Monday, August 03, 2015

Energy Econ 40, DOE Circular No. DC2015-06-0008

The Department of Energy (DOE) issued Circular No. DC2015-06-0008, Mandating All Distribution Utilities to undergo CSP) in securing PSA, dated June 11, 2015 and signed by resigned DOE Sec. Carlos Jericho "Icot" Petilla.

So all Distribution Utilities (DUs) in the country would now have to go through competitive bidding in securing their power supply contracts, abandon the old and existing bilateral supply contracts. A third person/party shall also be appointed by the DOE/ERC, and NEA to facilitate the bidding process.

I think it  is a reaction to (a) complaints of "sweetheart deals" between some DUs and electric coops like Meralco, and some power generation companies. and (b) DUs which have their own power generating plants too, making the other gencos that are not affiliated or controlled by the DUs at a disadvantage. Say Meralco  or Batangas Electric Coop or Cagayan Electric Coop also own a big power plant/s. That DU will naturally prioritize getting power from its own genco even if the price is higher than the other independent power producers (IPPs).. And that means higher electricity prices for the pubic but greater revenues/profit for the DU + genco partner.

Here is an example, I took from the DOE website. I am not sure if Isabela Power Corp. is also owned or affiliated with Isabela Electric Cooperative.

Thus, the DOE attempts to protect the public from further high electricity prices. But the DUs can also reason out that RA 9513 or the RE Act of 2008 also forces them to buy from more expensive renewables with guaranteed prices via feed in tariff (FIT). So why would the DOE now prevent them from prioritizing buying from their partner or DU-owned power plant/s?

That is why I do not support the RE act and the mandatory, forcible dispatch by the NGCP of power from new renewables like wind and solar because it sets a precedent, forcing DUs to buy from expensive power sources.

Although these suspicions have some valid grounds, the main problem of course is the geographical monopoly power of DUs and electric coops. Electricity distribution is among the "public utilities" that the PH Constitution says should be in  the hands of majority or fully Filipino hands and capital. By virtue of their being geographical monopolies via the Constitution  and Congressional franchise law, abuse of power can happen anytime. Hence, another reason why the PH constitution  should be amended to break this type of monopolies. Government should get  out creating monopolies regardless of bleeding heart arguments.

Meanwhile, the Energy Policy and Development Program (EPDP) will hold this forum on Friday, August 7.  

The speakers will be DOE OIC Secretary Zenaida Y. Monsada, Prof. Raul V. Fabella and Prof. Ruperto P. Alonzo of the UP School of Economics (UPSE).  OIC Secretary Monsada will talk about the above Circular while  Profs.  Fabella and Alonzo will discuss broad elements of a market-based policy on power supply contracting by DUs.  Then a panel of reactors from the private sector.

It is a by-invite forum only, not posted in the EPDP website. I will attend.

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