Malacañang readies power crisis move

September 12, 2014 at 14:07

PRESIDENT Benigno S.C. Aquino III will invoke the power crisis provision of the Electric Power Industry Reform Act of 2001 (EPIRA) to authorize government to contract additional power supply in the face of a looming shortage in Luzon next year.

“I am told that the worst-case scenario even involves a shortage of around a 1,000 MW,” Mr. Aquino said in his speech during the ceremonial launch of a power project in Makati City yesterday.

Mr. Aquino said one current measure — encouraging more participants in the interruptible load program (ILP) — has been found insufficient.

“To be more efficient and impactful [sic] in our efforts, very soon, we will formally ask Congress for a joint resolution that will authorize the national government to contract additional generating capacity to address the 300-MW projected deficit…,” Mr. Aquino said.

He said the Luzon grid will also need another 300 MW in reserves.

EPIRA’s Section 71 states that “[u]pon the determination by the President… of an imminent shortage of the supply of electricity, Congress may authorize, through a joint resolution, the establishment of additional generating capacity under such terms and conditions as it may approve.”

Communications Secretary Herminio B. Coloma, Jr. confirmed Mr. Aquino will invoke the law’s power crisis provision. “The law stated in very clear terms that the President may do what he said he will do in order to address a shortage in supply,” he said in a briefing.

Energy Secretary Carlos Jericho L. Petilla, who recommended this step in July, told reporters that contracting more supply will be the task of state-owned Power Sector Assets and Liabilities Management Corp. (PSALM).

Latest data show there will be a supply deficit around 285 MW by summer, said Mr. Petilla, adding that the grid still needs “a reasonable reserve of another 300 MW.”

“Invoking Section 71 and issuance of the resolution should be done within the month so that PSALM can already sign contracts with suppliers,” he said. “Funds can come either from PSALM or Malampaya fund, but Congress can discuss that and funding scheme should be approved by the Department of Finance.”

Mr. Petilla said modular generating capacity can be operational within four months of contract signing. “But December will be too late. We hope that we can move forward this September,” he said, adding that standards for suppliers include “cheapest price, shortest contract term and reliability.”

The fact Luzon itself is now reeling from unstable power supply — and not just the Visayas and Mindanao — has underlined a key investor worry. The Japan International Cooperation Agency has estimated that the National Capital Region, Central Luzon and the Cavite-Laguna-Batangas-Rizal-Quezon area combined accounts for 37% of the nation’s population and 62% of gross domestic product (GDP), with Metro Manila alone contributing 36% to GDP.

MIXED RECEPTION
Malacañang found support among lawmakers and businessmen, though others opposed the step as excessive.

Oriental Mindoro Rep. Reynaldo V. Umali (2nd District), chairman of the House Committee on Energy, said: “We will support such a move but the parameters… need to be defined.”

“I think it (release of resolution) will have to be September; if not, by the latest, October. It will be hard to meet that but there are ways to facilitate this,” he said on the sidelines of a meeting of the Joint Congressional Power Commission’s House panel.

The House of Representatives will be conducting budget deliberations in the next two weeks. As a rule, no other measure can be taken up at the plenary. The chamber is set to hold a three-week break from Sept. 27 to Oct. 19.

His counterpart, Senator Sergio R. Osmeña III, said the Senate “will wait for the declaration of an imminent electricity shortage and request to Congress for authorization to establish additional generating capacity.”

“The Senate Committee on Energy will conduct hearings to determine what is needed and doable and reasonably priced.”

Management Association of the Philippines President Gregorio S. Navarro backed the move, recalling: “I think the President has said that we’d rather have it and not use it, than later need it but not have it… I agree.”

John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines, said businesses will support the move to invoke Section 71, but clarified “there are other actions that should be taken in parallel.” These include raising the price cap of the Wholesale Electricity Spot Market “to encourage peaking plants to operate” and “to maximize the potential of ILP.”

Federation of Philippine Industries President Jesus L. Arranza said his group favors such additional powers to the President, while Philippine Chamber of Commerce and Industry President Alfredo M. Yao said: “We, the private sectors, are in agreement with the President for the government to contract the needed capacity.”

But the European Chamber Commerce of the Philippines (ECCP) said measures could be “very costly.”

“We still have the opinion that there are other options to avert a power crisis,” said ECCP Executive Director Henry J. Schumacher, citing options like energy saving, using energy-efficient lighting and ILP which could solve the problem if successfully implemented.

“Emergency powers on electricity have led to very costly solutions in the past and should be avoided,” he added, noting the Philippines has gone through “emergency short-term purchases under previous presidents and they turned out to be expensive — further burdening industry and Juan dela Cruz.”

Makati Business Club Executive Director Peter Angelo V. Perfecto questioned the move, saying his group has been working closely with the government to help increase ILP commitments. “We believe that emergency powers should only be a last resort,” Mr. Perfecto said. “Have we truly exhausted all efforts?”

In his speech, Mr. Aquino said the government has been pushing the ILP, which allows big consumers to run their own generating sets to ease power demand in exchange for compensation. “But this is a voluntary program, and private companies will have their own, valid reasons to choose to participate or not in this venture,” said Mr. Aquino.

He said ILP is estimated to yield 142 MW, but dependable output is just 71 MW. “Of course 71 megawatts is significant, but is obviously still very far from addressing even the best-case scenario of having a minimum power deficiency by next year.”

“Let me assure… the private sector: government intervention will be focused solely on addressing the projected shortage. We have no plans of intervening to distort the market or complicate the situation even further.” — with inputs from Melissa Luz T. Lopez