Power development is a 3-legged tower

The development of the Philippines’ power supply and energy mix must be based on three equally important legs: sufficient power supply, lowest cost power, and environment-friendly power.

All three legs must be equally strengthened for a wholistic and sustainable power generation mix. If only one is upheld, the other two will be sacrificed, thus hurting the interests of both the consumers and the country.

Sufficient power supply. Surely the Philippines needs continuing additions to its power supply to meet the growing needs of our population and robust economy.

This requires the creation of an investment structure that will encourage new local and foreign private power generators to come in and the existing ones to expand and improve the efficiency of their power plants.

On the part of the government, it must establish an approval process that will facilitate the timely construction of additional power facilities. The Department of Energy (DOE) must provide policy direction on energy mix and the strategic locations for power development. The Board of Investments must provide incentives for this energy mix and locational objectives for new plants.

On the part of the distribution utility, especially Manila Electric Co., which controls 74 percent of the Luzon power market, it must provide equal and competitive access to its market to encourage more independent investors and consumer-protective “arms-length” power supply projects. This is the better path to power supply development, not monopolized self-dealing projects.

Lowest cost power. The hallmark of reducing power cost is subjecting it to truly competitive processes and the strategic blending of the energy mix where lower cost energy resources are harnessed if they are available.

If power cost is a consideration in Mindanao, authorities would rehabilitate Agus and supply Mindanao with 800 megawatts of cheap hydro power during the normal months at P3 per kilowatt hour and 400 mw during the dry summer months. The proposed coal power plants will supply the 1,000-mw balance of base load and intermediate power.

In Luzon, power consumers and the government are continually subjected to the specter of a power crisis. They are regularly warned of power shortage and brownouts so that they will be so scared that they will agree to “sweetheart” prices and negotiated power supply contracts. This was seen to work in the power crisis of the 1990s, when 12- to 18-hour blackouts occurred regularly.

The new Metro Pacific group that now controls 74 percent of the Luzon distribution market (6,500 mw) seems unabashed about monopolizing future power supplies through Meralco, PowerGen and its various partnerships. Thanks to Rule 11, Section 4 (b) of the implementing rules and regulations of the Epira (Electric Power Industry Reform Act). Truly independent power producers are reportedly being offered only 5-year contracts, and Meralco’s own projects, 20-25 years at negotiated sweetheart prices and terms.

The Meralco generation market is on its way to serious monopolization, market domination and unbridled cross-ownership, a very anticompetitive structure that is an affront to the open market and competitive power aspirations of the Epira. This does not bode well for consumers. We should be shaking in our boots.

If Meralco really wants additional power supply and cares to be faithful to its obligation to provide power at least cost to its customers as a public service utility, it should open its market and call for open competitive bidding by new power investors and truly independent power generators. It has not done so in the last 14 years.

Meralco’s announced 1,800 mw of new self-negotiated coal power projects will most likely be in the range of P5-P6 per kwh, instead of P3.60-P4.50 per kwh. And it would be P9 per kwh when it is down for maintenance.

The pronouncements of the DOE and the Energy Regulatory Commission that they are moving to require competitive bidding for power supply may be pyrrhic and too late to stop the Meralco market’s rampaging monopolization.

Environment-friendly power. Electric consumers have their hierarchy of needs. First, they want sufficient power. Under the torture or threat of heat, brownouts, and business interruption, they ask to be given power “even at a high price.” Soon after they get that, they complain when the power cost is high. Later, they begin to be concerned about environment-friendly power.

The private generators cannot be expected to put a high priority on environment-friendly power on their own. It is really up to the government, the DOE and the Department of Environment and Natural Resources, to provide the rules and encouragement for environment-friendly power. This ideal must find its way in an energy-mix strategy of the DOE and even in a locational strategy for future power plants. It should provide more impetus for natural gas, hydro, and renewable energy development.

The Philippines’ power development plan, or semblance of it, is so out of tune with the international clamor for climate-change projects.

Rehabilitating Agus-Pulangui is a cheaper way to gain 400 mw of carbon-neutral power instead of 400 mw of solar and wind that require heavy subsidies.

The 500 mw of grid competitive renewable energy technologies like mini-hydro and renewable energies that do not require feed-in tariff subsidies should be encouraged with an express lane to implementation.

A solid power development strategy needs to stand on these three legs, all of which must be established and balanced, or the country’s tower of power for consumers will be toppled.

David Celestra Tan is a certified public accountant, former power generation executive, and volunteer legislative assistant in writing the Epira. He is the founder and former president of the Philippine Independent Power Producers Association, and a coconvenor of the consumer group Matuwid na Singil sa Kuryente Consumer Alliance Inc.