Petilla still maintains scenario for lack of power in summer

by Bloomberg, Janury 12, 2015
from Manila Bulletin

Office workers in the Philippines could be donning shorts for work this summer as air conditioners are dialed back to cut electricity demand and stave off blackouts.

At least that’s one scenario suggested by Energy Secretary Carlos Jericho Petilla as government and private offices, malls and factories are asked to set their air conditioners at 25 degrees centigrade (77 Fahrenheit).

“If we can go to work in shirts and short pants,” that could help cut power use, Petilla said in an interview last week.

Shopping malls and factories have already been warned to get ready to use their own generators as the blackouts that plague the country each summer are forecast to worsen in March and April. That’s when demand typically surges as temperatures reach as much as 40 degrees.

It didn’t have to be this way, said Petilla, citing refusal by Congress to grant President Benigno Aquino’s request to build new power plants, in the belief that commerce and industry could cover the shortfall themselves. The government has been banned from building power plants since 2001.

“We asked Congress to give the president emergency powers but when they didn’t give it before October, the power plant option is dead because it’s too late to build one now for use in summer.”

The bigger issue, according to James Lago at PCCI Securities Brokers Corp., is that the government misjudged power needs.

“This shortage is due more to government’s short-sightedness than the private sector,” he said. “The private sector has been willing to build but they are faced with hurdles the state could have addressed.”

The Southeast Asian nation’s demand for electricity has surged as its economy expanded. Consumption rose 50 percent to 72,922 gigawatt hours in the 10 years to 2012, three times as much as the 16 percent growth in generating capacity over the same period, according to government data.

The Philippines now has Asia’s highest electricity rates after Japan, making power suppliers the biggest winners from the increase.

Shares in First Gen Corp., which is adding 514 megawatts of capacity this year and in 2016, surged 95 percent in 2014 in Manila trading. Its unit Energy Development Corp. rose 54 percent. Trans-Asia Oil & Energy Development Corp., which has built its first wind power project, jumped 59 percent.

“The tight conditions would benefit power generation firms with upcoming new capacity,” CIMB SB Equities analysts Edser Trinidad and Romel Libo-on said in a Jan. 6 study. Demand forecasts from as far as three years ago “underestimated the Philippines’ economic growth and the new capacity pipeline was delayed.”

In 2013, electricity prices rose to a record when the nation’s only commercial gas plant at Malampaya shut for repairs. The number of blackouts also rose. Malampaya is again scheduled for a maintenance shutdown during peak demand this year.

The government needs to do a better job of building up a reserve of power capacity to guard against unforeseen shutdowns, said Lago at PCCI Securities. It also needs to keep margins of power companies at a reasonable level.

Philippine power companies enjoy a gross margin of 50 percent to 60 percent, double that of other parts of the region, he said.