BWorld 155, Electric cooperatives and system loss

* This is my article in BusinessWorld last Friday.

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).

Source: WB, World Development Indicators, Database 2017.

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 

BWorld 154, Kuala Lumpur, Incheon, JFK airports and lessons for the Philippines, October 01, 2017

BWorld 141, Reducing system loss, Part 2

* This is my article in BusinessWorld last Wednesday.

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.

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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

BWorld 135, On reducing the distribution system loss

* This is my article in BusinessWorld last Wednesday.

When matter changes form, there are certain “system loss” that occur. Like a one-kilo dressed chicken becomes less than one-kilo once it is cooked into adobo or tinola. Or a one-kilo green mango or banana becomes lighter than a kilo when it transforms into ripe, yellow mango or banana after a few days.

When electricity is transported or transmitted from a power generation company (genco) some 100+ kilometers away to a private distribution utility (DU) or electric cooperative (EC), there is a transmission system loss. Thus, a 1,000-MW output from a genco may become only 980 MW when it reaches the DU or EC.

Then when electricity is distributed from a DU or EC to houses and offices, there is also a distribution system loss. This loss is divided into (a) Technical loss, inherent in the physical delivery of electric energy including conductor loss, transformer core loss, and technical error in meters, and (b) Nontechnical Loss, energy lost due to pilferage, meter reading errors, meter tampering, others not related to the physical characteristics and functions of the electric system.

The Philippines has a relatively high degree of transmission loss + distribution loss while Singapore, South Korea and Japan have low systems losses, based on World Bank data (see Table 1).

There are several attempts to limit or cap the distribution system loss that is passed on to the consumers. One from the Energy Regulatory Commission (ERC) draft “Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency,” and two from the Senate. Here is a summary of their provisions.

These three measures are problematic and Sen. Pacquiao’s bill is the worst because of its populist posturing, disallowing private DUs to charge any system loss while pampering the ECs to have their system loss. Check again Table 1 above, it shows that none of the advanced countries like Singapore and Japan have zero system loss.

Sen. Gatchalian’s bill is not as bad as Sen. Pacquiao’s but like the ERC draft Rules,it suffers from some populism too, pampering the ECs with higher loss cap compared to private DUs.

Giving differentiated loss cap is favoring the ECs while penalizing private DUs and this is wrong. If the real purpose of the proposed ERC regulation and Sen. Gatchalian’s bill is to protect the consumers from high system loss charge in their monthly electricity bill, then they should slap a uniform low cap for all players, whether private DUs or ECs.

The rule of law is explicit in reminding people that the law applies equally to unequal players and people. Thus, a law against traffic counterflow should apply to all vehicles, from buses to cars, jeepneys, armored vans, tricycles and motorcycles. It should apply also to both private and public/government vehicles.

A law with penalty against non-rehabilitation of mined-out area should apply to all mining entities, whether big, medium, small and artisanal mining.

And a law or regulation on system loss cap should apply to all players, from big corporate DUs to medium or small electric cooperatives.

By slapping differentiated system loss cap, new government regulations will not be exactly protecting the consumers but more of protecting certain ECs so that their inefficient if not outright wasteful distribution system is rewarded with higher profit at the expenses of the consumers.

Ultimately, all ECs should be corporatized. They should be registered with and monitored by the Securities and Exchange Commission (SEC) and not by the National Electrification Administration because SEC has more transparent and realistic rules than NEA. But that will be another topic in the future.

For now, the rule of law, of not making exemptions and differentiation in the imposition of system loss cap, should prevail. And the loss cap that government has in mind should be realistic that DUs and ECs should not be burdened with additional high capital expenditures (CAPEX) and operating expenditures (OPEX) which ultimately will be passed to the consumers in the form of higher distribution charge.

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See also: 

BWorld 128, The quest for more stable and cheaper electricity in the ASEAN, May 08, 2017 

BWorld 131, Why the FiT-All is a burden to consumers, May 18, 2017

BWorld 132, Global commodity prices, trade and growth, May 27, 2017 
BWorld 133, Dissecting Dutertenomics' overspending plan, June 01, 2017 
BWorld 134, PPP vs ODA, June 08, 2017

BWorld 117, Energy bureaucracy, electric cooperatives and NEA

* This is my article in BusinessWorld last March 08, 2017.

The Philippines experienced a seemingly energy revival in 2016 and 2017 with plenty of new power plants commissioned and running. Mindanao experienced an energy surplus after many years of frequent involuntary “Earth hours” or almost daily blackouts lasting for many hours.

So it is ironic that while new power capacity were added into the grid, Luzon including Metro Manila, still incurred occasional “yellow alerts” in power supply. This indicated near-brownout situations that took place a few weeks ago since several power plants went offline all of a sudden, coinciding with maintenance and repair shutdowns that were scheduled ahead of time.

Some groups blame “collusion” of some generating companies (Gencos) to stage an artificial power deficiency and thus, command higher prices for several hours on those “yellow alert” situations. However, they offer little proof and numbers to back up this claim.

For me, the more plausible and visible cause is the undeclared “collusion” of various groups including many government agencies and environmentalist groups to delay if not stop the installation of more power capacities to have huge reserves that can (a) cover even huge unscheduled power shutdowns and (b) bring down electricity prices further as a result of intense competition. See table below as proof.

With only 700+ kWh/person/year in 2014, that puts the Philippines slightly higher than the electricity use of poor neighbors Cambodia and Myanmar, and only half the electricity consumption of Vietnam, 1/4 that of Thailand, 1/7 that of Malaysia and 1/13 that of Singapore.

Last Friday, March 3, I attended the forum on “Institutionalizing Energy Projects as Projects of National Significance” by Sen. Sherwin Gatchalian, Chairman of the Senate Committees on Energy and Economic Affairs, sponsored by the Energy Policy Development Program (EPDP) held at the UP School of Economics (UPSE) Auditorium.

The three reactors were Dr. Ronald Mendoza, Dean of the Ateneo School of Government, Dr. Alan Ortiz, President and COO of SMC Global Power Holdings Corp., and DoE (Department of Energy) Undersecretary Jesus Posadas.

The senator recognized the problem of low power capacity of the Philippines in general, and some big islands in particular. There are many big committed and indicative power plants lining up but they often encounter bureaucratic delays.

A paper, “An analysis of time to regulatory permit approval in Philippine electricity generation” (2016) by Laarni Escresa of EPDP showed that on the average, power plant operators need to secure 162 clearances (MBC, 2014) and 102 permits.

So the Senator’s bill will prioritize these big power plants (P3.5B or higher in capitalization) for faster approval process. For instance, agencies are given 30 days to check the documents submitted; if they fail to act on time, it is deemed that the papers are approved and permits be automatically granted.

Alan Ortiz mentioned something that’s somehow a shocking figure: Boracay’s electricity needs rose from 8 MW just 10 years ago to 100 MW today. From 8 to 100 MW in just 10 years -- that’s a lot.

Undersecretary Posadas gave a good assurance that the DoE is “agnostic” on the source of energy (renewable or not) and want to see more power plants coming in. He also said that the DoE will no longer issue a 3rd round of feed-in-tariff (FiT) for wind-solar. Good announcement.

Another factor that contributes to uncertainties in power generation are those inefficient and losing electric cooperatives (ECs). They just get power from the Wholesale Electricity Spot Market (WESM) and distribute to their customers and do not pay the many Gencos that happened to supply their electricity needs.

From the Philippine Electricity Market Corp. (PEMC), here are the top three market participants or players which have unpaid energy settlement Amounts at WESM as of Feb. 27, 2017:

(1) Albay Electric Cooperative, Inc. (ALECO) P98.59M, (2) Abra Electric Cooperative (ABRECO) P63.97M, and (3) AP Renewables, Inc. P14.38M (source: http://bit.ly/unpaidwesm).

The numbers above exclude the unpaid amount of ALECO in their Special Payment Agreement with PEMC amounting to nearly P1B.

The National Electrification Administration (NEA) does not seem to properly discipline certain ECs under its belt. To have an old debt of nearly P1B and new debt of nearly P100M from one EC alone (Aleco) should be a red flag indicator that this type of prolonged and sustained inefficiency and losses have been tolerated.

The NEA should step back from this and other problematic ECs and force them to corporatize and be subjected to bankruptcy laws under the Securities and Exchange Commission (SEC).

The Philippines and its electricity consumers need stable and cheap electricity. They do not need the burden of being dependent on ECs that lose money and are unable to pay generation companies that further add uncertainties to bureaucratic delays.

Bienvenido Oplas, Jr. is the president of Minimal Government Thinkers and a Fellow of SEANET and Stratbase-ADRi.

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See also:

BWorld 111, Electric cooperatives and unstable power supply, March 01, 2017

BWorld 114, Brownouts, ancillary services and transmission charge, March 23, 2017 

BWorld 115, Centralization and federalism, March 23, 2017

BWorld 116, Urban transport myths and the jeepney strike, March 28, 2017

BWorld 111, Electric cooperatives and unstable power supply

* This  is my article in BusinessWorld last February 08, 2017.

Almost everything we do now requires energy and if we stay in non-mobile structures like buildings and houses, everything requires electricity. Energy precedes development so unstable and expensive energy means unstable and poor economy.

Given the technological revolution the world has experienced in recent decades, it remains a tragedy that many countries still have low electrification rates and very low electricity consumption per capita.

Unfortunately, the Philippines is among those countries with still not-so-high electrification rates until today and its electricity use is among the lowest in the ASEAN (see table).

Electricity consumption in kWh per capita is high for the following developed and emerging Asian economies: Taiwan, 10,460; South Korea, 10,430; Brunei, 9,550; Singapore, 8,840; Hong Kong, 5,930; Malaysia, 4,470 (6.5x of PHL); China, 3,770; Thailand, 2,490 (3.6x of PHL). These countries and economies also have 100% electrification rate except perhaps China.

There are two reasons why the Philippines has a relatively low electrification rate and low per capita electricity use.

First is due to its archipelagic geography.

Many municipalities and villages are located in islands that are off-grid and, as a result, their residents rely on biomass like firewood for cooking and gensets running on diesel for lighting although some do use solar.

Second is due to politics.

There are not enough base-load power plants that can provide electricity 24/7 even in major islands like Luzon and Mindanao. This is because of political opposition by certain groups to cheap and stable fossil fuel sources like coal. Also, there are many bureaucracies (national and local) that discourage the quick construction and commissioning of new power plants. There are also weak, inefficient, and even corrupt electric cooperatives (ECs) that are given monopoly privileges to serve certain provinces and municipalities.

There are 119 ECs in the country from Luzon to Mindanao plus private distribution utilities like Meralco and those in PEZA/ecozones. All ECs are supervised and regulated by the National Electrification Administration (NEA).

Of the 119 ECs, some remain financially weak and problematic until today, like the Abra EC (ABRECO) and Albay EC (ALECO). These two ECs are so deep in debt they are unable to provide stable electricity to their customer-members and have arrears with power generating companies (gencos) that supply them electricity at the Wholesale Electricity Spot Market (WESM).

According to National Electrification Administration (NEA), from 2004 to 2014, it has released subsidies to ABRECO worth P56.6 million for the implementation of the Sitio Electrification Program (SEP), Barangay Line Enhancement Program, and its procurement of a modular generator set.

For ALECO, it was badly managed and was on the brink of bankruptcy that local business and political leaders proposed and supported its corporatization and take over by more established energy players.

In January 2014, ALECO was acquired by San Miguel Energy Corp.’s subsidiary Global Power Holdings Corp. (SMC Global) and renamed it as Albay Power and Energy Corporation (APEC). ALECO then was the first EC in the country that was corporatized.

Upon takeover, SMC Global and APEC inherited a P4-billion debt by ALECO including overdue payments at WESM of nearly P1 billion.

More than two years after the takeover, the debt ballooned to P5.6 billion, mainly due to low collection efficiency. APEC said its database of customers has been sabotaged since about 80% of its customers are not on the database.

APEC resorted to disconnecting some big customers that do not pay but disgruntled ALECO employees and officers have resorted to reconnecting them.

The ball and accountability is in the hands of NEA. Why are these things allowed to continue for years, to the detriment of paying customers and generation companies that are not paid on time.

In 2015, NEA reported that it lent a total of P2-billion loans to 51 ECs to finance their capital expenditure projects, rehabilitate their power distribution systems, among others.

NEA should perhaps consider slowly stepping out of the sector and push all the ECs to move towards full corporatization with full exposure to expansion or bankruptcy. The sector that needs protection should be the electricity consumers, not the ECs.

Consumers should be protected from expensive and unstable electricity as well as disconnection because the DU or EC has been disconnected by gencos and WESM for huge unpaid accounts.

The NEA, along with other government agencies in the energy sector, should look at the above table again, and try to find out why our electrification rate and electricity use are at the level of Pakistan and Mongolia instead of at the level of Thailand, Vietnam, and Malaysia.

Bienvenido Oplas, Jr. is the President of Minimal Government Thinkers and a Fellow of SEANET and Stratbase-ADRi.

-------------

See also:

BWorld 108, Rising feed in tariff (FIT) due to more wind-solar power, February 06, 2017 

BWorld 109, Asians' march to liberty and progress, February 16, 2017 

BWorld 110, Should we go federal or not? February 19, 2017

Energy 75, the PH solar confederation, electric coops and Meralco

From the DOE website, some group photos showing some of the major players in the PH energy sector. Below, one solar group, the Confederation of Solar Developers of the PH, Inc. (CSDP).

From left: DOE Chief-of-Staff Jesus Cristino Posadas, Engr. Arwin Ardon, Ret. Admiral Reuben Lista, Central Tarlac Biopower Inc. President Don Mario Dia, Equis Manager Craig Marsh, NV-VOGT Phils. President Vivek Chaudhri, North Negros BioPower, Inc. President Arthur N. Aguilar, Reynaldo Casas CSDP President, Aboitiz Equity Ventures Inc. Senior Vice President Juan Antonio Bernad, Carlos Aboitiz of Aboitiz Power, Solar Philippines President Leandro Leviste , SolarPacific Energy Corp. Senior Business Development Officer Dyna Enad, DOE Spokesperson & NASECORE President Pete Ilagan.

There is another solar lobby, the Philippine Solar Power Alliance  (PSPA) headed by Ms. Tetchie Capellan. Meanwhile,...

From the  DOE website, 

Cusi asked both agencies to “go down to the cooperatives” to resolve the issues raised by electric cooperatives namely PHILRECA, QUEZELCO and AMRECO, among others.

 Among the issues raised by the electric cooperatives were ensuring the right of way for electric projects, tax reforms, non-privatization of Agus and Pulangui complexes in Mindanao, the interconnection of SPUG areas to the main grid and the putting up of a one-stop shop and fast lane for the processing of permits and licenses for energy projects.

On the DOE-Meralco partnership in providing electricity connection to relocated informal settlers.

When "free electricity connection" was reported in local media, I asked Joe Zaldariaga what it means -- only the one-time cost of electricity connection plus meter readers are free, or also the monthly electricity bill of the informal settlers. Joe said that only the former is free. The latter, people still have to  pay their monthly electricity bill. This is low anyway because of  the  "lifeline subsidy" for consumers of only 100 kWh a month or less.

Meanwhile, I am curious why the electric  coops would oppose the privatization of hydro power plants in Mindanao? This is long overdue as EPIRA was enacted in 2001 or 15 years ago. Besides, only private players operating in a competitive environment would have enough incentives to really improve the electricity output of those hydro plants, especially when WESM in Mindanao would start operating.
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See also:

Energy 72, FIT-eligible solar plants in the Philippines, June 22, 2016 

Energy 73, Comments to DOE draft Department Circular on RPS, June 27, 2016 

Energy 74, Mindanao business opportunities via coal plants, July 13, 2016

Energy Econ 21: Joint Statement on EPIRA Implementation

I just received from a friend, a Joint Statement made today on how to improve EPIRA implementation. Many of these points are practical, some are technical. I fully agree with the statement, "EPIRA is not the problem, failure to implement it properly is." The call by many populist and left-leaning groups to "junk" or "amend towards greater government role" EPIRA is wrong.
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Amending or making changes in the Electric Power Industry Reform Act (EPIRA) or the Republic Act No. 9136 will not solve the problems because EPIRA is not the problem, failure to implement it properly is.

If EPIRA is sent back to Congress for review, the uncertainty it will introduce into the regulatory regime of the power industry will lead to a potentially chaotic system, and worryingly put our future needs at risk at a time when our supply of power is marginal.  Brownouts will be inevitable if we don’t build new power plants. International and local investors and financial institutions won’t invest in an industry where the rules are not known and stable. The national government should announce now that EPIRA will not be amended, as amendment will not solve the present problem, and the government should increase dialogue with industry participants to reduce key uncertainties or changing material rules midstream.

For instance, the basis for recent changes in the Wholesale Electricity Spot Market (WESM) prices was unclear. There were also changes in the rules, such as imposing a cap (50%) on the level of output that a Retail Electricity Supplier (RES) can source from its affiliated power generators; and how to count maximum installed generation capacity, which now includes power controlled by RES and results in double counting.  These should not be done without full discussion.

In view of the above, we urge the Department of Energy (DOE) to call a joint stakeholders meeting to address the following issues:

1.            Limits on open access

2.            Fiscal independence of the Energy Regulatory Commission (ERC)

3.            A review of the WESM price cap

4.            What level of power distribution utilities should be required to contract on a

continued basis

5.            How to better monitor and evaluate grid operations

6.            A review of the performance of electric cooperatives and how to improve it

7.            Studying the merits of demand side bidding in WESM and considering revisions to the WESM rules

8.            Making the System Operator and Market Operator independent as a merged group

9.            Deciding on what to do with the Malaya plant.

10.         Privatization of all power plants

11.         Looking for ways to improve bidding for new plants to encourage more participants,and reduce disputes.

12.         Review of the Transmission Development Plan

13.         A review of the taxes on the industry to consolidate them into a simpler system that may lead to lower prices

This meeting should include reviewing the role of each entity involved in the power sector, whether it should retain the responsibilities it now has, whether these should be strengthened, or amended or transferred elsewhere.

Finally, we urge the national government to declare power plants as critical infrastructures or projects eligible for registration with the Philippine Economic Zone Authority (PEZA) to streamline acquisition of permits and approvals from all local and national government agencies.

We believe urgent attention to these and other issues is called for and we look forward to working together with government towards an improved power sector.

American Chamber of Commerce of the Philippines (AmCham)

Employers Confederation of the Philippines (ECOP)

European Chamber of Commerce of the Philippines (ECCP)

Financial Executives Institute of the Philippines (FINEX)

Japanese Chamber of Commerce and Industry of the Philippines, Inc. (JCCIPI)

Korean Chamber of Commerce of the Philippines (KCCP)

Management Association of the Philippines (MAP)

------------

See also:

Energy Econ 17: Brown outs in Mindanao, Thin Reserves in Luzon, April 11, 2014 

Energy Econ 18: Brown outs in Metro Manila?, April 16, 2014 

Energy Econ 19: Wind Power, Feed in Tariff and Electricity Subsidy, April 23, 2014

Energy Econ 20: On Slashing the Max Power Generation Charge, May 05, 2014

Energy Econ 18: Brown outs in Metro Manila?

A friend, Rose, posted this in her fb wall yesterday,

I am totally pissed after hearing the news that Meralco will be implementing a rotating brownout tomorrow starting at 11am? Are they serious?? At the height of the heat we all suffer each day....they will implement THAT?! It's probably because all of these people thinking of this solution have not experience what it is to stew in the heat! I think before they implement this they should first themselves experience what ordinary Filipinos are experiencing each day! All this hullabaloo just so that this government and Meralco can justify what they've all along wanted to impose on the already burdened Filipinos! A P4 increase and more on our electric bill!

Rose's frustration is understandable. In many of our neighboring countries in Asia, they can put plenty of street lights even in less-populated cities because they have so much power supply. Here, we are still talking about brown outs, actual or imaginary.

The main problem here is in power generation (not enough new power plants, many ageing existing plants) and not in power distribution (Meralco, other electric cooperatives). During heavy storms, power interruption  can happen, problem with power transmission (NGCP) or distribution, if the storm would topple electrical towers and posts.

Rose added that  "this should have been addressed by the appropriate branch of government....and I am still not convinced enough that this is not just a scenario created by Meralco...and their friends in government to justify any increases in our electric bill!"

To summarize the situation:

(1) Immediate problem is high electricity prices and/or brown outs, actual or threats.
(2) This is caused by lack of new power plants; the old plants require more frequent maintenance or scheduled shutdowns, or they can easily conk out (unscheduled shutdowns).
(3) And this is caused by (3a) government bureaucratism (DOE, DENR, LGUs, etc) in giving or restricting new power plant permits, and (3b) environmental activism opposing cheap but stable power sources like coal, nuclear.

If one will check the monthly electricity bill, between 50-60% of it is due to generation charge (ie, going to power plants).

For people who remain pissed off with the electricity distribution utilities (DUs) or the electric cooperatives, there are two ways that people can get out of these DUs which, by political nature, are all monopolies (Meralco, Bataan Electric Coop, Cagayan Electric Coop, Cebu Electric Coop,...).

One is to have their own solar system, wind, etc in their homes and/or offices. This is expensive though.

Two is via "open access" which is also in the Electric Power Industry Reform Act of 2001 (EPIRA). A village or an industrial zone can go direct to an electricity producer (say a small coal or solar or wind plant) for demands of less than 1 MW. This way, they can stop paying (a) transmission charge, (b) distribution charge, (c) supply charge, (d) systems loss charge, (e) universal charge, (f) lifeliine subsidy charge, (g) taxes and fees, plus another charge, I forget. So you see, there are about 9 different items in our monthly electricity bill, but people only see Meralco or the electric coop as the villain.

By going through the open access system, people will pay only (a) generation charge to the small power producer, and (b) wheeling charge, for the use of Meralco or other electric coops' electrical lines, from the power plant to the end-users (houses in a village, an industrial zone, a mall, etc.).

If one cannot do any of these two choices, another choice is to reduce electricity consumption by using more energy efficient lights and appliances; have more big and open windows with screen, to allow more sunlight and wind.

----------

See also:

Energy Econ 14: Power Rate Hike, Who Colluded?, February 22, 2014 

Energy Econ 15: Electricity Angsts, Presentation at UP Diliman, March 08, 2014

Energy Econ 16: Electricity and Development, March 20, 2014 

Energy Econ 17: Brown outs in Mindanao, Thin Reserves in Luzon, April 11, 2014
Business 360 17: Electricity and GDP Growth, April 15, 2014