BWorld 777, PDUs vs ECs

PDUs vs ECs

February 18, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2025/02/18/653701/pdus-vs-ecs/

 

Last week, on Feb. 11, the Independent Electricity Market Operator of the Philippines (IEMOP) released the report, “Market Operations Highlights January 2025,” in a media briefing. They also released the monthly prices of the Wholesale Electricity Spot Market (WESM) from June 2021 to January 2025. For the purposes of brevity, I have used the comparative prices in January and June over four years. The prices show a declining trend.

 

In the power generation mix, coal remains the backbone of electricity production in the Philippines. Solar plus wind contributed only 2.2% of total generation in June 2022, 3.5% in June 2024, and 5.5% in January 2025 (see Table 1).

 

 

The anti-coal, pro-wind/solar environmental and business lobbies are misguided if they genuinely want the country to industrialize and create more jobs. Their advocacy to retire coal early will lead to frequent blackouts, and thus to manufacturing companies shutting down and moving to Vietnam, Indonesia, Malaysia, etc. where power supply (mainly from coal plants) keeps rising yearly and where electricity prices are low.

 

Also last week, on Feb. 13, the Energy Regulatory Commission (ERC) released the report, “Analysis of 2024 Power Generation Rates Yields Downtrend Trend.” They highlighted that “Between 2023 to 2024, ERC noted that the national average annual generation rate dropped by almost 10% from P7.50/kilowatt-hour (kWh) to P6.64/kWh… most areas in the Philippines, except for select regions, saw a significant cut in generation rates in 2024.”

 

This is good.

 

But while some regions on certain months have lower generation prices than Metro Manila (which is part of the Meralco franchise area), price is not the only or main criteria if we want the power sector to support sustained economic growth. Very often higher prices, like high body temperatures or fever, are just a symptom and not the cause. The main criteria or consideration should be power stability in order to avoid blackouts, to avoid using candles and gensets.

 

I saw data from the ERC on two important metrics that measure power stability or instability: the System Average Interruption Duration Index (SAIDI) which is measured in minutes in a year, and the System Average Interruption Frequency Index (SAIFI), or how many times in a year a power interruption occurs. The lower the indices, the better, the more stable the power supply is.

 

Three situations are considered: Scheduled maintenance; Power supply or grid-related outages like supply deficiency, plant tripping, transmission maintenance, etc.; and All Others which are things like vehicles hitting poles, etc. So I compared the performance of private distribution utilities (DUs) with electric cooperatives (ECs) in the same province or neighboring geographical area using the ERC’s metrics.

 

For Scheduled maintenance, Meralco’s SAIDI was 51 minutes while Batangas EC (BATELEC) 1’s was 257 minutes (or 4+ hours) and BATELEC 2’s was 1,386 minutes (23 hours).

 

For Power supply, Meralco’s SAIDI was 26 minutes while BATELEC 1’s was 2,676 minutes (47 hours or nearly two days) and BATELEC 2’s was 1,819 minutes (30 hours).

 

This is the main reason why many of the mayors in towns in Batangas province which are under BATELEC 1 and 2 wanted their towns to be serviced by Meralco. The price per kWh between the three power providers may be similar but the frequency and duration of blackouts is horrible. The townspeople are inconvenienced and suffer discomfort, their appliances and bulbs are damaged, and they need to use candles or gensets often, and so on. Meralco opted to help BATELEC and other ECs improve their services via technology sharing.

 

Several mayors also want to be out of the franchise area of Northern Davao EC (NORDECO), formerly Davao North EC (DANECO), and instead have their towns be served by Davao Light and Power Co. (DLPC).

 

The SAIDI in Power Supply in 2023 for DLPC was 61 minutes while that of NORDECO was 1,256 minutes (21 hours). The SAIDI in 2022 for DLPC was 31 minutes and that of NORDECO was 10,283 minutes (171 hours or seven days).

 

The same trend between private distribution utilities vs electric cooperatives can be found in Zambales with Subic EnerZone (SEZ) vs ZAMECO; in Cebu with VECO vs CEBECO.

 

I included in Table 2 North Negros EC (NONECO) because its franchise area includes my birthplace, Cadiz City. The SAIDI of NONECO is bad compared to DUs like VECO, MERALCO, or DLPC.

 

 

This column has argued in the past, and will reiterate here, that all ECs should become corporations, or their franchise areas be served by corporate DUs, monitored by the Securities and Exchange Commission (SEC) along with other public service companies like airlines, bus lines, shipping lines, water companies, etc. ECs should not be protected by a political body — the National Electrification Administration (NEA) — and occasionally subsidized by taxpayers via a higher NEA budget.

 

During the 3rd Ruperto P. Alonzo lecture on the “Energy Trilemma” held on Feb. 7 at the UP School of Economics (UPSE) and organized by the Program in Development Economics Alumni Association (PDEAA), there were two good speakers — Congressman Mark Cojuangco and Eric Francia, CEO of ACEN.

 

Mr. Cojuangco talked about the virtues of nuclear energy and Mr. Francia talked about the virtues of the retail competition and open access (RCOA) provision of the EPIRA law, among others. While ACEN is gung-ho about having a purely RE portfolio, Mr. Francia is wise enough to recognize the role of coal and gas plants in ensuring the power stability of the country.

 

The lecture was followed by the PDEAA alumni homecoming, also at UPSE, and we want to acknowledge and thank the National Grid Corp. of the Philippines (NGCP) for its donation, which I failed to mention in this column last week. The NGCP’s role as provider of the transmission backbone and highway between many power plants to DUs, ECs, and retail electricity suppliers is important. 

PhilStar 28, Why Philippine growth of 6 to 6.5% in 2025 is possible

Why Philippine growth of 6 to 6.5% in 2025 is possible

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star 

February 13, 2025 | 12:00am

https://www.philstar.com/business/2025/02/13/2421136/why-philippine-growth-6-65-2025-possible

 

The three quick reasons for this argument are: election cycle growth, low base growth and declining unemployment and inflation. The former refers to either a high growth the previous year is retained in election year, or election year has higher growth than previous year. Recent election years were 2013, 2016, 2019, 2022; then this coming May 2025.

 

The base effect growth refers to a low base and low growth the previous year often leads to higher base and higher growth the next year. Here are the numbers.

 

Election cycle growth

 

In 2012 and 2013, the Philippines has flat high growth of 6.9 and 6.8 percent respectively. Other neighbors have opposite result, Indonesia from 6.0 to 5.6 percent, Malaysia from 5.5 to 4.7 percent, Thailand from 7.2 to 2.7 percent.

 

In 2015 and 2016, the Philippines grew from 6.3 to 7.1 percent while Vietnam decelerated from 7.0 to 6.7 percent, Malaysia from 5.0 to 4.5 percent, Japan from 1.6 to 0.8 percent.

 

In 2018 and 2019, the Philippines has another flat high growth of 6.3 and 6.1 percent respectively. Many neighbors have deceleration: Malaysia has 4.8 and 4.4 percent, Singapore has 3.5 and 1.3 percent, Thailand has 4.2 and 2.1 percent. China has 6.7 and 6.0 percent, Korea has 3.2 and 2.3 percent, Japan has 0.6 and -0.4 percent.

 

And in 2021 and 2022, Philippines grew from 5.7 to 7.6 percent. Further recovery from horrible economic contraction in 2020 also contributed to this high growth, aside from being an election year. Several neighbors have opposite results: Singapore has 9.7 and 3.8 percent, China has 8.4 and 3.0 percent, Korea has 4.6 and 2.7 percent, Japan has 2.7 and 1.2 percent.

 

So there is reason to be more optimistic in 2025 than 2024. People and politicians withheld spending and saved last year, and will spend higher this year, particularly in official campaign period mid-February to early May.

 

Low base growth

 

The clearest example of this is from a contraction of -9.5 percent in 2020 to 5.7 percent growth in 2021, then 7.6 percent in 2022. Before that, a very low 1.4 percent in 2009 then 7.3 percent in 2010; also 3.9 percent in 2011 then 6.9 percent in 2012. The contraction in 2020 was the worst economic performance in Asia, and the worst in Philippine economic history since post World War 2. That is how dictatorial the Philippines lockdown in 2020 was compared to lockdown policies of many countries in the world.

 

Household consumption constitutes 73 percent of GDP. In 2024, it grew only 4.8 percent, low base and low growth, while the average growth from 2012 to 2019 prior to lockdown was 6.2 percent.

 

Investments or gross capital formation constitutes 22 percent of GDP. So household consumption plus investments constitute 95 percent of GDP. If investments will continue its average growth of nine percent in 2022 to 2024, and if household consumption will grow by at least 5.5 percent this year, these two can significantly pull up overall GDP growth to 6.0 to 6.5 percent. The growth target by the economic team in 2025 is achievable.

 

Declining unemployment and inflation

 

Last week the Philippine Statistics Authority (PSA) released the labor data for December 2024, it was another low 3.1 percent of total labor force. So the full year January-December 2024 unemployment rate was only 3.8 percent – an all-time low since the 80s or even earlier period. Another indicator of good economic stewardship by the economic team and other agencies in attracting and keeping job-creating investors and entrepreneurs.

 

Also last week the PSA released the inflation data for January 2025, only 2.9 percent. Philippine inflation declining from 5.6 percent in 2022, 6.0 percent in 2023, and 3.2 percent in 2024.

 

To summarize, these four factors will further support my contention that a 6.0 to 6.5 percent growth in 2025 is achievable: (a) low unemployment rate momentum, meaning more people have jobs and spending power; (b) deceleration of inflation in 2024 and January 2025 that will inspire more consumer confidence this year; (c) low base in household consumption in 2024; and (d) high election spending in the first two quarters this year.

 

And lastly I will add that energy prices this year will stabilize at low prices mainly because of Trump’s drill baby drill policy. Oil, LNG and coal production and exports by the US will further rise, helping depress their global prices, and translated to lower energy and electricity prices domestically.

BWorld 776, On the ERC rates reset and nuclear energy

On the ERC rates reset and nuclear energy

February 11, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2025/02/11/652275/on-the-erc-rates-reset-and-nuclear-energy/

 

Last week, on Feb. 3, the House Committee on Energy held a public hearing about a Meralco refund and an investigation on the absence of a rate reset in the last decade for Meralco and the National Grid Corp. of the Philippines (NGCP).

 

The main issues were previously reported here: “ERC amends resolution to keep Meralco regulatory reset on track” (BusinessWorld, Dec. 29, 2024), “Senate bill extending Meralco franchise OK’d on 2nd reading” (BusinessWorld, Jan. 29), and “Meralco to refund P19 billion to consumers” (Philippine Star, Jan. 29).

 

This column and reactions in BusinessWorld also discussed the same topic two years ago: “Low power supply and Meralco distribution cost” (April 3, 2023), “Response to Bienvenido S. Oplas, Jr.’s April 3 piece, ‘Low power supply and Meralco distribution cost’,” by Alfredo Non (April 7, 2023), “More on Meralco distribution charges and energy transition” (April 13, 2023).

 

The representatives at the House Committee hearing last week focused their questions on former Energy Regulatory Commission (ERC) Commissioner Alfredo Non, who led the ERC for seven years (July 2011 to July 2018) when the scheduled fourth reset was not made. He said, among others, that the reset computation is very complicated, and a correction was needed in the third reset.

 

So far Meralco has refunded P48 billion to the consumers and is scheduled to refund another P19 billion. Public assumption was that Meralco’s distribution rate was bloated but when I checked the numbers from 2011 to 2018, this is not the case.

 

I checked the Meralco website and disaggregated the total charges from August 2011 to July 2018. I chose this period because this is the time that Mr. Non was ERC Commissioner, and he had oversight function for Universal Charge in Missionary Electrification (UC-ME) and Feed-in Tariff Allowance (FIT-All). UC-ME is a subsidy to customers of off-grid islands and provinces while FIT-All is subsidy to renewable energy (RE) companies that provide intermittent power like solar and wind under the RE law of 2008 (RA 9513).

 

I found that the generation rate by generation companies (gencos), the NGCP’s transmission rate, Meralco’s distribution-supply-metering (DSM) rate, system loss, government taxes, and subsidies to lifeline customers were generally flat over those seven years.

 

But the UC-ME rate increased significantly, from only 10 centavos in 2011 to 44 centavos in 2018; and the FIT-All rate increased from four centavos in 2015 to 24 centavos in 2018 (see Table 1).

 

So three narratives are debunked or belied by the above numbers. The first being that electricity prices “keep rising,” since the prices in 2016-2017 were even lower than the prices in 2011-2012. Secondly, that gencos of conventional power plants like coal and gas, the NGCP, and private distribution utilities like Meralco are to blame for the refund — which is a far out idea. And third, that the ERC leadership in that period were blameless — it was they, especially Mr. Non, that allowed the big jump in the UC-ME and FIT-All.

 

RPA ENERGY LECTURE

Also last week, on Feb. 7, the 3rd Ruperto P. Alonzo (RPA) Annual Memorial Lecture was held at the UP School of Economics (UPSE) in Diliman, Quezon City. The lecture, organized by the UPSE Program in Development Economics Alumni Association (PDEAA), was titled “Energy Trilemma: An Analysis of Philippines Situation.”

 

The four speakers were House Committee on Nuclear Energy Chairperson Representative Mark Cojuangco, Department of Energy Undersecretary Rowena Guevarra, ACEN President Eric Francia, and Institute of Climate and Sustainable Cities Advisor Albert Dalusung. It was moderated well by energy lawyer Jay Layug. I will discuss in another column the discussions that afternoon. For now I want to highlight the potential role of nuclear energy in helping reduce inflation.

 

Countries with a declining share of nuclear power over total generation from 2003 to 2023 have experienced generally high or rising inflation rates, and vice versa. Significant declines in nuclear/total generation were seen in Sweden, the UK, Germany, and Japan and their inflation rates increased.

 

In contrast, Asian nations that have a generally flat share of nuclear/total generation, or have increased it over the same period have experienced low or declining inflation rates — like China, India, South Korea, and the United Arab Emirates (see Table 2).

 

 

Mr. Cojuangco is correct in consistently and passionately advocating that the Philippines resume the operation of the nuclear plant in Bataan, and the construction of large nuclear plants in Pangasinan and other provinces in the country.

 

Meanwhile PDEAA officers and organizers want to thank the following who gave donations for the alumni homecoming that followed after the RPA lecture. Donations, mostly in kind, were used for raffle prizes and giveaways: Ferdinand Constantino, Jack Teotico of Galerie Joaquin, Aboitiz Power, GSIS, Meralco, the Metrobank Foundation, and Robinsons Retail. Thank you.

Canada Day 2025

Last Thursday June 26 was Canada Day held at Fairmont Hotel, Makati. 

Below my co-participants in the "Philippines Nuclear Trade Mission to Canada" last March 2024 led by Acting Secretary of DOE Sharon Garin (6th from left). Also in the photo is CA Ambassador to PH David Hartman (next to Sec. Garin). Not present here are officials from DOST, ERC, and other local media who came with us.

The ballroom was full, many from the diplomatic community in Manila plus Philippines government officials and business leaders.

Thank you, Canada Embassy. Special mention Guy Boileau and Eleonore Rupprecht.

BWorld 775, On PhilHealth’s excess funds again, and Open Government Partnership

On PhilHealth’s excess funds again, and Open Government Partnership

February 6, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.
https://www.bworldonline.com/opinion/2025/02/06/651406/on-philhealths-excess-funds-again-and-open-government-partnership/

 

Last Tuesday, Feb. 4, the Counsel of Government-owned and -controlled corporations (GOCCs), Solomon M. Hermosura, went to the Supreme Court to defend the transfer by the Philippine Health Insurance Corp. (PhilHealth) of excess funds to the National Treasury — saying that it was lawful and that it does not impair the constitutional right to health, and thus petitions against it should be dismissed by the Court.

 

It is lawful, he said, because it complies with the Department of Finance (DoF) Circular 003-2024. It affirms the Filipinos’ right to health because in 2024, PhilHealth increased the all-case rates package by at least 95%, and enhanced outpatient packages for chronic conditions with greater coverage for critical and life-saving treatments.

 

Despite remitting P60 billion in excess funds last year, Mr. Hermosura pointed that PhilHealth’s operating budget for 2025 has been increased to P284 billion — P25 billion more than its 2024 budget, and P118 billion more than its 2022 budget of P166 billion.

 

Good arguments, Mr. Hermosura. And a good initiative, Finance Secretary Ralph G. Recto. I have argued before and I will argue again that between health parochialism (and education or social work parochialism, etc.) and fiscal realism, the latter should prevail.

 

Health and social welfare spending by both national and local governments jumped a great deal from 2020-2024, even if the virus scare has simmered starting February 2022 when the election campaign period started.

 

The budget deficit averaged P1.54 trillion/year in 2020-2023, from only P0.52 trillion/year in 2017-2019. Financing or borrowings averaged P2.20 trillion/year in 2020-2023, from only P0.81 trillion/year in 2017-2019.

 

But in 2024, some fiscal “mini-miracles” happened.

 

One, non-tax revenues jumped from an average of P333 billion/year in 2020 to 2023, to P555.3 billion from January-November 2024 alone. This was mainly because Mr. Recto increased the mandatory remittances of GOCCs from 50% to 75%.

 

Two, financing or borrowing decreased from P2.2 trillion/year in the last four years to only P1.24 trillion in January-November 2024. This was mainly because the DoF avoided new borrowings to finance certain expenditures by tapping the excess funds of PhilHealth and the Philippine Deposit Insurance Corp. or PDIC.

 

Again, I support the DoF and the rest of economic team, and the GOCCs Counsel for arguing the legal and fiscal rationality of transferring the excess funds of PhilHealth and PDIC to the National Government.

 

Government should cut not only borrowings but also expenditures. Many subsidies must be cut and discontinued, people should go back being self-reliant and not dependent on the state for their household needs. In exchange, the state should cut income tax and other taxes to allow the people to keep more of their money and savings for themselves and their households.

 

OGP MEETING

The Open Government Partnership (OGP) Asia and Pacific Regional Meeting Philippines 2025 kicked off this week, Feb. 3 to 7, with events mostly held at UP Bonifacio Global City (BGC) and the Grand Hyatt Manila in BGC. Among the many topics discussed were transparency in public procurement, digital governance, anti-corruption and public integrity.

 

I attended the panel on “Leveraging strategic collaborations to address corruption” yesterday, Feb. 5, at the Grand Hyatt. It was sponsored by Stratbase and Democracy Watch and the keynote speaker was Budget Secretary Amenah F. Pangandaman.

 

Corruption is a perennial issue in practically all governments around the world, from multilateral agencies to national down to local governments. I checked Transparency International’s corruption index, and limited my comparison to four ASEAN countries. I then compared their index scores with their employment data to test the hypothesis that “high corruption is equal to low job creation and high unemployment.”

 

The Philippines has been declining on the corruption perception index over the last 10 years, and its unemployment rate was also declining (except during 2020-2021 lockdown dictatorship). Indonesia exhibits the same pattern.

 

Malaysia has had wild fluctuation in the corruption index while its unemployment rate has been falling back to pre-lockdown levels. Vietnam has a weird situation: it is rising on the corruption index yet has declining unemployment (see the accompanying chart).

 

So, open government is good and should ultimately lead to more transparency and less corruption. But it will take time because the corrupt personnel and officials will always find ways to cover up their acts.

 

To effectively cut down on corruption, we should move towards cutting down the size of government, and cutting the government’s spending, bureaucracies, and subsidies. And we should cut the taxes and borrowings needed to sustain big government.

 

In December 2023, Argentina’s President Javier Milei’s first month in office, he cut the number of government ministries or departments from 19 to nine and quickly achieved a budget surplus after two months, and slowly stabilized prices. There was no civil war as predicted by the anti-deregulation lobbyists and activists.

 

US President Donald Trump and Department of Government Efficiency (DOGE) czar Elon Musk are also doing a similar quick and big cuts in federal agencies, bureaucracies, and expenditures. Milei’s pace of deregulation and his results have inspired Trump and Musk to do their own deregulation and spending cuts, borrowing cuts, and, very soon, another tax cut.

PhilStar 27, From energy regulation to deregulation, Part 2

From energy regulation to deregulation, Part 2

 

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star 

February 6, 2025 | 12:00am

https://www.philstar.com/business/2025/02/06/2419448/energy-regulation-deregulation-part-2

 

In 2000 or one year before the Electric Power Industry Reform Act of 2001 (EPIRA, RA 9136), the primary energy consumption (PEC, for transportation, cooking, electricity, etc.) of these four ASEAN countries in exajoules (EJ) were as follows: Indonesia 4.19, Malaysia 2.20, Philippines 1.11, Vietnam 0.77. One EJ is equivalent to 277.78 terawatt-hours of electricity.

 

In 2010 or after a decade, their respective PEC in EJ were: 6.26, 3.36, 1.23, 1.94. Vietnam overtook the Philippines in 2004. And in 2023, their respective PEC in EJ were: 10.11, 4.81, 2.19, 4.89.

 

The percentage increase from 2000 to 2023 were as follows: Indonesia 141.3 percent, Malaysia 118.5 percent, Philippines 98 percent, Vietnam 534.5 percent.

 

The main reason for this perhaps is that Indonesia, Malaysia and Vietnam subsidize their energy while the Philippines taxes its energy. The most recent energy tax hike was under the TRAIN law of 2017 (RA 10963): diesel from zero to P6/liter, gasoline from P4 to P10/liter, LPG from zero to P3/liter, coal from P10 to P150/ton.

 

Aside from energy taxation, energy regulation must have contributed also to slow expansion of PEC in the Philippines relative to its ASEAN neighbors like Indonesia, Malaysia and Vietnam.

 

The Energy Regulatory Commission (ERC) was created under Chapter IV of EPIRA law with a primary function to “promote competition, encourage market development, ensure customer choice, and penalize the abuse of market power” (Section 43).

 

There is a Congress Bill amending EPIRA particularly the ERC. In the latest House Committee Report No. 1381 submitted by the Committee on Energy and Committee on Appropriations last Jan. 25, 2025, one proposal is to have “benchmarking rates” not only for transmission and distribution but also for “procurement of necessary power supply for distribution utilities (DUs) and ancillary services (AS)”, meaning power supply agreements (PSAs) between generation companies (gencos) and DUs, AS.

 

The ERC itself has been conducting consultation and group discussion about this plus other amendments in EPIRA. This “benchmarking” for power generation is wrong and unnecessary, here are five reasons why.

 

One, generation sector under EPIRA is deregulated and competitive, no monopoly or oligopoly in any region or any technology or source of electricity. Those who over-price will risk not getting any supply contract, those who cartelize can be blindsided by new players and merchant power plants.

 

Two, competitive selection process (CSP) supervised by the ERC itself is sufficient to ensure price competitiveness. There is no provision in EPIRA stating that the costs of generators shall be regulated by the ERC, no provision that generators must disclose their costs to the ERC.

 

Three, the retail competition and open access (RCOA) provision of EPIRA makes the end-consumers as ultimate regulator -- in pricing, electricity source and other criteria. ERC itself can become relevant only when there is breach of contract between the gencos and end-consumers.

 

Four, “one price fits all” via benchmarking in generation is price control and hence, price dictatorship. Price differentiation under consumer segmentation allows for best and competitive pricing for different consumers. Even in the same bus company plying same route say Cubao to Baguio, there is no single monthly pay for all drivers, the more experienced drivers are paid higher than less experienced ones.

 

Five, the main factor that affect electricity pricing is how large the supply is relative to the demand, which determines the level of supply margin and reserves. Energy regulation should be kept to the minimum so that more players, more investors will come in to expand power supply and hence, increase power reserves that can bring down electricity prices both short- and long-term.

 

Again, the most expensive electricity is no electricity, a blackout. The rich will turn to gensets running on diesel, more costly and more polluting while the poor will turn to candles which can cause fires and damage to lives and properties.

 

Energy deregulation to further expand energy investment and supply can be the elephant in the room in terms of ensuring price competitiveness. Regulation should focus on enforcement of contracts between power suppliers and consumers, penalize the wrong-doers, discipline the market towards more competition and not deception.

 

RPA Lecture on Energy Trilemma

 

Tomorrow Feb. 7 at 3 p.m., the 3rd Ruperto P. Alonzo (RPA) Annual Memorial Lecture will be held at the Elizabeth Yu Gokongwei room of UP School of Economics (UPSE), Diliman, Quezon City. The speakers will be House committee on nuclear energy chairperson Rep. Mark Cojuangco, DOE UnderSecretary Rowena Guevarra, ACEN president Eric Francia and Institute of Climate advisor Albert Dalusung. The lecture is free and open to the public, no need to pre-register.

 

After the RPA lecture, the UPSE Program in Development Economics (PDE) alumni homecoming will follow at the same venue.  Prof. RPA (+) was a highly respected faculty member of UPSE and PDE was his beloved program. Hence, the annual lecture was named after him. Before he passed away, he did a number of energy economics research, he was focused on energy security, stability and price competitiveness. Hence, he was agnostic about where the energy source will come from so long as the power sector can support and sustain the country’s high growth agenda.

BWorld 774, Third-fastest growth among the largest economies in the world

Third-fastest growth among the largest economies in the world

February 4, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2025/02/04/650662/third-fastest-growth-among-the-largest-economies-in-the-world/

 

Last Thursday the Philippine Statistics Authority (PSA) released the country’s fourth quarter (Q4) GDP performance. It was 5.2%. This means that the full year (Q1-Q4) 2024 growth was 5.6%. Here I will compare this with other major countries, specifically the 60 largest economies in the world when measured by GDP size at purchasing power parity (PPP) values of at least $350 billion in 2023.

 

The result shows that the Philippines had the second-fastest growth among the 60, next to Vietnam. But India looks to be second because its Q1-Q3 growth was already at 6.6%, so the Philippines will likely be the third fastest among the 60 largest economies in the world (see Table 1).

 

I checked the press statements released by the economic managers regarding this. Finance Secretary Ralph G. Recto said that: “While this is below our target, we continue to be one of the fastest-growing economies in both the region and the world… We remain optimistic about our outlook for 2025. A lower inflation rate gives us more room to ease interest rates… CREATE MORE (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Bill) taking full effect, we anticipate more investments materializing, especially with the strong business interests we attracted from our recent investor engagements at the World Economic Forum and Philippine Business Dialogue in the Netherlands.”

 

Budget Secretary Amenah F. Pangandaman expressed similar optimism, saying that: “While our target for 2024 is 6% to 6.5%, the results still put the Philippines among the fastest-growing economies in the Asia-Pacific region, outpacing many of our ASEAN neighbors… despite record-breaking six consecutive storms between end-October and middle of November which greatly affected the economy. We still hit 5.6% in spite of all these storms shows that our formula for growth is working.” 

 

I agree with the assessment of the two officials. The weather was bad in Q4 last year but may be favorable to us in Q1 this year. It has been generally wet and cloudy. I think agriculture will post high growth this quarter as many rice fields were still planted with their third crop while before they should be on fallow or rest period.

 

I checked some details of our full year 2024 GDP performance via expenditure or demand side, and industry source or supply side.

 

On the expenditure side, fast growth of 7.5% was registered in investments or capital formation and it makes up 24% of GDP. Government consumption also grew by 7.2%, but it is only 14% of GDP.

 

On the industrial origin side, fast growth of 6.7% was registered by the services sector, which constitutes 63% of GDP. Agriculture which constitutes 8% of GDP, contracted at -1.6%, largely due to the series of storms that affected many crops (see Table 2).

 

 

US President Donald Trump’s energy policy of “drill baby drill” should lead to higher production and exports of oil, LNG, and coal. Thus, we can expect lower energy prices contributing to lower inflation in the next four years. We should take advantage of this great opportunity, with our agriculture using more machines to raise productivity while reducing crop waste and losses. Our power generation sector, which relies more on gas/LNG and coal, will experience lower fuel costs and this can lead to cheaper electricity prices.

 

Low energy prices and low inflation improve consumer confidence. Household consumption, which constitutes 73% of GDP, should pull up overall economic output, and create more jobs for our people. We should complement this with cuts in bureaucracies and regulations, cuts in public spending to reduce the budget deficit, reducing borrowings, and reducing interest payments. 

PhilStar 26, From energy regulation to deregulation, Part 1

From energy regulation to deregulation, Part 1

 

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star 

January 30, 2025 | 12:00am

https://www.philstar.com/business/2025/01/30/2417774/energy-regulation-deregulation-part-1

 

The Electric Power Industry Reform Act (EPIRA, RA 9136) was signed on June 8, 2001, and will turn 24 in five months. I will compare electricity production from 2001 onward in the three largest ASEAN countries by population—as of 2024, Indonesia has 283 million, the Philippines has 116 million and Vietnam has 101 million.

 

The power generation in terawatt-hours (TWH) for Indonesia, the Philippines and Vietnam was as follows: 101.7, 47.0, and 30.6 TWH in 2001; and 133.1, 56.8 and 57.9 in 2006. Vietnam overtook the Philippines in 2006. In 2011, the figures were 183.4, 69.2 and 101.5 and in 2023, 350.6, 119 and 276.4 TWH.

 

The percentage increase from 2001 to 2023 was: Vietnam 803 percent, Indonesia 245 percent and the Philippines 153 percent. Vietnam and Indonesia must have been doing something better to provide more electricity for their large populations and big manufacturing plants compared to the Philippines. Their energy regulation may be less restrictive than ours.

 

EPIRA’s Chapter IV is titled “Regulation of the Electric Power Industry,” and the Energy Regulatory Commission (ERC) was created (Section 38). The main purpose of the ERC is the “Promotion of consumer interests” (Section 41), and its main function is to “promote competition, encourage market development, ensure customer choice, and penalize the abuse of market power in the restructured electricity industry” (Section 43).

 

As a free-market advocate for 25 years now (I co-founded Minimal Government in 2004, which was renamed Minimal Government Thinkers in 2008), I advocate fewer bureaucracies, lower taxation and regulations, more market and capitalist competition and greater individual choice and freedom. I am particularly unfriendly toward government price control, whether direct or indirect, and I strongly support increasing supply, attracting more players and fostering competition.

 

I checked the ERC resolutions from their website—dozens upon dozens of regulations are issued every year, and most are highly legalistic. Engineers, entrepreneurs and economists like me struggle to keep track of them, let alone understand the growing number of legal documents each year. This complexity alone is bad for business in the power sector.

 

Nevertheless, I found a few resolutions that I think are anti-competition, anti-market development and therefore anti-EPIRA’s Section 41.

 

One, price control via the secondary price cap in the Wholesale Electricity Spot Market. ERC Resolution 08, Series of 2014 (May 5, 2014), set a price cap of P6,245/MWh or P6.245/kWh for a 72-hour period, despite a rolling price of P8,186/MWh. Then, Resolution 20 (Dec. 15, 2014) made this price cap permanent, applying it once a P9,000/MWh rolling average price was breached over a seven-day period.

 

Price control is wrong. At times of high demand and low supply, due to scheduled, unscheduled or extended maintenance of big power plants, oil-powered peaking plants step in to provide additional supply—but at higher prices, reflecting the higher cost of oil as a fuel, as well as the capital expenditures and maintenance of these plants. They must be properly compensated to help prevent blackouts and the need for candles.

 

Imposing price control means that new peaking plants will not be built because the ERC, the government, and the public will demonize them if they charge higher rates. Yet the most expensive electricity is no electricity at all—a blackout. The regulators are indirectly saying that “cheap but not available” is preferable to “expensive but available” electricity, even for a few hours or days each year. This largely explains why yellow-red alerts continued even last year.

 

Subsequent ERC resolutions in May 2017 and July 2021 reduced the rolling period but maintained the price control policy to this day.

 

Two, high reliability standards and fines. ERC Resolution 10, Series of 2020 (Dec. 19, 2020), introduced the Reliability Standards/Interim Outage Rules. Under this, ERC reduced the allowed outage time for maintenance or planned shutdowns and began penalizing generation companies (gencos) that exceeded these limits.

 

This is wrong. When a power plant extends its maintenance shutdown, it already incurs losses due to its inability to sell power. If it has a supply contract, it must buy alternative power at a higher price. Excessive regulatory suspicion and restrictions discourage power expansion.

 

Regulators are not onsite plant engineers. Regulators do not risk losing their jobs if a company loses money due to extended maintenance and fines on top of that. Thus, regulators themselves may be violating EPIRA’s spirit and purpose—encouraging market development and competition.

 

Three, price regulation after competitive price selection. ERC Resolution 16, Series of 2023 (Oct. 6, 2023), introduced the Competitive Selection Process (CSP) Guidelines. It requires distribution utilities to secure their Power Supply Agreements (PSA) through a competitive selection process (CSP) involving competing gencos, with CSP parameters set by the ERC itself. Thus, any winning bid should already be the least-cost option for consumers.

 

Then, ERC introduced a two-level review process: Step 1: CSP compliance; Step 2: PSA reasonableness. Why is Step 2 needed? Does this mean that if ERC deems the CSP result “unreasonable,” it can override the most competitive winning bid?

 

Regulators are not entrepreneurs. They do not lose money if a company teeters on bankruptcy due to selling at a loss over a 10- to 15-year PSA. Moreover, ERC lacks clear guidelines on how it determines PSA rates to be “unreasonable.”

 

I will continue this discussion in another column. For now, I think the ERC should consider the regulatory strategies of Milei (Argentina President) and Trump (US President). Milei mandated that for every new government employee hired, three must be retired or fired. Trump ordered that for every new regulation, regulators must abolish two or three old ones. There’s energy deregulation somewhere, we should try that.