Wishlist 2020: No brownouts and end of energy turf wars

By MYRNA M. VELASCO – January 4, 2020, 10:00 PM
from Manila Bulletin

The year 2019 glaringly showed an era of wrong energy forecasts especially during the summer months, indecisions, disagreements and globe-trotting for energy officials while the domestic energy scene had been palpably in chaos. The start of the next decade needs to be different – that is, if the country’s energy officials would really have to keep the lights on for the Filipinos in the long term.

cusi gatchalian devanadera

More than three years into this administration – yet the Department of Energy (DOE) leadership had not attracted a single major power plant investment (of baseload capacity scale) that would satiate the electricity needs of the country beyond the 2022-2023 timeframe when supply-demand would be at equilibrium again, especially in the economic center of Luzon grid. Since he assumed the department’s helm in 2016, Energy Secretary Alfonso G. Cusi had brandished about courting the Japanese, Chinese and even Russian investors into putting up new power projects in the Philippines. Had they come? Hmmm… No! And it seems there’s very little or no appetite for them to inject capital especially if these projects are not underpinned by power supply agreements (PSAs), as later on revealed by the Chinese to the energy chief.

We know what DOE
did last summer

Cusi’s favorite battering ram had been the media – with his claims that no major blackouts really happened during the election season in May or during the summer months. But we know it too well that Luzon grid had been plunged into series of “yellow” and “red alert” conditions – with episodes of rolling brownouts from April to June pummeling various parts of the country.
Unfortunately, he doesn’t like that kind of candor, but that had not been a problem? Ha?! Certainly, it was – because there were Filipinos gnashing their teeth while sweating into summer heat; and the strained and catastrophic stresses in power supply also manifested later as spikes in their electric bills.

Caught by his own words, Cusi asserted this during a Senate investigation on the power outages: “The brownouts experienced by electricity consumers in certain parts of Luzon are deeply regrettable, and we apologized for the inconvenience caused.”

As early as March, DOE officials already came forth assuring that summer electricity supply will be sufficient and that the power system will not encounter problems. But less than a week after that announcement – it had fallen flat into their faces that Luzon grid had to experience red alert or rolling power interruptions – or the dreaded brownouts that all Filipinos could relate to. The media asked about probabilities of forced outages on power plants – and the DOE said it shouldn’t be a problem because based on their historical data, that was just hovering at more than 300 megawatts on cumulative basis annually. Then boom – more than 1,000 up to 3,000MW of power supply were being taken out simultaneously from the system due to combination of maintenance shutdowns and the simultaneous forced outages of power plants.
The next scene had been all too familiar: Congressional investigations on why these power plants (primarily new and older fleets of coal plants) had all been suffering from tube leaks (a dilemma which is actually never heard of or not being encountered in power systems of other countries).

When the series of “yellow” and “red alert” conditions started and were being reported, Senate committee on energy Chairman Sherwin T. Gatchalian blamed the media for being the harbinger of bad news. He was all too confident in saying “media lang ang nagsasabi nyan,” but when problems became too apparent for him that the DOE actually forecasted wrongly, he felt betrayed for being fed by energy officials with “fake news.” The lawmaker led the joint Congressional investigations on the summer brownouts and the strained supply or lack of reserves in the power system – yet following series of hearings, no outcome or resolution had been made public. If truth be told, Congress has an oversight role over the energy agencies, hence, it is Gatchalian’s job to ensure that he can rise smarter and he can generate more solid data as basis for projections especially when caveats are buried or mangled – similar to what the previous Senate energy committee leaderships had done, and for him not just walking into a wavering line and blindly relying on DOE’s figures and assumptions – and he must be sensible enough to strip out wrong information being fed to him.

The Philippine Competition Commission (PCC) and the Energy Regulatory Commission (ERC) also joined the fray – with these two regulatory agencies even giving pronouncements that they will look into possible ‘collusive acts’ of the power plant owners and operators. Yet when the issue died down, probe efforts also retreated into oblivion. In fact until now, the ERC has not even advanced into public hearings on the 2013 collusion case against power plant owners and operators – despite the fact that six long years already passed.

With these incidents practically wanting to get out of the darkness, Cusi is at least assuring that summer 2020 will be different – that as early as now, he’s already making sure that power utilities like Manila Electric Company (Meralco) must guarantee that electricity supply will be sufficient and reliable when scorching weather temperatures would kick in. “What we are prioritizing right now is how to address the increased demand in the coming months,” the energy chief said, with him emphasizing that it will be the distribution utilities that shall be contracting fully on their peak demand for summer.

But lest Cusi forgets, it’s the power plants that conked out and had plunged the system into supply insecurity and power outages in the last summer. Into the longer term, the energy chief has even bigger dilemmas of ensuring long term power supply – with no new committed power projects in the DOE list that he can brag about for now. He has just more than two years to make certain that those investment-dollars will really flow soon – and not later. And it’s also high time to see if Cusi’s obsession with nuclear power and his proposed CSP scheme for DUs would really guarantee the country that there will be light at the end of the tunnel – and to prove to the industry that his approach is policy-prescriptive and not just captivated by “special” or favored interests.

ERC-DOE turf war

If investors in the energy sector feel that they’re like being spun in a whirlpool and wading through dense tables – that is owing to facts that they really are, and that’s because of the never-ending turf war between the DOE and the ERC. And sad to say, these do not even delve with debates over substantive and intellectual paradigms or bold legal norms with clear focal points, but more on which agency shall have more relevance over certain policy structures. The Electric Power Industry Reform Act (EPIRA) had clearly demarcated the policy-making role of the DOE in the deregulated power industry; while the ERC is the regulator with rule-making and quasi-legislative functions over certain dictums and reforms in the sector.

But Cusi and ERC Chairperson Agnes Devanadera can’t seem to have full and clear grasps of what they’re supposed to deliver and act on for their respective roles. Disagreements and narrowness of perspectives range over policy and regulation issues focusing on: the Retail Competition and Open Access (RCOA) policy; the Competitive Selection Process (CSP) on the power supply contracting for distribution utilities; the net metering program for renewable energy (RE); and even the concerns for the setting up of the reserve market and the Wholesale Electricity Spot Market (WESM) in Mindanao, just to name a few.

For the RCOA or that edict which gives electricity consumers the choice to contract for their own power supply, the DOE already laid down policy bringing down threshold level to 750 kilowatts (on voluntary basis), but most of the industry players are stuck with not getting renewals or approvals of their retail electricity supplier (RES) licenses because the ERC can’t render decisions on them. Devanadera argued they have their hands tied because of the pending temporary restraining order (TRO) of the Supreme Court on the RCOA rules, although in her latest pronouncement, she asserted that they will issue a resolution soon to address the issue of the expired RES licenses.

On the CSP, the two agencies can’t seem to agree on sending representatives during the PSA auctions of the DUs, with the ERC chief noting that they can’t adhere to that arrangement because it might eventually affect ERC’s decision-making processes on the PSA applications. But while they are on that scrimmage, the DOE and ERC had wittingly or unwittingly held captive for some time the filing of PSA applications of the generation companies (GenCos) that won supply contracts for the delivery of brownfield capacity to Meralco starting December 2019.

The net metering program, which is intended for “pro-sumers” (or the consumers generating their own electricity supply and could potentially inject their excess capacity to the grid) – and while that is a policy rooted in the best of intentions, the DOE and ERC want their own versions of rules and policies; hence, investors and consumers don’t seem to know where they stand at this point.

If the turf war of these two agencies would not end at the start of this decade, one can only guess how longer will the needed policy reforms be delayed further – just because no light bulb can seem to shine brighter in a room and no one wants to admit culpability.