NGCP IS INCONGRUENT AS SYSTEMS OPERATOR

(answer to comments from post Sec. Petilla Latest to Exit from DOE’s Revolving Door)

Dear Messrs. David Tauli and Cerael Donggay of Mindanao.

We agree with you. NGCP being Systems Operator is indeed an anomaly and one reason why the transmission sector is divergent of the power development and competitive market aspirations of the EPIRA Law. We wrote in the Philippine Power Insights in September 2014 about this defect in the law.

The EPIRA Law of 2001 did not intend the Transmission Concessionaire to be Systems Operator. Section 21 clearly spelled out the functions of the Transmission Concessionaire and it did not include being Systems Operator. In fact, Section 9 specifically defined the functions of the government owned Transco and that included being Systems Operator. There is an inherent conflict of interest in the Transmission Services provider being the Systems Operator that works against the interest of a competitive market development. It is just incongruent.

MSK pointed this out in one of the Multi-Sectorial Task Force to Find Ways to Reduce Electricity Prices. And Transco President Rollie Bacani said while it would be self-serving of the Transco for them to push it themselves, they would welcome Transco becoming Systems Operator. Curiously, in the proceedings summary that was supposed to be presented to Secretary Petilla, it said Transco is against being Systems Operator).

NGCP became the Systems Operator, not through the amendment of RA 9136 that was passed in June of 2001, but through the passing of a superseding law, RA 9511 which was passed in December 2008 to legalize the award of the transmission franchise to the winning bidder NGCP. RA 9511 defined under Section 1 the franchise of NGCP as “to operate, manage and maintain, and in connection therewith, to engage in the business of conveying or transmitting electricity through high voltage back-bone system of interconnected transmission lines, substations and related facilities, system operations, and other activities that are necessary to support the safe and reliable operation of the transmission system and to construct, install, finance, manage, improve, expand, operate, maintain, rehabilitate repair and refurbish the present nationwide transmission system of the Republic of the Philippine”.

Someone must have lobbied hard for “systems operations” to be inserted in the middle of the section as if it is a routine function and the good legislators maybe did not realize the full import of the insertion.

Did they mean for NGCP to be Systems Operator when they inserted “systems operations” in the franchise functions? Being “Systems Operator” in technical parlance is becoming a rule making and policy making authority. This is different from operating the transmission system. I don’t believe the government intended to make it part of the bidding for the transmission services concession the sale of the grid policy and rule making authority of the government. The NGCP being System Operator is like a license to print money. This is akin to defaulting the mass transportation policy making functions of government to the mass transit franchisee. Or the country’s monetary policy to the printer of the paper currency.

The country’s transmission connections is divergent of our aspirations for a deregulated and competitive generation sector. NGCP is always seeking to expand the boundaries of their service coverage. And that means revenue. Many power generators, specially the new ones, complain of the slow grind of grid connections which deters the timely entry into the grid of much needed power supply. Maybe this can be traced to the “monopolistic” mind set of the State Grid of China as the concessionaire and the ex-NPC people they hired.. NPC was also a Philippine monopoly in power transmission. Obviously neither would have a deregulated mind-set and attitude. The local financial partners are new investors in power and cannot be expected to embrace the precepts of deregulation, archipelagic and embedded generation, and promotion of competitive markets.

The original idea for a foreign concessionaire is to grant it to someone with the financial wherewithal to finance the extensive expansion of the grids transmission sector and the eventual “transfer of technology” in creating an open and competitive transmission sector. The country got a concessionaire whose own transmission system is monopolistic. And they don’t have an open market technology to transfer. China’s power cost is low because the government recognized that it is an essential element of industrialization and modernization and hence made low power cost as a government policy. It did not try to achieve low power cost through market competition and privatization.

The Philippine government has been lacking that overriding commitment to lower power cost, which is nonetheless achievable through deregulation, privatization, and competitive markets. Except we implemented it in a very Filipino way. For the critical period of 2001 to 2010, we diluted our own power deregulation law and building in loopholes in the implementing rules that the blessed ones can exploit. We did not really have a genuine commitment to a truly competitive market.

We agree that NGCP must be given a fair return on their fair investment……but it should not be allowed to make the rules on how the service will be provided as the Systems Operator. We don’t know what it will take for the government to realize that this is sabotaging the country’s power development.

Maybe this is a structural anomaly that Senator Miriam Santiago can look into……and where a Senator Carlos Petilla and a Senator Albie Benitez can help galvanize.

Matuwid na Singil sa Kuryente Consumer Alliance 

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Petilla for the Senate?

9 May 2015

We heard that Sec. Petilla is preparing to run for the Senate and will file this coming October. Our initial reaction when we first heard he was resigning was indeed he is getting ready to run. Subsequently many intriguing speculations came out as to why so early and why the reason given was cryptic.

If he is, Sec. Petilla has demonstrated the intellectual depth and political savvy at the Department of Energy in dealing with the complex dynamics of the power sector and he becoming Senator will immensely improve the understanding of that august body of the many intricacies of the power sector than can help addressing the problems and the aching reforms needed.

MSK is disappointed that the movement for power cost reduction was not given more impetus after so much hope was given. That the Department of Energy continued to “grant” renewable energy entitlements to favorable FIT rates, specially solar, instead of subjecting them to bidding and having the chance to reduce the consumer subsidy for RE. But then maybe this is endemic of the DOE revolving door and the daunting challenge in reforming a sector where several 900Lb gorillas lord over the landscape. So much to do in the so little time that these Energy Secretaries stay on the job.

To be fair, at the Department of Energy, Petilla certainly took many bold steps even in sacred alleys that showed that this guy gets it and can have the courage to work for the greater good. He and his team grasped what ailed the WESM and on regional basis adeptly caused political compromises to power solutions. Mindanaoans are apparently happy. We repeat, his “Dasap” initiative to subject power generation contracts to competitive bidding is prescient and bold.

The consumers lament is that many of these hopeful solutions will fizzle with him leaving so early. The bright side is maybe thei Senate can be a better platform for Sec. Carlos Jericho Petilla to push for the kind of welcome reforms that will correct the industry.

If Secretary Petilla is really running for the Senate, electric consumers should be rallying behind him for this is one person who understands their flight and who will most likely help create the remedial laws for reform.

Sec. Petilla Latest to Exit from DOE’s Revolving Door

by David Celestra Tan, MSK
30 April 2015

The coming exit of Secretary Carlos Jericho Petilla from the Department of Energy after only 2 years at the helm reminds all of us that the department has become a revolving door of good capable men of considerable promise but not staying long enough on the job to make a lasting difference in this critical sector that badly needs long term leadership and policy direction to correct what have been ailing it for so long.

Secretary Petilla leaves and the consumers again are left in the dust. To suffer the high rates, the continued monopolization and negotiated contracts, the imbalanced energy mix, rudderless power development, a confused renewable energy sector, a divergent and lumbering transmission sector, a perennially short power supply, and a continued lack of safeguards for the consumers.

Secretary Petilla turned out to be a shooting star. Showing bold and prescient power reform initiatives only to fizzle, and in boxing parlance, seemed unwilling to “pull the trigger” to make things really happen. Remember the much ballyhooed Multi-Sectorial Task Force to Find Ways to Reduce Electricity Prices? Consumers and businessmen got excited and held their collective breathes after months of multi-sectorial meetings. Then in the end, the Secretary did not even find it important enough to receive formally the finished report. (The report is watered down but that’s another story). Perhaps some very powerful hands made him back-off.

Perhaps Secretary Petilla is threading towards reforms that the power establishment found threatening to their entrenched hold on the industry. His “dasap” is bold and now it is in limbo. Some say Petilla had to resign because the President listened to someone else in the appointment to a vacant slot at the powerful Energy Regulatory Commission. A move that insiders believe is a precursor to who will influence the choice of the next ERC Chairman after Chairperson Ducut retires in July. The two biggest power groups are heard to be unabashedly sounding out people willing to be appointed to the DOE and ERC and PEMC, on the understanding that they will protect their vested interests. (Well, what’s new?)

Technocrats like Petilla, Almendras, and the names before them were smart and well-educated and could pick-up in no time the lingo of power, eloquently speaking energy and policy, energy mix, reserves, and the vagaries of the wholesale electricity spot market. But they fail to go really deep into the structural defects and weaknesses of the energy sector to make the kinds of reforms that will right the sector and benefit the consumers. Mainly because they don’t stay long enough on the job.

The Philippines government structure is patterned after the United States where the Secretary of the Department is still appointed by the President and serves at his leisure. Nonetheless for the most part, the energy agencies have been able to pursue reforms and oversee the industry and stay the course, ever mindful of insuring the protection of the taxpayers as electricity consumers. Aside from a strong anti-monopoly and pro-competition and pro-people culture, the difference is a strong bureaucracy in the United States. Capable and patriotic minded people committed and truly guarding the interest of the country and consumers. A strong energy authority that will be ever present with continued policy.

Perhaps the problem is in the appointing authority. We hope sometime the country will get lucky and elect a President who will appoint an Energy Secretary who would be devoid of conflict of interest, and will truly pursue, and be allowed to pursue, a vision of low power cost, a truly competitive power sector, and a more sensible regulatory policy and methodology. And yes, someone who will stay long enough to get the job done and be allowed to “pull the trigger” if needed. Someone who will make structural changes and bureaucratic strengthening in the DOE and other energy agencies for a lasting pro-people power sector.

With the Presidential Election looming in May 2016, the replacement Energy Secretary will be a caretaker one with only a year of tenure. Sadly for the people, it is a critical one year. The generation sector is rampaging towards irreversible monopolization and promising initiatives for reforms will die in the vine. Let us hope they appoint someone who at least knows the power sector and will have a short learning curve.
Department of Energy, DOE, energy and policy, energy mix, Energy Secretary, ERC, high power rates, Jericho Petilla, Sec. Petilla, technocrats, WESM, zenaida DucutDepartment of Energy, DOE, energy and policy, energy mix, Energy Secretary, ERC, high power rates, Jericho Petilla, Sec. Petilla, technocrats, WESM, zenaida Ducut
It will be a short spin at the DOE Revolving Door but we nonetheless hope it would be a productive one for the desperate electric consumers.