its power needs are supplied by base load coal power plants from Cebu and Panay. Also by geothermal from Leyte and Dumaguete. For the 300mw of solar projects installed on Negros island to be absorbed by the grid, they will need to be exported to Cebu and Luzon. But it cannot be done became there is no transmission capacity. Solar power in the afternoon stayed in Negros causing an oversupply that sent the WESM price (the market price for RE FIT) tumbling to P1.50 to P2.50 per kwh in the afternoon hours. Additionally those intermittent solar drop in output by as much as 60% when cloud cover passes thus requiring grid operator NGCP to secure instantaneous replacement power from Luzon to stabilize the system. That 100mw of ready ancillary service is expensive and passed on to the consumers.

The Negros solar dilemma hit the consumers’ pockets three ways. First they are already paying for the P4.00 per kwh subsidy for every kwh of solar energy, the FIT recovery also drops due to the lower market price in the grid where FIT is supposed to recover some of the revenue. Then the cost of the ancillary services to cure the intermittence of solar are passed on to the consumers via the NGCP transmission charge.

Solutions to High Fit subsidies and the stranded solar projects

The DOE under new Secretay Cusi had declared that there will be no more third wave of FIT for solar. Bless his heart. The NREB for its part is now talking about coming up with a subsidy scheme for the so called 360mw of “stranded solar projects” that did not get in the second wave of FIT.

Why is the government still talking about subsidizing solar? The reason for the Feed In Tariff subsidy program for renewable energy is to encourage investments. To kind of kickstart the RE program. But when investors have already come and there are more suppliers than the country can afford to subsidize, it is time to make everyone compete for the country’s RE business. Why is the DOE so averse to holding biddings for solar projects? Why are they insisting on doling out subsidies that are passed on to the consumers? The fiscal incentives offered by the RE Law of 2008 is enough.

Why not hold an auction among those 360mw of stranded solar projects? Let us establish the avoided cost of power as coal at P5.00 per kwh. Add 12% VAT and that would be P5.60 per kwh.

Let all these solar projects bid with the P5.60 ($0.114 per kwh) as the maximum rate. Then we get clean energy without any subsidy. Note that $0.114 per kwh is still more than double the bidded rates in the Middle East which was $0.04 per kwh.

At $0.114 avoided cost solar developers should be able to afford the investment in storage battery to manage the intermittence of solar and to extend its service to the evening peak hours.

What to do with the 50mw of solar in the First Wave enjoying $0.20 per kwh and those who worked fast and are well connected to get into the 500mw second round at $0.177 per kwh?

Let us accelerate the digression rate. Those who built their plants in 2015 and 2016 already caught the low cost solar panels and should be able to afford the lower rates. If not why not force them to add storage batteries so the consumers do not pay for ancillary services to regulate their output.

We also may need to review the role of the National Renewable Energy Board (NREB). As a government office they should work for the interest of consumers instead of acting as a lobby group for RE. Maybe the DOE’s REMB (Renewble Energy Management Board) is also part of the problem. Maybe there is a need to clarify for whom their bells must toll and that is for the Filipino consumers.

The RE and FIT program is another case of knowing that we wanted to provide FIT subsidies to encourage RE development but forgetting in the end why we are doing it. We wanted to develop clean energy but if the investors are already here, there is no need to subsidize. Instead make them compete for our business. We don’t need those who are here only because they can make a killing.

In case you are not noticing, the Universal Charges combined are the fastest increasing component of our electric bill. FIT-All will soon be P0.22 and can eventually be P0.35 per kwh. On top of the UC-ME that is now P0.19 and the UC stranded cost of PSALM, consumers are getting screwed further.

It is not too late to get out of this FIT nightmare and get back on track towards our clean energy dreams. Towards that why not subsidize and incentivize large hydro and geothermal instead. Review the grid competitive Biomass and mini-hydro. Those dreams are still worth dreaming.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.
Matuwid.org
david.mskorg@yahoo.com

The Kind of ERC the Country Needs

Part 1

David Celestra Tan, MSK

5 May 2017

If there is a silver lining in what is going on at the Commissioners level at the Energy Regulatory Commission, it is that this is an opportunity towards finally righting the regulatory course for this very critical government agency that has been adrift in the sea of confused identity and foggy purpose.

If we use Sections 41 and 43 of the Epira Law that created it as scorecards, the ERC would score a 65% at best.

President Duterte’s decision on ERC Chair Salazar is a big step forward that we hope will finally lead to the long needed remake of the regulatory agency.

First A Background on how we Got here

16 years after its creation under the Epira Law of 2001, the regulatory agency had not found its regulatory soul.  Its best Chair was the first one, Atty. Fe Barin,  who was ignominiously promoted to the Monetary Board and later as SEC Chair reportedly because the vested interests (the same people who lobbied for the loopholes in the Epira Law) “could not work with her”.  The President then appointed a “trapo”politician who promptly gave everything the distribution utilities wanted and saw rates soaring including the reviled PPA (purchased power adjustment, remember?). He resigned and ran for Congress but lost.  He was replaced by another “trapo” politician and when his term expired he was replaced by another politician. And the rest is history.

If there is anything we can say about the travails of the supposedly non-politician JV Salazar (although we heard he is an election lawyer), it is that it was a letdown because we the consumers had hoped so much from him. After all, the resigned DOE Secretary Carlos Jericho Petillascreened and vouched for him.

To be fair, the ERC suffered from the sheer magnitude of responsibility dumped on it by the Epira Law. Anything that the bi-cam framers of the Epira Law could not resolve, or did not want to give to their distrusted DOE, they gave to the ERC.  That was the official line. Insiders said the real reason was the powerful lobbyists wanted to keep the rules and implementation concentrated in the regulatory agency, which they historically had been able to “capture” under its predecessor ERB.

ERC was observed to release rulings on very complex Meralco issues but take very long to rule on simple methodologies for electric cooperatives just like the old ERB.   We recall an incident when the ERB was criticized on one ruling, the Chairman had the temerity to fax her reply from Meralco offices. (Yes Junior, we use fax at that time not email!)

The ERC could have used the steady and incorruptible guiding hands of Fe Barin in its formative years when it could have defined its regulatory soul.  But the appointing authority gave it a succession of leaderships that were too susceptible to the enticing lobbying of the vested interests.  Being Commissioners and being its chair is so powerful that absolute power had intoxicated. The ERC lost its way.

MSK refers to them as the old ERC.  The current crop of Commissioners are upgrades from the previous ones.  Former President Noynoy Aquino has political detractors but in our book one of the best things he did for the power sector was appointing  two very capable and morally upright Commissioners in Gloria Victoria YapTaruc and Alfredo Non, absolute professionals with high levels of integrity. Commissioner Josefina Magpale-Asirit brought valuable insights from her previous stint at the Department of Energy. Commissioner Geronimo Sta. Ana was a long time official of the Cebu Chamber of Commerce and brought business sector insights to the regulatory agency. Although his appointment causedan uproar because he was supposedly a recommendee of a vested interest group as exposed by another vested interest.

The old ERC similarly had some good commissioners and line officials but the caliber and moral compass of the Chairman (and his Executive Director) defined where they were going as an institution.  And they went lower than purgatory with patronage and misguided regulation.

Sadly, the ERC has many professionals in its ranks that are committed to public service as exemplified by the late Atty. Jun Villa.

In the new ERC, the conflict at the Commission levelstemmed from the reported dictatorial tendencies of the new Chairman which did not sit well with the other commissioners who understandably invoked that the Commission is a consensual body.  There is normally a reason why someone wanted to be dictatorial.

The problem with the New ERC thoughis that they were only implementing the rules and methodologies that they inherited without revisiting whether they are anti-consumer or if they are contrary to the ERC’s own mandate to prevent monopoly, anti-competitive behavior, abuse of market power, and cartelization. Perhaps the ERC have been overwhelmed by the weight of the responsibility and just the sheer volume of work and contentious issues from 15 private DU’s 119 electric coops, 100 or so private power generators, the PSALM, NPC, and NGCP.

Your consumer organization MSK thanks Commissioner Geronimo Sta. Ana for responding to the petition of MSK when he was OIC last December 2016, for a review of the Performance Based Rate making rules (PBR) which had been unacted by the ERC for about a year. We believe PBR has been causing P10 to P15 billion a year in undeserved profits to the DU’s.

The consequence is here we are 16 years later and we have the highest electricity rates in the Asean and our country is not anywhere near the global competitiveness that the Epira Law aspired for. Cross ownership between the distribution sector and generation sector is pervasive and monopolization and rate overcharging is prevalent.  A lot of it caused by the loopholes in the law and its IRR and ERC’s failure to truly regulate and protect the public interest.

 The Epira Law of 2001 envisioned the ERC Commissioners to be incorruptible which is the reason the law provided for a generous safety net of retirement at the level of Supreme Court justices and the security of a tenure.

 Let us hope that President Duterte would cause a leadership reform in the ERC that would be committed to enlightened and incorruptible regulation that balances, efficiently and timely, the interest of power service providers like the DU’s and generators and the need of the consumers to be safeguarded from the profit optimization maneuvers of these private business.

 Reforming the ERC is a national emergency.

 

Next: Creating the Kind of ERC the Country Needs

MatuwidnaSingilsaKuryente Consumer Alliance Inc.

Matuwid.org

david.mskorg@yahoo.com

Wanted: A Clear Energy Mix Strategy for the Country from DOE

David Celestra Tan, MSK

1 May 2017

One of the most critical functions of the Department of Energy is to provide a prescient Energy Mix strategy for power supply development.  And one of the expensive lessons learned since the power sector was privatized and deregulated under the EPIRA Law of 2001 is that the private sector cannot be counted upon to develop a holistic energy mix power supply that will provide energy security, competitive power, and environmental protection for the country.

Left to themselves, the private generators naturally will gravitate towards the low risk and most profitable technologies like coal. A recent case in point is the signing by Meralco with its sister company Meralco PowerGen more than 4,000mw of power supply, all coal.  And this after its Chairman is supposed to have egged the DOE “to provide the energy mix policy direction and the private sector will follow.”

While we as a country are talking about concerns for climate change, the reality is that most of the base load power supply are now coal. Mindanao has become coal country after having been clean hydro (and low cost power) island for generations. Visayas is also dominated by coal.  And here comes Meralco, the largest distribution utility in the country at 62% market share committing their future power supply to coal.

Diversifying Energy Mix a Tough Challenge

Diversifying the country’s energy reliance is a critical strategy for energy security. It cannot rely too much on one fuel like coal. Most of our coal comes from Indonesia and Australia. Something happens to those countries and the country will pay through the nose. Indigenous coal like Semirara does not provide Filipinos with price leverage because even this local coal is price-indexed to foreign coal prices. We need to balance it with natural gas, geothermal, hydro, and a sensible renewable energy program.

 The private sector is justifying all these by saying coal is the only option if the country is to have cheap power. Gas generation is similarly in the same cost level but the infrastructure for LNG supply has not been sufficiently developed. And it is not going to happen without a resolute and sustained push from the DOE.

Surely it will take sustained effort for 3 to 6 years but the DOE’s leadership historically had not stayed long enough in their jobs to make meaningful direction to the diversification of our power technologies.

Clean energy options like hydro, solar, wind, and biomass are reaching grid parity with coal. Nationally it seems coal generation rate will be in the P5.00 to 5.50 per kwh range.  Meralco’s claimed rates of P3.60 per kwh for their new contracts with Meralco PowerGen are based on low coal prices. And when world coal prices kick up we will see its real price. But clean energy is not as easy as coal which can also be developed at large scales of 300 to 1200mw compared to renewable energy which is 10 to 100mw in each location.

Our power cost is high because low power cost is not really a national policy. We only pay lip service to it. We buy into the line of the power generators that “the most expensive power is shortage of power”.  Assuring sufficient supply and attaining least cost power must always go together.  When the government only talks about assuring adequate supply and the need for renewable energy, you know that price is not a consideration which means it is going to be non-competitive and expensive.

 Energy mix also need to define whether we are pursuing centralized power for our archipelagic country or are we decentralizing our power supply by encouraging bite sized power plants on each island? Should we aspire for N-1 power reliability in each island?

We mostly talk about base load supply and renewable energy.  Energy Mix includes developing intermediate, reserve, and ancillary services power. The rise of intermittent renewable energies, like wind and solar, make development of ancillary services power even more exigent.

What is the role of hydro projects? Should they be sources of cleaner and cheaper power as in the pre-EPIRA days before 2001 at P2.10 per kwh or should they be reserve and ancillary services power as the new private owners have converted them to be at WESM prices of P6.00 per kwh. Along these lines would depend the role of the Agus hydro complex in Mindanao. Should they be privatized and turned into ancillary services power as they did in Luzon or should they be rehabilitated and restored to being a source of lower cost power for the people of Mindanao? On the role of hydro in the energy mix will also depend whether the Laiban dam project in Quezon will be encouraged or not.

The Department of Energy is mandated by RA 7638 (Department of Energy Act of 1992) to prepare, integrate, coordinate, supervise and control all plans, programs, projects and activities of the Government relative to energy exploration, development, utilization, distribution and conservation.  Its mandate however was made more specific by the Epira Law of 2001 to include the following under Section 37.

(a) Formulate policies for the planning and implementation of a comprehensive program for the efficient supply and economical use of energy consistent with the approved national economic plan and with the policies on environmental protection and conservation and maintenance of ecological balance, and provide a mechanism for the integration, rationalization, and coordination of the various energy programs of the Government;

 (b) Develop and update annually the existing Philippine Energy Plan, hereinafter referred to as ‘The Plan’, which shall provide for an integrated and comprehensive exploration, development, utilization, distribution, and conservation of energy resources, with preferential bias for environment-friendly, indigenous, and low-cost sources of energy. The plan 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

(c) Develop policies and procedures and, as appropriate, promote a system of energy development incentives to enable and encourage electric power industry participants to provide adequate capacity to meet demand including, among others, reserve requirements;  

(d) Monitor private sector activities relative to energy projects in order to attain the goals of the restructuring , privatization, and modernization of the electric power sector as provided for under existing laws: Provided, That the Department shall endeavor to provide for an environment conducive to free and active private sector participation and investment in all energy activities;

We are not saying setting up a policy guideline on Energy Mix would be politically easy. Every mix the DOE pushes will have detractors because sectors have their own agenda. And implementation is another matter.  The DOE has been considered toothless in implementing power development strategy. Its Philippine Energy Plan is considered nothing but a tally sheet of power projects being determined and developed by the private sector. The CSP reform is the one that is giving DOE enforcement teeth for an energy mix policy.

Let us hope the DOE comes up with a prescient Energy Mix policy soon.  We have not had a President with the true political will to do what is right for the country. The term of President Rodrigo Roa Duterte is an opportunity to reform the power industry and create an Energy Mix for the country. Let us not miss this chance.

 

Matuwid na Singil sa Kuryente Consumer Alliance Inc. 

Matuwid.org

david.mskorg@yahoo.com