It’s all about power supply

by Erlinda B. Cinco, January 18, 2015
from Manila Bulletin

Electricity rates, as many of us consumers know, went down for the third consecutive month. That is definitely good news for us. According to media news accounts, the big reason for this was the adequacy of power supply from the power generators.

While we have all enjoyed the low power rates, especially during the holidays, we should not expect that this will continue in the coming months. News reports said a new charge will be added to our electricity bills starting this February.

Called Feed-in Tariff Allowance (FIT-ALL), collection for this new line item in our electricity bills will be collected by distribution utilities and electric cooperatives nationwide, which will, in turn, remit this to the National Transmission Corporation (Transco). This will then be remitted by Transco to renewable energy (RE) companies as funding for the building of power plants that will run on renewable energy.

Reports further said the Fit-All would amount to an additional P0.04/kwh that would have to be paid by all power consumers. I understand that this was challenged before the Supreme Court since it involves costs for projects that are still in the drawing board or pipeline. Meaning, they are  asking us to pay for something that is not there yet.

I  have also long been reading about the impending power supply deficiency this summer, driven mainly by the month-long maintenance shutdown of Malampaya. Malampaya is the source of fuel, natural gas in particular, by some of Luzon’s large power plants, including San Lorenzo, Sta. Rita, and Ilijan.

I am reminded of the record-high rates in December, 2013, and January, 2014, triggered also by the one-month shutdown of Malampaya. This was even made worse by the simultaneous plant outages leading to excessive Wholesale Electricity Spot Market (WESM) charges. At that time, the generation charge, or that portion of our electricity bill that we pay to the generation companies, almost doubled.

The exorbitant rates during the December, 2013, to January, 2014, billing months are something that, we, as electricity consumers, would not want to happen again. But deja vu! Just a little over one year has passed, and we are looking again at what may be a repeat of high electricity prices this summer. Again, because of Malampaya.

The question I pose now is, “What needs to be done to avoid a repeat of December 2013-January 2014?” After we experienced perhaps the worst thing that the power industry has witnessed after the power crisis during the early ‘90s, I am hoping that there were a couple of lessons that all industry players have learned to prevent another round of power spikes this coming summer.

It was somehow comforting that the Department of Energy (DOE) initiated a program called the Interruptible Load Program (ILP). So what is it about? It enjoins large electricity consumers such as malls, hotels, office buildings, and other establishments to avoid using electricity from their respective distribution utilities like Meralco, and operate instead using their own generator sets, especially during times when power supply is not enough to meet demand. In this way, overall demand would be lessened and whatever supply deficiency there may be at any given time would be made smaller or even addressed.

While the ILP seems a good enough measure to help address the expected supply situation this summer, I do not think that this is the real answer we are looking for.

Again, it is the supply situation we are trying to deal with here, not demand – side management. ILP, being a solution coming from the customers themselves, is a demand – side approach. Should not we be addressing a problem from its very root? If what we’ll be facing is a supply-side problem, should not we be looking for solutions from the supply end as well?

While I am not discounting the possible contribution of ILP, I think that it’s still merely a band-aid solution to a problem that we will continue to experience over the next few years. ILP should only be a last resort.

Assuming Malampaya will shut down every year or that power plants will either be on scheduled or forced outages every so often, should not the long-term solution to this lingering problem be the setting up of more power plants? Granting that there are a number of power companies out there that are more than capable of building new power plants that can produce additional low cost electricity, the question is whether the government is actually making it easy for them to do so.

I have been hearing of some proposed power plants, one with capacity as big as 600MW, that are pending before the court. For goodness’ sake, why are we even making it difficult for these investors to set up the very power plants that  can serve as long-term solution to our power woes?

The threat of a power crisis in the coming months is not something that should be taken lightly. If it indeed occurs, not only will it hurt us now. It will continue to haunt us year after year, until we look deep into the source of what is crippling our power industry and adopt a no-nonsense approach to solving it. And it begins with more capacity. It is that simple.