* This is my article in BusinessWorld last Friday.
Source: WB, World Development Indicators, Database 2017.
See also:
Three news reports published by BusinessWorld during the
past few days indicated that the energy sector in the Philippines and its
several neighbors is becoming more efficient, market-oriented, and less
bureaucratic. These news articles were (1) “ERC declines to intervene in 4
Meralco power deals” (Sept. 20), “DoE says no plans to extend FiT for biomass,
river projects” (Sept. 26), and “Malaysia, Thailand, Laos to sign
energy-trading deal” (Sept. 26).
The first article says that the Energy Regulatory
Commission (ERC) is upholding its own rule to stop intervention after a
deadline for petition against any power supply agreement (PSA) has been met.
The second one says that the Department of Energy (DoE) will
not extend the feed in tariff (FiT) or guaranteed high price for renewables for
20 years, for undersubscribed biomass and run of river hydro power. This move
will protect electricity consumers from further high electricity prices.
The third story says that electricity trading in the
three countries mentioned will mean greater power stability and more price
competition among power producers. This is like expanding our Wholesale
Electricity Spot Market (WESM) from national to regional trading.
To add to this list of positive news, it has also been
reported that power transmission and distribution in the region have become
more efficient, cutting down on system losses.
Within a decade, the Philippines, for instance, has
managed to chop system losses from 12.9% to 9.4% of electricity output, an
efficiency gain of 3.5% (See table).
Based on the table, economies with low system losses have
high electricity consumption per capita, except Hong Kong. And vice versa,
countries with high system losses of at least 9% tend to have low per capita
electricity use.
And this implies that the technology and administrative
processes to bring down system losses are generally correlated with the wealth
and industrialization of an economy.
There are several attempts both in Congress and the ERC
to significantly reduce the distribution system loss by distribution utilities
(DUs).
The ERC Draft Rules intend to make high consideration if
not outright favoritism of many electric cooperatives (ECs) by giving them (a)
high technical loss (mainly conductor loss and no load loss) cap of 5.5-7.0%,
(b) high cap on nontechnical loss (illegal connection, direct theft, meter
error, billing irregularity) of 4.5%, total of 10-12.5% distribution system
loss that can be passed to consumers. In contrast, (c) private DUs will be
forced to have a low technical loss cap of only 2.75%, and low nontechnical
loss cap of only 1.25% or total of only 4% distribution system loss by private
DUs.
This is not a good plan for the following reasons.
One, it institutionalizes a double-standard. Favoring ECs
and allowing them to remain wasteful and pass the additional cost of high
system loss to the consumers vis-a-vis strict monitoring of private DUs and
disallowing them to pass high system losses charges to their consumers.
Two, it does not pressure or discipline the ECs and force
them to become more efficient in cutting their system losses. As a result, it
is not possible to bring down the system loss to the levels of Thailand,
Malaysia, China, Japan, Singapore if this attitude and policy is further
adopted.
Three, it does not push many inefficient ECs to be
corporatized, to behave like many private corporations that are forced by SEC
regulations to be more transparent.
Four, it remains silent on transmission system loss of
the sole grid operator, the National Grid Corp. of the Philippines (NGCP).
Government through the ERC should create rules that apply
to all players — ECs in the provinces and private DUs in big urban centers — no
exceptions or favoritism, and give consumers further reduction in overall
electricity prices.
Forcing both provincial ECs and private DUs to have low
system loss at uniform rates is consistent with enforcing the rule of law,
consistent with encouraging more competition, consistent with the spirit of
EPIRA law of 2001.
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See also:
BWorld 152, Cronyism in Renewable energy, gas sectors? September 23, 2017
BWorld 153, Property rights, trademarks and consumer protection, September 30, 2017
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