The feared power shortage: why it did not happen (Part 1)

by Lenie Lectura, 12 July 2015
from BusinessMirror

First of three parts

It was in July last year when resigned Energy Secretary Carlos Jericho L. Petilla said he had recommended to Malacañang that President Aquino invoke Section 71 of the Electric Power Industry Reform Act (Epira) to address a looming power shortage in Luzon that was anticipated to happen during the summer months of 2015.

Petilla’s pronouncement did cause quite a stir because, for one, there were controversies hounding the Executive branch on the Disbursement Acceleration Program that time.  Many were worried that there could be abuse of power if the President was granted emergency powers by Congress to address the tightness in power supply.

Former President Fidel V. Ramos also exercised emergency powers during his term to buy more power-generating capacity, albeit on a take-or-pay basis, which led to higher power rates because consumers had to pay even for electricity that was not consumed.

So the debate in the Senate and the House of Representatives on whether to grant President Aquino such authority lingered for several months.

Sen. Sergio R. Osmeña III, chairman of the House Committee on Energy, said the Aquino administration should not let Petilla—whom he earlier called on to quit—handle the country’s power woes. Instead, he said, experts should deal with it.

To prevent abuse, the House of Representatives proposed that “the authority granted to the President shall be valid from effectivity of this joint resolution until July 31, 2015.”

With this, Rep. Reynaldo
Umali of Oriental Mindoro expected bigger support and less resistance from politicians, business groups and other sectors in the passage of measures granting the President special powers.

Umali added that the President had requested for a “fast-track solution” to stop the expected power crisis from hitting Luzon.

Meantime, industry stakeholders scrambled for solutions to a potentially inconvenient and power-short summer this year. Filipinos in Luzon waited in suspense for months until summer came and passed, but the feared two- to seven-hour rotating brownouts did not occur.

 

Tight supply

Petilla’s anticipation of a possible power shortage was based on an outlook prepared by his competent undersecretaries, directors and trusted staff.

“I am uncomfortable with our supply for 2015. Our outlook is we have very thin reserve supply as against demand, so thin that we can go on red alert,” the energy chief said then.

A red alert means insufficient power supply.

In particular, the DOE projected that in Week 14 of 2015 (approximately from March 29 to April 4), a maximum projected shortfall of 1,004 megawatts (MW) is likely.

Of this, 600 MW are needed to meet the dispatchable reserve and 404 MW to meet the required contingency reserve.

Moreover, the DOE said a total
of four weeks of yellow alert is projected in the critical period.

A yellow alert means thin power reserves. This is issued when power reserves dwindle and fall below 647 MW, which is the largest running power-generating unit.

“We can live on yellow alert but on red, we cannot,” Petilla said.

While some power projects are expected to fire up by 2015, these may not be enough to avert a red alert, since they will not be operational at the same time. Further, the Malampaya natural-gas facility, which is fueling three gas power plants, was expected to go offline for maintenance checkup from March 15 to April 14.

“There is an admission that by 2015, our supply is not enough. There are projects that we feel may not push through,” he said.

The Manila Electric Co. (Meralco) echoed Petilla’s pronouncement. “We do need more power plants in the country. The margin of [supply] safety in Luzon is very tight,” Meralco Chairman Manuel V. Pangilinan had said.

Meralco President Oscar Reyes also anticipated that there would be “increasing tightness until new power-generating plants come in.”

The country’s largest utility firm recently warned that Luzon will
continue to have a power-supply problem until 2018 and they believe that 2015 is going to be the tightest year, insofar as power
supply is concerned.

“This year would be the tightest year. There is some degree of continued tightness even  up to next year, in 2016 and in 2018,” Reyes said.

He added: “The country’s economic growth has also put pressure on the aging and inadequate power-generation infrastructure in the Luzon grid, resulting in increasing forced outages and longer scheduled shutdowns of power plants.”

Meralco recorded 83 forced power-plant outages and 52 scheduled power-plant shutdowns last year. Most of the power plants are very old, that’s why they conk out. “What has not been evident before, which now has come to light, is really the effect of aging power plants…. We are in a tight situation right now. Recently, there have been renewed warnings of potential brownouts,” Reyes said.

Moreover, growth in peak demand in 2014 of 3.3 percent in the Meralco franchise area to 6,121 MW and 5 percent in the Luzon grid to 8,717 MW has not matched with the entry of new generating capacity, adding pressure on power supply and reserves in 2015.

Meralco’s own way to address an increasing demand in its franchise area is to enter into additional nterim power supply agreements with power producers.

 

ILP

In the onset of summer this year, it was very clear that President Aquino would not be granted emergency powers. There was so little time left.

The only viable solution identified then was the Interruptible Load Program (ILP), which seeks to encourage heavy users of electricity to run their own generator sets  during peak-demand periods, instead of getting their supply from the Luzon grid.

The electricity that would not be taken from the grid would be available to household and small users, preventing a rotating blackout.

Meralco threw in its full
support by constantly encouraging its large customers to sign up with the program.

As of March, Meralco said it was able to gather enough commitment for up to 667.29 MW of committed interruptible load for the summer.

With ILP, power supply from the grid that will not be consumed by participating customers will be available for use by other customers within our franchise area. Through this, the aggregate demand for power from the system will be reduced to a more manageable level, helping ensure the availability of supply during the anticipated power crisis this summer.

At that time, the ILP was the government’s only card left.

Umali said the success of the ILP would largely depend on the cooperation of the malls, factories and other private establishments to use their own generator sets when the National Grid Corp. of the Philippines expects the supply of electricity to fall short of demand. The only problem, however, is that the ILP is voluntary.

“The important thing here  is for [ILP participants] to  respond when called. If they do, rolling brownouts could hopefully be minimized. We don’t have compulsory powers.
We don’t want to give them the impression that there will be no
brownouts,” Pangilinan had said.

As early as January 2013, Meralco officials had warned of tight power supply in the Luzon grid by summer of 2015. Shortly after that warning, the DOE disputed this by saying that there is enough supply of about 800 MW. Later on, the DOE said it anticipates a power-supply problem that will occur in the summer months of 2015.

Philippine Independent Power Producers Association President Luis Miguel Aboitiz said the period April 5 to 15 was supposed to be a critical period in terms of power situation in Luzon, because high demand anticipated during summer would coincide with the one-month maintenance shutdown of the Malampaya gas field.

The Malampaya facility supplies natural gas to  Kepco Philippines’s 1,200-MW Ilijan combined-cycle plant and the 1,000-MW Santa Rita and 500-MW San Lorenzo natural-gas plants of First Gas, a subsidiary of the Lopezes’ First Gen Corp. These gas plants, in turn, supply about 45 percent of Meralco’s power requirement.

The Malampaya gas facility accounts for 40 percent of Luzon grid’s requirements. To be continued

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