* This is my article in BusinessWorld last Wednesday.
See also:
BWorld 135, On reducing the distribution system loss, June 9, 2017
BWorld 138, PPP vs ODA, Part 2, June 21, 2017
BWorld 139, State central planning vs household decentralized planning, June 22, 2017
BWorld 140, Mineral rent and taxation, June 23, 2017
This is a follow up to a previous piece entitled, “Rule
of law in Distribution system loss cap (June 7).” This sequel is prompted by
three recent developments: (a) “NEA seeks expanded authority over electricity
distributors (BusinessWorld, June 20),” (b) “DoE official backs NEA control
over power distributors (BusinessWorld, June 21),” and (c) public hearing early
this month by the Energy Regulatory Commission (ERC) to reduce the system loss
cap of all distribution utilities (DUs).
The ERC plans to allow higher cap (maximum rate of system
loss) for electric cooperatives (ECs) compared to private DUs.
In particular, the ERC plan is to impose a technical loss
cap of 3.25% to 7.0% for three clusters of ECs but only 2.75% cap for private
DUs and a non-technical loss cap of 4.5% of energy input for all ECs but only
1.25% cap for private DUs.
The message is that the proposed new ERC regulation is to
favor ECs, all under the supervision of the National Electrification
Administration (NEA), which has the effect of allowing them to incur higher
wastes that can be passed on to electricity consumers while forcing private DUs
to spend more on higher capex so that their system losses are reduced to the
barest minimum.
The NEA and the various provincial ECs are not exactly
doing well in consistently reducing the distribution system loss and raising
the overall electrification rate in the country.
As of 2013, only 87.5% of all households in the country
have electricity, and not all of them have 24/7 electricity, many still suffer
from frequent “Earth Hours” -- that is to say power outages -- daily. (See
table.)
The Philippines’ archipelagic geography is a contributor
of course for the rather low electrification rate as many households in far
away islands are off-grid and rely on generation sets administered by
Napocor-SPUG and small private electricity sellers. More off-grid areas are now
using solar.
Still, the absence of 24/7 electricity in many areas
covered by ECs as administered by NEA is a problem. When there are frequent
brownouts, people use two things: candles and generation sets. Candles are
among the major causes of fires in houses and communities while gensets are
noisy and are running on more expensive fuel, diesel oil.
The Philippines’ low electricity generation compared to
its neighbors in the region (column 4 of the table) is a result of combination
of many factors, like the huge bureaucracies face by generation companies
putting up new power plants, and rigidities in the electricity distribution
system.
Protecting the electricity consumers via lower
distribution charge, lower system loss charge, and lower incidence of brownouts
can be done via the following measures.
One, both the ERC and the NEA should identify which are
the most inefficient, lowest-rating ECs or DUs, push them to be corporatized
(not exactly “privatized” because ECs are already private entities). These
agencies, in turn, should serve notice to these ECs that if they fail to make
their operations more efficient, then they will be corporatized. With these
measures, these ECs will be forced to improve their systems loss, collection
efficiency, employee-customer ratio, etc.
Two, the government should remove differences in caps of
systems losses between DUs and ECs. The ERC has to determine the increase in
rates so that DUs can comply with their systems loss cap since they need to put
up more expensive equipment to decrease technical systems loss. Having a
different system loss cap for ECs and DUs means the ERC will not exactly be
protecting the consumers but more of protecting ECs so that their inefficient
if not outright wasteful operations are tolerated and rewarded with higher
profit.
Three, NEA should not aspire to supervise all DUs
including private corporations. It is not exactly good at instilling financial
discipline on all ECs as a number of them are inefficient and therefore lose
money while charging high costs to their consumers (See “NEA offers P1.7-B loan
window for distressed power cooperatives,” BusinessWorld, April 12). NEA in
fact should step back and give more supervisory functions to the Securities and
Exchange Commission (SEC) via ECs that were corporatized. After all, the SEC
has more transparent, more universal corporate rules than NEA.
Bienvenido S. Oplas, Jr. is a Fellow of SEANET and
President of Minimal Government Thinkers. Both are members of Economic Freedom
Network (EFN) Asia.
--------------
See also:
BWorld 135, On reducing the distribution system loss, June 9, 2017
BWorld 138, PPP vs ODA, Part 2, June 21, 2017
BWorld 139, State central planning vs household decentralized planning, June 22, 2017
BWorld 140, Mineral rent and taxation, June 23, 2017
No comments:
Post a Comment