Cusi vows to lower power rates

By: Amy R. Remo, July 22nd, 2016 03:51 AM

from Philippine Daily Inquirer

Cusi has also committed to roll out initiatives that can attract more investors to build new power plants, warning that the lack of an adequate power supply will likely stunt the country’s economic growth and the government’s job creation efforts.

“We have to make (electricity) more affordable. But aside from that, we have to put it at the level that can be secure. Now, our supply is still not as sufficient as we want it,” Cusi said at a roundtable discussion with the Inquirer Business section on Wednesday night.

“We need to have good supply and we have to have affordable power so that we can encourage more businesses to establish in the country. We won’t be able to do this unless we can ensure our energy supply,” he added.

Just three weeks into his job, the energy chief has identified ways of bringing down power rates and boosting supply—goals that many of Cusi’s predecessors had sought.

These include the following:
Rebalancing the energy mix to ensure more affordable generation costs without sacrificing the reliability of supply.

Tapping unused Malampaya funds to strike off a portion of the stranded debts and stranded contract costs from consumers’ electricity bills.

Finding ways to reduce or lift the burden of systems loss charges on consumers.

Energy situation
In his first 100 days in office, Cusi will assess the energy situation, review the capacities of existing power plants and conduct a technical audit of all power assets from generation to distribution and even transmission.

“After 100 days, we would have already completed the technical audit and determined if our existing standards are still fit for future applications. Also, we will be able to identify the ideal energy mix (for a developing economy like the Philippines) … and more or less, we will know how to reduce (electricity) prices,” he said.

He said he found the current situation very challenging partly because of differing views about the environment.

“Right now, our energy mix still includes coal. What’s difficult is that we want to bring down the rate of electricity but at same time we don’t like to use the source that is cheap, and the cheapest still is coal and nuclear,” Cusi said.

While the Department of Energy (DOE) will continue to develop the renewable energy industry, Cusi admitted to the need of having coal in the power mix, as this would provide stable energy supply.

“We are [wide open to new coal projects] and we have such projects on the pipeline. These will be adequate to cover for the economic growth. Our energy growth must support our economic growth. As of now, there is that pressure on our energy supply because of the growing economy and so supply must grow faster. We are now studying the right balance in the power mix,” he added.

Cusi was quick to note, however, that this did not mean that the current administration was biased toward coal projects.

Environment standards
He said the Philippines “will still need coal as one of the main sources of our energy …. In other more developed countries, the coal plants coexist with the community in which they operate. We can do this in the country.”

Short of a reconciliation with the thrust of the Department of Environment and Natural Resources, Cusi noted that to ensure that environmental standards were being met, all existing energy facilities would be subjected to a technical audit.

“This will make sure you are complying with the standards and these include community development. We will determine whether our standards are the standards we should be implementing in the future. This will be necessary for us to know if we need to revise standards and set new regulations,” he added.

For pricing, Cusi said the focus was not on the “how much” but on the fairness of the rates by determining whether energy companies were pricing power supply correctly.

Stranded costs, debts
“Part of the bill we are paying now is for the debts of National Power Corp. (Napocor), which are called stranded contract costs and stranded debts. We’re studying how to take it out from the bill,” he said.

Currently, only the stranded contract costs are being charged to customers through the universal charge.
Stranded contract cost refers to the difference between the contractual payment obligations and the revenue earned from the sale of the contracted energy for eligible, government-managed independent power producers.

Stranded debt refers to any unpaid financial obligations of Napocor, which have not been covered by the proceeds from the sale of Napocor power assets. It was earlier estimated that the stranded debts and stranded contract costs amounted to P140 billion.

Also being eyed, according to Cusi, was to spread the collection of this amount over a longer period to cushion the impact on customers.

Cusi said the DOE was also studying how to use the Malampaya Fund, the government’s share of revenues from the operation of oil and gas wells in Malampaya off Palawan province.

“The Malampaya (Fund) is barely being used but it’s just like the coconut levy—that should be used for the people. This is now being studied by the legal team,” he said.