Thursday, June 27, 2019

Czech and Russian readers of this blog

This blog normally gets around 350 pageviews/day, but since last April, went up to about 550/day. Yesterday was different, my blog got 5,616 views in one day. From 9am to 3pm it was getting around 900/hour.


Very curious, I checked where the readers and audience came from... Czechoslovakia. Wow, thank you guys.

Few hundred Russians also checked in.

Below, audience by country. Past month, mostly from Russia. But overall, since stats were collected by blogger for this site from July 2010, most readers are from the US. Followed by readers from the Philippines, then Russia and other Europeans.

I hardly write about Russia and I wonder why this blog has many readers from that country. Anyway, thank you guys out there.


Thank you, readers.

Sincerely,

Bienvenido "Nonoy" Oplas Jr.

Tuesday, June 25, 2019

BWorld 342, Rising welfarism, rising taxes

* My article today in BusinessWorld.




Among the factors given why President Duterte’s Senatorial bets won and shut out the opposition in the May 2019 Senatorial elections were: a. high popularity of the President; b. high visibility of his build-build-build programs; c. reduction in inflation in 2019; and, d. failure of the opposition to convince voters that they are the “right group to lead the charge.”

These were contained in the articles written by fellow columnists in BusinessWorld, particularly:

1. “Understanding President Duterte’s approval ratings” by Andrew J. Masigan (June 04).

2. “Why the opposition lost in the 2019 Midterm (Senatorial) Elections” by Diana J. Mendoza (June 11).

3. “Why President Duterte’s senate bets won” by Calixto V. Chikiamco (June 17).

4. “Vox populi” by Romeo L. Bernardo (June 24).
  
I think what was missing among those analyses is that the Duterte administration has expanded welfarism and endless subsidies to the public regardless of their impact on the budget deficit, public borrowings, and need for more taxes. In short, Duterte has bribed the voters with more freebies on top of existing ones to get more votes.

Consider what the administration has expanded so far:

1. Free tuition in all state universities and colleges (SUCs), RA 10931 (Aug. 3, 2017)

2. Free irrigation law, RA 10969 (Feb. 2, 2018)

3. Free feeding program, RA 11037 (June 20, 2018)

4. Expanded/free nutrition program, RA 11148 (Nov. 29, 2018)

5. Free/expanded PhilHealth, RA 11223 (Feb. 20, 2019)

6. Free/expanded PhilHealth for persons with disabilities (PWDs), RA 11228 (Feb. 22, 2019)

7. Magna Carta for the Poor (more freebies and mandates), RA 11291 (April 12, 2019)

8. Institutionalizing 4Ps (expanded CCT), RA 11310 (April 17, 2019)

9. Sagip-Saka law (more freebies to farmers), RA 11321 (April 17, 2019).

Freebies are not really free — they are costly to the rest of the taxpayers. The numbers would show that compared to previous two administrations, the rise in public debt stock was very high under the current administration, average of P588 billion/year vs. P223 billion/year under the Aquino, and P265 billion/year under the Arroyo administrations. (See Table 1.)
  


The Philippines’ public debt/GDP ratio has been steadily declining, from 74% in 2004, 55% in 2009, to only 42% in 2016. Then the Duterte administration came and the decline has stopped and steadied at 42%. (See Table 2)
  


More welfarism, subsidies, and freebies with no timetable means more waste and social inefficiencies. Even the non-poor (like many college students in SUCs like the University of the Philippines) were considered poor and hence, became entitled to more freebies.

We need less welfarism and freebies. We instead need to cut taxes and regulations, encourage more entrepreneurship and job generation by the private sector. Then state dependence will decline and more self-reliant citizens will flourish.
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Sunday, June 23, 2019

13th ICCC, Washington DC

Heartland Institute will hold the 13th International Conference on Climate Change (ICCC-13) this coming July 25, 2019, at Trump International Hotel in Washington DC, USA. Lots of interesting, brilliant speakers.


I have attended the 2nd ICCC in New York, March 2009, and the 4th ICCC in Chicago, May 2010. Those two big and very technical conferences solidified my skepticism of the "man-made" or anthropogenic climate change (CC) agenda and drama.

Nikki Comerford of Heartland asked me if Minimal Government Thinkers would like to be among the minor co-sponsors, I said Yes. I will help promote the ICCC here in the Philippines. Thank you for the invite.
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See also:
9th ICCC, Las Vegas, July 04, 2014 
Climate Tricks 68, High demand for climate money, June 03, 2018

Saturday, June 22, 2019

Energy 127, Power underwhelming: Why are there power outages?

This is a special report by BusinessWorld last June 17 where I was one of the resource persons they have interviewed. Enjoy.



By Mark T. Amoguis
Senior Researcher

IN THE PHILIPPINES, one would have to get used to brownouts, or the drop in voltage in an electrical power supply system. Whether or not it is intentional, these outages have wide-ranging effects on the economy: households would experience no electricity for a few minutes or even for hours, causing great inconvenience; businesses would incur higher costs by way of lost revenue and reduced productivity; and investors would be hesitant to do business, leading to reduced investments.

The Luzon grid has had episodes of “yellow” alerts since March due to high electricity demand outstripping supply as well as unscheduled outages of power plants. The first yellow alert, which occurred on March 5, saw peak demand for the day reaching 9,491 megawatts (MW) against the grid’s available capacity of 10,115 MW with an operating margin at just 624 MW — falling short of the required contingency reserve of 647 MW.

Thinning reserves reached a low when the National Grid Corporation of the Philippines (NGCP) declared on April 10 its first “red” alert notice as power demand in Luzon outstripped reserves following unscheduled outages.

NGCP, which is the private firm that operates, maintains, and develops the country’s transmission network, issues these alerts whenever energy reserves are inadequate. The grid operator has several levels of reserve energy that it uses to stabilize the fluctuating power demanded from the electricity grid.

One, there is a “regulating” reserve, which is the standard operating requirement to maintain a balance between available capacity and system demand. This is ideally equivalent to around four percent of peak demand.

On top of the regulating reserve, the NGCP maintains a “contingency” reserve that it allocates to immediately cover the loss in supply when the largest power generating unit online — usually at around 600 MW — fails to deliver.

Lastly, the operator also maintains a “dispatchable” reserve that is readily available to replenish lost contingency reserve.

A yellow alert notice is issued when the dispatchable reserve is fully spent and the system is already tapping into its contingency reserve. A red alert notice means both dispatchable and contingency reserves are gone.

Based on NGCP notices, there were seven yellow alerts and seven red alerts in April alone. In May, there were 13 yellow alerts and two red alerts.

This number far outstripped the number of yellow alerts in the previous years, according to consumer advocacy group CitizenWatch Philippines’ “PowerPlant Watch.”

“Comparing this to previous years, we had only seven instances of yellow alerts in 2018 and only three during the same period in 2017,” wrote Hannah Viola, convenor of CitizenWatch and energy fellow at Stratbase ADR Institute, in her column in BusinessWorld titled “A Call for Energy Transparency” published on April 9.

Bienvenido S. Oplas, Jr., columnist for BusinessWorld, economist, and president of Minimal Government Thinkers (MGT), noted in an e-mail interview the Philippines’ power capacity as being “far out from many neighbors in East Asia.”

Citing data from the Central Intelligence Agency’s World Factbook, Mr. Oplas said the Philippines, which has a population of at least 100 million, has a lower power capacity per person compared to neighboring countries such as those of Vietnam, Malaysia, and Laos at 2.1 times, 4.9 times, and 4.9 times, respectively.

LACK OF POWER PLANTS, DE-RATINGS
Industry players and analysts said this scenario could have been avoided had there been more power plants available to compensate for those undergoing unscheduled shutdowns or maintenance.

Data from the Department of Energy (DoE) showed there are 126 power plants in Luzon grid alone as of end-2018 with installed and dependable capacities of 16,133.06 MW and 14,641.76 MW, respectively.

However, results of a study from the Energy Regulatory Commission (ERC) released in May showed that up to 72% of these power plants are at least 16 years or older, which may have contributed to the grid’s power deficiency this year.

“Older plants require more frequent maintenance and repairs and may be more prone to unscheduled outages,” Lawrence S. Fernandez, Manila Electric Co. (Meralco) vice-president and head of Utility Economics, said in an e-mail interview.

DoE Undersecretary Felix William B. Fuentebella said in a separate e-mail interview that the occurrence of unplanned and forced outages were considered in the DoE’s assessment of the 2019 summer supply and demand outlook as well as the potential impact of El NiƱo.

“However, the simultaneous breakdowns were not expected in spite of the preparation and availability of the interruptible load program during the red alert statuses, which resulted in manual load drops,” Mr. Fuentebella said, adding that the delays in the entry of committed power plants “contributed to the limited capacities” in the Luzon grid.

Meralco’s Mr. Fernandez said they have noticed the demand for power has been growing faster in the rest of Luzon compared to the Meralco service area.

“However, it was really the unplanned and forced power plant outages and the delayed entry of new generation capacity that caused the alerts this year,” he said. “This thinning power supply, paired with rising power demand, combine to create a less than ideal power situation.”

“I think the unforeseen factor there was the ‘old plants’ factor; just many of them went on unscheduled shutdowns,” MGT’s Mr. Oplas said.

A closer look at available data showed plants currently online include those built way back in the 1940s and 1950s — plants whose efficiency has eroded through the years.

Two of these plants are located in Luzon — the Caliraya dam-type hydroelectric power plant (HEPP) and the Botocon run-of-river type HEPP, both located in Lumban, Laguna. These plants were commissioned in the early to mid-1940s.

Adding to the forced and unforced outages, the lack of supply is also attributed to plant de-ratings, which happens when a power plant is operating at less than its maximum capability in order to prolong its life.

“The current situation of our power plants and the continuously rising demand suggest that it would be beneficial to our grid if new capacities are built so more supply and reserves are available,” said Meralco’s Mr. Fernandez.

For MGT’s Mr. Oplas, the lack of new peaking power plants being built is also a concern. These are power plants that are generally run when there is high demand or only during peak times.

The economist explained there is little to no incentive in putting up these peaking plants as they can only sell through the Wholesale Electricity Spot Market (WESM), which has installed price caps to protect consumers from excessive price spikes.

“There should be incentives for developers of peaking plants that may be idle for nine to ten months per year, then running only for a few hours per day on hot months… Even if they charge high, say five to ten times the average WESM clearing price on certain hours, it’s still cheaper compared to having massive blackouts, or the poor buying candles (and have more fires) or the middle class and rich buying more generator sets (and have more air, noise pollution),” he said.

“When demand is high during hot months, baseload and mid-merit plants cannot deliver extra,” he explained.

Joe R. Zaldarriaga, Meralco assistant vice-president and public information office head, said the government and power plant operators should look into the causes behind these power plant outages and address them accordingly.

“It would be best to explore ways of better operating, maintaining and sustaining the various power plants and keep them running efficiently. The government should also continue identifying projects of national significance, like large power plants and transmission facilities, and help fast-track their construction and operations,” he said in an e-mail.

DELAY IN POWER SUPPLY DEALS
According to DoE’s Mr. Fuentebella, common hurdles faced by proponents in pursuing new power projects include “licensing/permitting challenges” as well as access to financial packages.

For his part, MGT’s Mr. Oplas noted the “thick, wide bureaucracies” in the local and national levels when applying for a power plant project.

“[T]he whole thing would require 359 government signatures, involving 74 agencies and bureaus, covering 43 different licenses and contracts,” Mr. Oplas explained, citing a September 2018 PowerPoint presentation of Senator Sherwin T. Gatchalian, who chaired the Senate’s energy committee in the 17th Congress.

Meralco’s Mr. Zaldarriaga said for power projects, long-term planning is crucial as the construction of a power plant, which includes the permitting process takes more than five years to achieve.

Business groups have been calling for the construction of power plants to ensure ample long-term supply of electricity. However, hampering efforts is the delay in the approval of power supply agreements (PSA), which is a bilateral agreement between a generation company and a distribution utility for the purchase and supply of power.

A PSA is typically a critical milestone for power projects as these are signed before construction of a power plant starts to reassure banks that the plant will have ready buyers for its output.

The Supreme Court (SC) ruled last month that all PSAs submitted by distribution utilities to the ERC on or after June 30, 2015, must undergo what is called a competitive selection process (CSP).

CSP requires contracts between power generation companies and distribution utilities to be subjected to price challengers, a process that is aimed at lowering electricity cost.

The decision affected seven PSA applications that were filed by Meralco that covered 3,551 MW. The contracts were signed on April 29, 2016, a day before the April 30, 2016 extended deadline set by the ERC.

The ERC promulgated CSP in November 2015 but had to restate its effectivity date to April 30, 2016 through a resolution issued in March 2016. It said the move was prompted by letter-inquiries from distribution utilities and generation companies assailing the legal implication of the CSP to existing power supply deals.

Meralco’s PSAs are with two subsidiaries of its unit Meralco Powergen Corp., which is constructing power plants under subsidiaries Atimonan One Energy, Inc., San Buenaventura Ltd. Co., and Redondo Peninsula Energy, Inc.

The Atimonan project, whose PSA was filed in 2016, consists of two ultra supercritical coal-fired power plants with a capacity of 600 MW each. It was originally expected to be completed by 2021, but has since faced several regulatory issues. The company now looks to complete the project by the fourth quarter of 2025.

Meralco also has a PSA with St. Raphael Power Generation Corp., its joint venture with Consunji-led Semirara Mining and Power Corp. Meralco is also seeking approval for PSAs with Central Luzon Premiere Power Corp., Mariveles Power Generation Corp., Panay Energy Development Corp., and Global Luzon Energy Development Corp.

The high court ruling is viewed as a mixed bag, according to the sources interviewed by BusinessWorld.

DoE’s Mr. Fuentebella said the ruling is a welcome development in the power industry.

“While ensuring transparency, competitiveness, and reasonableness of the power supply cost, it will provide an opportunity to enhance the power supply agreements between the generation companies and distribution utilities that will eventually redound to the benefits of the electricity consuming public,” Mr. Fuentebella said.

For MGT’s Mr. Oplas, it is more of a net negative as this will further delay the construction of power plants.

“It is now 2019 and [the] SC wants to backtrack CSP ruling to PSAs made four years ago? ERC and SC should focus on enforcing CSP only to new PSAs,” the economist said.

Nevertheless, Meralco has said that they will respect the SC’s decision.

“Meralco respects, honors and abides by the SC ruling on [the CSP]. Moving forward, we will conduct CSP to ensure availability of quality, stable and cost-competitive supply in the country,” Mr. Zaldarriaga said.

“Meralco PowerGen, through its subsidiaries, will also work with all the concerned parties and agencies to ensure that planned power plants progress and to have these up and running as soon as possible,” he added.

So far, there are 19 private sector-initiated power plant projects in Luzon targeted to go online between this year and 2023, data from the Energy department as of end-2018 showed. These facilities are expected to have a combined committed capacity of 4,774.8 MW.


Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls.
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Friday, June 21, 2019

BWorld 341, MORE investment liberalization needed

* Here's my article in BusinessWorld yesterday, June 20, 2019.


Four reports in BusinessWorld last week seem to show a confusing investment environment of the Philippines:

1. “Foreign direct investments fall in March” (June 11).
2. “Investment pledges climb 40% in January-May” (June 12).
3. “Reforms eyed to boost FDI inflows” (June 13).
4. “Foreign funds to continue fleeing PHL stock market” (June 13).

So actual foreign direct investment (FDI) in early 2019 has fallen while pledges of FDIs at the Board of Investments (BoI) were up.

I checked the United Nations Conference on Trade and Development (UNCTAD) World Investment Report (WIR) 2019 to see trends in FDI inflows. The following trends are emerging over the past five years: (a) Global FDIs are declining; (b) FDIs in China, HK, and Singapore are flatlining; (c) FDIs in Vietnam, Thailand, Taiwan, Myanmar, Cambodia, Laos are rising; (d) FDIs in the Philippines are up-and-down (see table).


Japan, S. Korea, and Taiwan are sources or origins of FDIs, not destinations of FDIs. The Philippines is still far from becoming a net exporter of FDI.

During the UP School of Economics Alumni Association (UPSEAA) lecture held on June 14 at the Ark by UnionBank, InLife building, on Ayala Avenue, the lone speaker was Department of Trade and Industry (DTI) Secretary Ramon Lopez, himself a fellow alumnus. Sec. Lopez mentioned that among the promising areas for FDIs and top 12 investment priorities in the Philippines is the shipbuilding and ship repair (SBSR) sub-sector. His data showed that we are currently the 5th largest ship producer in the world based on gross tons, with nearly 2 million tons built in 2017. There are also 119 shipyards nationwide. As a regular passenger of roll-on roll-off (RoRo) boats in my annual local travels to Mindoro and Panay, Negros islands, this is good news to me. More big and modern boats, more competing shipping lines, more options for passengers.

Sec. Lopez also mentioned on several occasions the need to liberalize the Public Service Act (PSA), amend the Foreign Investments Act (FIA), and Foreign Investment Negative List (FINL) to further attract more FDIs into the country. True, the transportation sector (land, sea, and air) should be opened up to more foreign capital.

Another report in BusinessWorld titled “Japanese businesses cite martial law, lack of direct flights as main Mindanao issues” (June 13) corroborates this necessity. Some Japanese investors want to develop a flower farm in Mindanao and transport the flowers, some of which are “very expensive,” to Japan but there are not enough airlines that serve this route.

The market-oriented reforms for efficiency (MORE) that the incoming Congress this July should prioritize are PSA, FIA, and FINL liberalization and related measures. These will greatly help address the investment gap, which will create more jobs and expand more choices in services for passengers and consumers.
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US-Iran conflict

This is not good. Oil prices already declining to $51 a barrel, then Iran bombed huge oil tankers, prices went up to $53+, later back to $51. Yesterday Iran shot down a US military drone, now we are back at $57.



In the US-CN trade war, Trump haters attack "Trump tariff/protectionism" only, they do not attack, lambast "China taruff/protectionism."

In the US-Iran spat, Trump haters again would attack "Trump aggression" only, "Iran aggression" do not attack or lambast Iran.

Now see this lousy conspiracy theory, advanced by a HK-based Filipino friend:

“Iran is a peaceful country but the US wants to invade it to control the Middle East completely.”

What? Iran bombed other countries’ oil tankers, Iran bombed the US drone, they explicitly admitted the latter, now blame the US? Lousy.

Another friend, Emil Dapogs, opined it correctly:

“US wants to invade the Middle East has been a long-standing accusation that lost its legs. The US wants the Middle East's oil is another farce. The US has its own oil deposits bigger than Saudi Arabia's!”

Very true. The US wants the MidEast to be rich, wealthy, so the people there can buy US cars, agri products, gadgets, various services, etc. US won't want to have more poor countries that will require more subsidies from its taxpayers to develop again.

Free Trade 68, China is non-protectionist? Only Trump is protectionist?

The China communist government's propaganda is spreading spreading lots of fake news, like the following:
(1) They "own" all areas in the 9-dash line SCS/WPS, 
(2) Their sponsored (but failed) #extraditionbill is good for HK people, 
(3) They are non-protectionist, low-tariff economy and Trump "started the trade war" with high tariff, China simply retaliated. 

Lies. Dishonesty. Fake news. But somehow they are successful in distorting facts and many people (especially Trump-haters) seem to believe them esp. #3. But look at the numbers who are the real protectionists.




Now see this story for instance,

"Trump started the trade war by levying new taxes on $250 billion worth of Chinese exports. China retaliated both by increasing the duties Americans face..."

Garbage. Fake news. China is the real protectionist, since many decades ago, and former US Presidents Obama, Bush, Clinton, etc. did not push China hard enough on its high tariff, IPR stealing plus various non-tariff barriers (NTBs) policies.

Here's one reality about China,

China: The Perfect High-Tech Totalitarian State
by Tyler Durden  Thu, 06/20/2019 - 00:05
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Wednesday, June 19, 2019

BWorld 340, Solar para sa politika

* My column in BusinessWorld yesterday, June 18, 2019.


Among the records of the outgoing Congress is the legislation of a cronyist bill, the Solar Para sa Bayan Corp. (SPSBC) franchise. It is so unpopular that perhaps all other power developers and generation companies (gencos), both conventional and renewable energy (RE), perhaps all private distribution utilities (DUs) and electric cooperatives (ECs) in the country have opposed it.

Among the questionable, cronyist provisions of HB 8179 are the following:

One, it originally wanted a nationwide franchise in electricity distribution for unserved and underserved areas, later limited to 16 provinces plus certain cities and municipalities of Batangas and Quezon, for a total of 18 provinces. No other franchised DUs or ECs have this privilege.

Two, there is nothing significant in its power generation but it has a franchise while all other gencos including other RE developers do not have a franchise. SPSBC claims it is competitive yet it requires a Congressional franchise and a franchise by nature is a monopoly, anti-competitive.

Three, the Electric Power Industry Reform Act (EPIRA) of 2001 unbundled energy players into transmission, generation, distribution, and supply companies; SPSBC is a generation, distribution, and supply company rolled into one.

Surprisingly, the Department of Energy (DoE) and the Energy Regulatory Commission (ERC) did not raise strong opposition to the franchise bill. Perhaps the reason is that the mother of the majority owner of SPSBC is the Chairperson of the Senate Committee on Finance, which handles the budgetary appropriation of government agencies.
  
Four, a new insertion in the bicameral report — not in the original HB 8179 and seemingly just came out of thin air — expanded the definition of an “underserved area.” The Chairman of the Senate Committee on Energy, Senator Sherwin Gatchalian, gave an Objection Speech (June 3, 2019) to HB 8179 as amended by the Senate and argued that the bicameral report should not be ratified. His objection was based mainly on the said insertion, where underserved areas now include “where electricity services have been interrupted at least twelve (12) times in the twelve (12) months preceding the date of the determination that such area is underserved.”

Sen. Gatchalian cited two reasons why this insertion is wrong: (a) “There is no basis for the frequency of interruptions indicated in the bicameral report. Currently, the standard for the frequency of interruptions is determined by the ERC and is updated regularly… To legislate a regulatory parameter would tie the hands of the regulator…”, and (b) “there is no definition of the word ‘interruptions’ in the bicameral report… frequency interruptions are not only a function of the performance of the DU but also of power plant performance, availability of power supply, kind of power plant, and even calamities… to legislate a low and unfounded bar for an area to be considered underserved would be a disservice not only to the community but would be unfair to the franchised DU.”

The SPSBC franchise bill appealed to the gullible public because it somehow presented itself as a solar power company — and solar is cool; it helps “save the planet” while giving “cheap, reliable” power to the public.

Far out.

Even among the richest economies in the world which have wide solar farms — Germany, Italy, and Australia. among them — the contribution of solar to total electricity generation remains low. And many of our neighbors in East Asia like Hong Kong, Singapore, Indonesia, Malaysia, Vietnam, and Taiwan have zero or very small solar contribution to their power generation (see table).



The SPSBC franchise bill is a political project that favors a single newbie corporation. President Duterte should veto it. If he signs it into law, it will set a new precedent and pave the way for many other cronyist bills to be filed in the next three years. This will further weaken the EPIRA law and weaken the rule of law in the country.
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