Showing posts with label Carlos Petilla. Show all posts
Showing posts with label Carlos Petilla. Show all posts

Tuesday, October 13, 2015

Energy 44, Position paper on DOE circular re mandatory CSP by DUs of their PSAs

The Department of Energy (DOE) conducted a public forum last week, October 06 at Intercon Hotel in Makati, for players and stakeholders in Luzon re its Circular mandating all distribution utilities (DUs) to undergo mandatory, obligatory competitive selection process (CSP) in securing their power supply agreements (PSA). 


The grand ballroom was overflowing with so many participants, from Luzon-based electric cooperatives and distribution utilities (DUs), power generation companies, NGOs and government agencies. DOE served buffet lunch at 12, program started at past 1pm.


This circular is weird and can raise suspicions regarding former DOE Sec. Carlos Jericho "Icot" Petilla, now a Senatorial candidate of the administration. He issued the circular last June 11, hide it completely from the public, then he resigned days after that. Then the draft Circular suddenly surfaced and was published in the papers June 30 or after nearly 3 weeks. 

Only then the DOE started limited consultations by July-August. This Department order or Circular is another mandatory, obligatory, coercive regulation from the government. I am not in favor of this circular of course. Currently, DUs get supply contract from generation companies (gencos), the Energy Regulatory Commission (ERC) as the government referee, as Third Party mandated by EPIRA, approves or raises questions, of the supply contract.


During the open forum, the first to ask question was David Tan of the Matuwid na Singil sa Kuryente (MSK), mainly an anti-Meralco NGO and lobby group. Then I was 2nd, and made a follow up comment minutes after.

Below is the position paper that I sent to the DOE and the ERC. It is posted in the DOE website, along with position papers by 29 other NGOs, gencos, DUs and individual.
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Suggestions and proposals on the IRR of DOE Circular No. DC2015-06-008, "Mandating all Distribution Utilities to undergo Competitive Selection Process (CSP) in securing Power Supply Agreements (PSA)”

By Bienvenido Oplas, Jr.
President, Minimal Government Thinkers, Inc., Makati City
http://funwithgovernment.blogspot.com/,  https://electricityasia.wordpress.com/
email: minimalgovernment@gmail.com
October 09, 2015

As I discussed verbally during the DOE-ERC public consultation on the subject at Intercon Hotel last Tuesday, October 06, 2015, may I reiterate the following suggestions for the IRR.

1. There should be a sunset provision, like

Section ___. Sunset Clause. The DOE and ERC shall conduct a study or commission a study on the Cost-Benefit analysis after one year of implementation, to see if the circular has indeed brought down the cost of electricity in the country or even contributed to higher electricity prices. If the benefits are smaller than the costs, the Circular should be withdrawn, or CSP will no longer be mandatory, through another Department Circular.

Rationale: We should compare (a) purported reduction in generation charge because of CSP vs. (b) cost of the Third Party as reflected in our monthly bill, other cost of distortion. If (a) < (b), then the circular should be withdrawn or abolished, or at least revised by the new DOE Sec., whoever he/she will be.

2. DOE and ERC should publish online the (a) identities of groups and their officials that apply to be accredited as Third Party, and (b) their projected fees to be added to the monthly electricity bill, before the DOE decides the winning group or party.

Rationale: There seems to be a strong lobby by certain groups to rush the implementation of the Circular, even if many questions remain unanswered. In the spirit of transparency, the gencos and DUs in the country are already publicly available, the groups that want to become intermediary between these two parties should also be made transparent.

3. Create another section that may read like

Section ___. ERC Ruling over the Third Party. The ERC shall have the final say whether the PSA as approved by the Third Party will really benefit the consumers.

Rationale: It is a mystery that while the ERC was created by legislation under the EPIRA as the real and institutional Third Party between gencos and DUS, the ERC would agree to become a mere Fourth (4th) Party because there is a new Third Party that was inserted in the process. And the draft IRR gives lots of powers and leeway for the Third Party

Thank you very much.
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Sunday, August 30, 2015

BWorld 17, More on the PHILIPPINE ELECTRICITY MARKET

* This is my article in BusinessWorld Weekender on August 27, 2015.
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THIS is a continuation of an earlier discussion, “The Philippine electricity market: Monopoly and competition” (Weekender, August 14).

As noted in that article, Carlos Jericho L. Petilla had issued, before he resigned as energy secretary last June, DoE Circular No. DC2015-06-0008, “Mandating All Distribution Utilities to Undergo Competitive Selection Process (CSP) in Securing Power Supply Agreements (PSA).” That order aims to address, among other things, the suspicion of “sweetheart deals” between some big electric cooperatives (ECs) and distribution utilities (DUs), on the one hand, and the generating companies (gencos), on the other, resulting in expensive electricity prices in the Philippines.

Here is another data, a bit old, from a 2013 commissioned study by the US Agency for International Development (USAID). The first set shows the actual prices including taxes (in Philippines and Singapore) and subsidies (Thailand, Malaysia, and Indonesia), and the second set, adjusted prices if taxes and subsidies were minimized, next to zero.

The USAID report explained why the adjustment was done: “Several factors may explain these wide differences. One is tax: effectively 9% in the Philippines, as opposed to 6% in Malaysia and 7% in Singapore and Thailand, albeit 10% in Indonesia. But the bigger contributor to the price differences is the implicit subsidies to state-owned utilities. The International Energy Agency (IEA) estimated that the electricity subsidies in 2011 in Indonesia, Malaysia, and Thailand were at least 5.56, 0.94, and 5.67 billion US dollars, respectively....”



Thus, most if not all comparative electricity prices are based on artificial pricing. People blame gencos or the big DUs but not governments which intervene a lot in electricity pricing, resulting in either very high or very low prices.

The DOE Circular was the subject of discussion in a forum organized by the Energy Policy Development Program (EPDP) early this month. There were six speakers, led by OIC-Secretary Zenaida Y. Monsada of the Department of Energy (DoE), Director Mylene Capongcol also of the DoE, UP School of Economics professors Raul Fabella and Ruperto Alonzo, UP College of Engineering professor Rowaldo del Mundo, and Romeo Bernardo of LBT Consulting.

Mr. del Mundo is the lead technical adviser to the Central Luzon Electric Cooperatives Association-First Luzon Aggregation Group (CLECAFLAG) under the USAID COMPETE project. Twelve ECs in Central Luzon aggregated their total power demand of 300 MW, auctioned it off, and contracted for 20 years the winning supplier, won by GN Power (with expanded capacity of 1,200 MW in Bataan). In his presentation, Mr. del Mundo showed this table of comparative electricity prices in the ASEAN.
  
By pounding on the need for demand aggregation by DUs as shown in the CLECAFLAG experience, Mr. del Mundo concluded, “The mandatory CSP is the only antidote to [the] EPIRA’s [Electric Power Industry Reform Act] cross-ownership that will avoid temptation to parties with conflict of objectives.”

There is a problem in this conclusion of supporting mandatory or obligatory, instead of voluntary, CSP, based on specific circumstances among DUs and gencos. For the following reasons:

One, as shown in Table 1, we have high electricity prices because the government imposes many taxes on energy while other ASEAN countries subsidize their energy consumption.

Two, Mr. Bernardo noted in his presentation that “Growing pains from regulatory uncertainty, and contracting, approval, and construction bottlenecks have delayed new plants. The average time it takes to build a baseload power plant in the Philippines is probably double elsewhere. Just getting approvals, coupled with overcoming NIMBY opponents, is an ordeal.” And he showed this list of some 200 signatures and permits needed to put up one baseload plant.


 Three, Mr. Fabella suggested market testing of PSA contracts instead of mandatory CSP. Market testing is easier to enforce because the Energy Regulatory Commission (ERC) only verifies and approves the market test (say, auction) employed, and is easier to defend in public. There are many modalities for market testing like the cases in Chile, Brazil, New England.

Four, there’s the big question of who are the “third parties” that will be recognized by the DoE, the ERC, and the National Electrification Administration (NEA) which will approve or disapprove the PSA between the DUs and gencos. Will they work for free? Very unlikely. Rather, the DOE and ERC will be forced to make extra budgetary requests to pay for these “third parties” including allowances for their meetings and public consultations.

It is also possible that NGOs, the media, and other sectors actively or silently supporting the “Repeal/Abrogate EPIRA” movement may position themselves as “third party” referees. The DoE circular is not about repealing or tinkering with the EPIRA.

In short, the DoE circular is barking at the wrong tree: By making the competitive bidding mandatory rather than voluntary, it will invite or create more problems than what it intends to solve. The circular should therefore be withdrawn. Or amended to make CSP voluntary, not mandatory. The DoE and other government agencies should instead address other problems and contributors to expensive electricity in the country. Like multiple taxes, numerous permits by the Philippine government, from the barangay to city/municipal, provincial, and national government offices and agencies. Requiring a firm to present up to 200 different permits would expose it to 200 different opportunities of corruption and extortion.

Government should simply learn to step back from too much intervention, regulation, and taxation.


Bienvenido S. Oplas, Jr. is president of the free-market think tank Minimal Government Thinkers, Inc., and a fellow of the South East Asia Network for Development (SEANET).
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Saturday, August 15, 2015

BWorld 15, The PH electricity market

* This is my article yesterday in BusinessWorld Weekender.
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The Philippine electricity market: MONOPOLY AND COMPETITION
  
ENERGY is development, and that includes electricity. It is not possible for an economy to grow fast and have sustainable development if its power supply and distribution are unstable and costly. Thus, having sufficient, stable, and affordable electricity is a necessary though not sufficient condition for economic development.

The Philippines remains to have among the most expensive electricity prices in Asia. Here are data with some breakdown also shown, including the cost of power generation, cost of grid/transmission, and value added tax (VAT) or gross sales tax (GST). Of the 14 major cities in North and Southeast Asia plus Australia and New Zealand listed below, Manila has the 3rd most expensive electricity prices -- 3rd in overall residential tariff, 3rd in generation cost, 3rd in grid charges, and 3rd in tax rates. 


Some reasons why other Asian cities and countries have lower electricity prices than the Philippines are as follows:

One, their government subsidizes electricity while the Philippine government imposes multiple taxes, royalties, and fees on power. The VAT rates are shown above, and royalties alone for Malampaya natural gas are as high as P1.45/kWh, and this is ultimately passed on to the consumers.

Two, Philippines power generation capacity is low, with total primary energy supply (TPES) in 2012 for instance only 0.44 tons of oil equivalent (toe) per person per year. Indonesia has twice, Thailand has four times, Malaysia has six times, and Singapore has 11 times that amount.

So with these two factors -- high electricity prices and low power gen. -- average electricity consumption is also low, only 668 kWh per person per year in 2012. 

SUSPICIONS
The Philippine power and electricity sector is characterized by a mixture of competition and monopolies. Power generation is generally competitive with many generation companies (gencos) slugging at each other. Power transmission is a national monopoly via the National Gird Corporation of the Philippines (NGCP). And electricity distribution is reserved to geographical monopolies, mainly the 120 electric cooperatives (ECs) nationwide, the biggest of which, Manila Electric Company (Meralco), accounts for about 75 percent of total electricity sales in Luzon and about 55 percent nationwide.

The issue of high electricity prices in the country has resurfaced once again but in a different angle. In current practices, the various ECs and distribution utilities (DUs) have bilateral contracts with different gencos, and such bilateral arrangement is sometimes suspected of being “sweetheart deals,” wherein both the gencos and DUs benefit to the disadvantage of the consumers.

To address this concern, the Department of Energy (DoE), on the watch of then secretary Carlos Jericho L. Petilla, issued Circular No. DC2015-06-0008, “Mandating All Distribution Utilities to Undergo Competitive Selection Process (CSP) in Securing Power Supply Agreements (PSA).” The order was dated June 11, 2015, or about two weeks before Mr. Petilla’s resignation.

The general principles behind this circular are to (a) increase transparency in the procurement process, (b) promote and instill competition in the procurement and supply of electric power to end-users, (c) ascertain least-cost outcomes, and (d) protect public interest.

Entities that will be covered are ECs, private investment-owned distribution utilities (PIOUs), multipurpose cooperatives, entities within economic zones, and other authorized entities engaged in the distribution of electricity.

Aside from suspicions of “sweetheart deals,” some DUs and ECs have their own gencos. Cross-ownership of DUs and gencos is allowed in the Electric Power Industry Reform Act (EPIRA) of 2001. Two examples here.

One is Meralco, whose wholly owned subsidiary, Meralco PowerGen Corp. (MGen), is targeting a portfolio of 3,000 MW by 2020. MGen is planning or constructing two other big power plants, the 1,200-MW Atimonan, Quezon, coal plant, and the 500-MW San Buenaventura, Quezon, coal plant, both slated for 2018. Another consortium, the Redondo Peninsula Energy, Inc., is slated to open its $1.2-billion, 600-MW coal power plant in Subic in 2018.

Two are the three DUs of Aboitiz Power -- Visayan Electric Co., Subic Enerzone Lima Enerzone, and Davao Light.

TAXES, MONOPOLIES
By forcing the ECs and DUs to undergo competitive bidding for their power supply contracts, the DOE hopes to break or minimize the practice, or at least minimize suspicions, of price-rigging.

This is definitely a welcome move for independent power producers (IPPs) which have little or no cross-ownership and control with ECs and DUs. They will have a fairer and level playing field in getting supply contracts. But while the goal is laudable, the circular will be unable to address other problems and contributors to expensive electricity in the country. Among these are the following.

1. High and multiple taxes, royalties, and fees imposed on natural gas and other energy sources and on electricity generation/transmission/distribution businesses.

2. Expensive electricity is also being imposed recently by RA 9513 or the Renewable Energy (RE) Act of 2008, wherein wind, solar and biomass are given guaranteed prices via feed in tariff (FIT) for 20 years.

3. Monopoly characteristic of ECs and DUs because electricity distribution is considered a “public utility” and, hence, protected by the Constitution and franchise laws. Abuse of power is a possibility that is always second nature to any monopolist. This will require amending the Constitution.

A compromise will have to be made, like having a transition period to allow the maturity of existing power supply contracts.

The long-term measures to address structural problems that lead to expensive electricity is to limit government intervention, to step back. Like amending the tax code to reduce or abolish certain taxes on energy, amending the RE law to abolish the FIT provision, and amending the Constitution to remove economic protectionism.


Bienvenido S. Oplas, Jr. heads a free-market think tank, Minimal Government Thinkers, Inc., and is a fellow of the South East Asia Network for Development (SEANET).
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Monday, May 05, 2014

Energy Econ 20: On Slashing the Max Power Generation Charge

When there is thin or very small power reserves on peak demand hours of hot months April-May, there are two options. (1) Have rotating brown outs, kill electricity demand for a few hours in some areas; or (2) get expensive power from peak-load plants like diesel barges and avoid brown-outs.

The P32/kwh max rate (usually for 1 or 2 hours, and used to be P62/kwh) allowed in WESM (vs average price of about P5/kwh) looks exorbitant, true. But if it will help avoid a brown out of 1 or 2 hours, it may look less merciless as other people would describe it. So some businessmen are willing to invest in diesel barges that may run only 1 to 3 hours a day (vs. base load plants like coal and nat gas that run 24 hours a day), in exchange for a higher generation charge.

Now there are moves by the ERC and DOE to slash the max rate to only P6.25/kwh.

A power investor will only put his money in base load plants that run 24/7 and selling at P4-7/kwh, not in peak load plants that may run only 1-3 hours a day on hot months, and zero on rainy and cold months, and be allowed by the ERC to charge only P6+/kwh. When there are no or very few peak load plants to address short-term high electricity demand, frequent brown outs on hot months will happen.

When there is frequent brown out, people will resort to (a) buying generator sets, which are costly and running on costly diesel, or (b) have more candles and experience more fires. People forgetting to attend to their candles which accidental fell down, burned a piece of paper, ultimtely burning the entire house and the neighboring houses.

Electricity supply should be big relative to demand. Electricity prices should be low due to competition among many power generating companies. This thing is not happening yet. DOE itself is part of the problem why power supply is limited.

Three friends made the following comments when I posted the above discussion in my fb wall.

(1) Bembette: noy, as part of the energy family, we have a directive to turn off our aircon for 3 hours everyday, during the peak hours. there has been a decrease in our energy consumption. adverse effect: aircons bogging down because of the constant turning on and off, which means additional cost for repair/replacement.

(2) Grace: During times of extreme heat or cold here, and the power grid looks like it may be overwhelmed; our power companies ask the we "help" by unplugging any unnecessary electric & electronic devices (cable boxes, clocks, DVD players, etc - you're not at home using them). That reduces demand some.
(3) Rose: It's a no win solution for consumers Noy! Grrrr!

 (4) Andrew: What about raising prices during peak hours? That would be the Hong Kong solution.

Another adverse result of forced conservation as narrated by Bembette. A government office saves from monthly electricity bill but spends more on appliances maintenance, or replacing them with a new unit.

Grace's observation is correct, it should be done during period of emergencies and unforeseen events. Either the power plants conk out, or there is power but the transmission lines or distribution lines are cut off due to toppled electrical posts. It is different in predictable or foreseen events, like high electricity demand in the hot months of March-April-May, the last two especially.

 And this partless addresses the disappointment of Rose. Consumers can bring down their electricity bill by shifting some of their activities to non-peak hours, say doing electric laundry, ironing, electronic work, at non-peak hours.

 Andrew's proposal is incorporated in the long term direction of the wholesale electricity spot market (WESM), pricing by the hour. Thus, cheaper monthly electricity bill for those who are using more electricity during non-peak hours. Currently, the distribution utilities like the various electric cooperatives nationwide lump the pricing in one average price for the month. Thus, users of electricity during non-peak hours subsidize those who use more electricity during peak hours.

When investors come in to put up new power plants,

"Petilla said more than 100 signatures are required from various government agencies just so an investor cant push through with a project."

Government is very often, the main cause why there are not enough new power plants in this country. Its bureaucratism, permit-permit-permit, tax-fees-royalties mentality, discourages a number of potential players into power generation.
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Posted by Bienvenido Oplas Jr at 8:42 AM 0 comments
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Saturday, February 22, 2014

Energy Econ 14: Power Rate Hike, Who Colluded?

In a fb group, Government and Taxes, Freedom andResponsibility, I had a debate with Troy ZD last February 5 this year. He posted this news report from the Inquirer, http://business.inquirer.net/163008/meralco-admits-telling-therma-mobile-to-sell-at-p62kwh-at-spot-market#ixzz2sPIrwxBR 


and commented that 
 If this and other admissions by Meralco, the ERC etc are not an evidence of collusion that would make the SC strike down the price increase and to force the re-evaluation of EPIRA and particularly the WESM then the SC has sold us out.

I replied that an electricity distribution utility (DU) like Meralco, Batangas Electric Coop, Cagayan Electric Coop, etc., distributes electricity from two sources: (a) from bilateral contracts for its basic, non-peak electricity demand, and (b) from WESM or spot market for its peak demand period (say 5-7am, 6-8pm). In the case of Meralco-TMO bilateral contract, the contract price was P6.20/kwh in Oct 2013 and P8.65/kwh in Nov. 2013. See Table 3, Government and Taxes: Fat Free Econ 51: Ten Things About the Meralco Rate Hike

Of the 286 GWH that Meralco bought from WESM in Nov. 2013, it is not clear how much of it came from TMO at P62/kwh, how much from other diesel power plants at P25 or P40 or 50 or 62. I have not seen the numbers yet.

It is possible that Meralco told TMO and other diesel plants to bid at P62 so that not a single DU, Meralco included, would buy at that max price so that the clearing price would be at a lower amount.

The term "collusion" has been over-used and may be even abused. Who colluded? Meralco and TMO? Meralco and who else? At what volume (in GWH) at what price and when did the collusion happen?

Could it be that a DU bought from a generating company (GenCo) at the max bid price of P62/kwh but only for 2 or 3 GWH volume? If this is the case, can this still be considered as collusion considering the very small volume of electricity involved?

I will be very glad to see explicit answers from those who endlessly suggest there was collusion, like Troy, Bayan Muna, other groups and individuals.

The average clearing price for November 2013 at WESM was P33.22/kwh. Answer the 4 questions above.
1. Who colluded?
2. At what volume (in GWH),
3. At what price the collusion happened?
4. At what days and hours the collusion happened?

Troy replied that it’s what they are trying to find out in the senate and in the SC

Can you beat that? People have been using that term “collusion” since 3 months ago, and until now there is zero proof of collusion? Puro allegation and ngaw ngaw lang? Hoping that endless allegation becomes an accepted "truth"?

If people are honest, they should shut their mouth from endless accusations because they have zero proof. If they are dishonest, they will retain the accusation even if proof is zero.

Troy posted this  quote, no source given:
the assertions from both Meralco and TMO that only 100 MW of capacity have been provided are quite odd. At the beginning of June, Aboitiz Power announced it had completed the rehabilitation of the four power barges, and that they were fully operational at their 242-MW rating. Even as early as September, 2012 TMO informed the ERC that rehabilitation of two of the units had been completed. The claim that only 100 MW has been provided so far (100 MW is, coincidentally, roughly the effective net capacity of the two smallest barges, rated at 57 MW and 52 MW, respectively) begs the question whether the TMO facility may have been another of those supposedly “unplanned” plant outages that forced Meralco to buy higher-priced power from the spot market.

Malaya 1 has been on technical shutdown since July 2013. Even if one DU will beg at P100 or P200/kwh, that plant will never be able to produce electricity. Malaya 2 has been on scheduled maintenance shutdown since late October 2013. See chart 4, http://funwithgovernment.blogspot.com/.../fat-free-econ...

And even assuming that NPC or PSALM (whoever operates Malaya power plant) could produce magic last November and make it run, its generation cost that will be passed to consumers would be something that will make the activists curse and howl. It is an inefficient, costly government power plant that can save us more money if it is not running than it is operating.

So people really point at Meralco-TMO collusion, somehow question #1 is answered, fine. Questions 2 to 4 must be answered to substantiate that there was indeed Meralco-TMO collusion.

People were so hooked on their conspiracy theory. Even if a power plant is 100% incapable of producing electricity, they will say that there is magic somewhere (by Batman? Superman? Spiderman?...) to make it run and save us from the Meralco-TMO-other GenCos collusion conspiracy theory.

I think this is a good explanation why a DU like Meralco with an existing contract to a GenCo like TMO told the latter to bid at the max rate of P62/kwh -- because it does not intend to buy significant volume at that price on non-peak hours. It turnedout that Meralco did buy from TMO at P62 -- at a monster volume of 0.5 kwh! Total purchase of Meralco from WESM in Nov 2013 was 286,000,000 kwh, 0.5 kwh of which was purchased at a "collusion" price of P62/kwh. Nice joke on collusion.
http://www.interaksyon.com/article/80150/power-rate-hike--justices-say-root-of-problem-lies-with-must-offer-rule-regulators


There are at least two lessons here. (1) Remove the "must offer" rule for all GenCos. If they do not want to be dispatched at particular hours because its power supply is already fully contracted, or it wants to do emergency repair on a minor mechanical problem that can become a big problem if not acted upon, then ERC should not compel them to offer.

Or (2) Retain the "must offer" rule but remove the P62/kwh max bid price. Make it indefinite. So that a GenCo that does not want to be dispatched for a particular hour can price its power at P1,000/kwh or P5,000 or higher, precisely so that NO ONE will buy from it.

Nice quote. People will always think the problem is with electricity distribution and the monopoly DUs, when the clear problem facing them is the lack of power generation.

Government is a major contributor to high electricity prices in this country. Aside from VAT and other taxes, it also slaps various mandatory fees under "universal charges."

Malaya power plant can greatly help in this power rate hike debate if it is privatized soon, two benefits: (a) money from privatization proceeds be used to pay back some of the stranded cost so that universal charges will decline. And (b) private operator can make it run more efficiently, more frequently, add to more power supply, while paying taxes to the government. A seldom-operating, government-owned Malaya plant is a costly elephant that adds to more costs than benefits to electricity consumers.
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Thursday, February 13, 2014

Energy Econ :13: Universal Charges and Thin Power Reserves

A friend posted today in his fb wall,

DOE Ssec. Petilla reportedly told the supreme court that the implementation of the Epira law is a learning process. Fine, if that is how this govt wants it. However, we, the consumers, do not have to pay for your lessons.

I commented that the main problem is the lack of power generation, lack of power plants, and not on power distribution or transmission. If you have only 200+ MW of excess reserves, and one 300 MW power plant will suddenly conk out (especially if it is 20+ years old), brown out is the logical thing to happen.

Someone suggested that the problem is the off take provision in the IPP contracts. Government guaranteed a certain volume of power to be purchased from IPPs whether it is needed or not, and the cost of unneeded power is passed on to consumers

That was correct… many years ago. The cost of that provision is now in the NPC stranded contract cost, passed on to us electricity consumers at P0.19/kwh, reflected in the universal charges. See illustration from NPC, right.

The bulk of our monthly electricity bill, more than half of total, is from generation charges by the power plants. For instance, for the December 2013 bill, in P/kwh:

a. generation charge 7.67
b. distribution charge (meralco) 1.22
c. transmission charge 0.97
d. system loss charge 0.80
e. supply charge 0.60
f. metering charge 0.41
taxes not included yet.
http://funwithgovernment.blogspot.com/.../energy-econ-11...

The "off take provision" that was earlier mentioned refers to NPC stranded contract cost, being passed to us at P0.19/kwh.

We lack cheaper power plants like natural gas, geothermal, hydro and coal. If government royalties from natural gas field in Malampaya (now the famous Malampaya fund scandal by the previous and current administrations, along with pork barrel scandal) is absent, natural gas should cost only about P2/kwh or less. With government royalties, nat gas is about P4/kwh.

To prevent brownouts, distribution utilities (DUs) like Meralco, Pangasinan Electric Coop, Batangas Electric Coop, Cagayan Electric Coop, etc. must buy from diesel power plants to plug power deficit and hence, prevent brownouts. These diesel plants are expensive, and their cost will be passed on to us in the form of higher generation charge. From P4-5/kwh to P7 or higher.

Repeat that: the main problem is in power generation, not in power distribution or transmission.

A good observation from Mr. RDC:

I think the point that the Secretary of Energy was trying to make was that no law, not even the EPIRA, was able to foresee all situations and contingencies. A lot of the problems in the electric power industry now are a result of inadequate safeguards against forces that are outside anybody's control--politics having a lot to do with it which affects the economy and thus everything else.

True. No laws and regulations, past and present, can really foresee the future. All new regulations and restrictions are reactions to past and current problems and issues. By the time these issues were “addressed”, new issues would come out and the new regulations will not be able to capture or anticipate them.

Re power brown outs, here again is a chart from the DOE. Check projections for April-May 2014, or 2-3 months from now, the power reserves will be very thin, maybe only 100 MW. If the horizontal line, total power supply, will not go down, say a 100 or 200 or 300 MW power plant will suddenly conk out, then we will have no brown out this coming April-May. Knock on wood.


Mr. RDC added, “To put power supply in perspective, demand for power increases every year and yet there has been only one power plant that saw the light of day from the time it was put on the drawing board during the time of EPIRA (at least, in Luzon)--that of GN Power in Bataan. A lot of the plants that came on stream during the EPIRA implementation were conceived and were commenced prior to EPIRA. The commissioning for the next new plant will be next year, if I'm not mistaken."

My friend suggested further that being an electricity , he should not pay for anybody sleeping on or learning their job. I suggested that the government – the DOE, EMB/DENR, BIR/DOF, LGUs, etc. -- are NOT sleeping on their job. They are wide awake. Someone wants to put up a new power plant, they are all awake to impose and enforce various regulations, restrictions, permits, taxes, fees, royalties, until very few, GN Power included, has the stomach and financial resources to pay for all those bureaucracies.

Meanwhile, here's a new development on the sector. From interaksyon, posted last night.

MANILA - A day after an agency in-charge of Malaya Thermal Power Plant (MTPP)drew flak for not running it in November, the Department of Energy has formally designated the facility as a 'must-run' unit (MRU) for the electricity spot market.

The DOE issued Department Circular 2014-01-0003 designating the 650-MW Malaya Thermal Power Plant (MTPP) as an MRU in the Wholesale Electricity Spot Market (WESM)….
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