Tuesday, April 17, 2018

DOE wants total electrification by 2019, but co-ops fear getting wiped out by big players


By Lenie Lectura - April 16, 2018

The Department of Energy (DOE) is now aiming to complete the electrification of the entire country by next year—or three years ahead of the original target—by easing the entry of private-sector players into the far-flung areas’ power markets.
“We need to fast-track it. We need to accomplish it earlier, at the earliest 2019,” Energy Secretary Alfonso G. Cusi said in an interview.
Cusi committed to implement the directive of President Duterte to remove the barriers to rural electrification. The President, in a meeting with Cusi and Energy Regulatory Commission (ERC) Chairman Agnes  VST Devanadera, focused on the missionary electrification in the unserved areas of the country. The Chief Executive made it clear that he wanted to remove the barriers that are blocking the entry of the private sector to provide better options and more choices for communities.
According to Cusi, Duterte said: “This has to stop!”  He was referring to the hurdles standing in the way of the total electrification of the entire country.
The President instructed the DOE and the ERC to initiate bold executive actions to allow the entry of the private sector so that the Filipino consumers can have access to adequate and affordable electricity that will redound to more economic and social benefits.
This means private investors must assist ailing electric cooperatives (ECs) that are regarded as nonperforming or ineffective and, thus, are barriers to total electrification.
“The wisdom of the President is using emerging technologies targeting far-flung barangays which have had no power. The DOE is fully committed in pursuing his directive,” Cusi said.
The DOE, according to Energy Undersecretary Felix William B. Fuentebella, will craft a master plan to help achieve its goal. The blueprint will include an inventory of unserved and served areas, timeline, among others.
“We should have an inventory. The ECs and DUs must submit first a report on the compliance of serving the areas assigned to them. That’s part of the master plan. Also, the master plan should include a business plan not only for ECs but for DUs, as well,” Fuentebella said in an interview.
He added that the report of the ECs and DUs must be submitted to the National Electrification Administration (NEA) within 45 days from the directive issued on March 22. NEA, in turn, has 15 days to countercheck and finalize a report before turning it over to the DOE.

Resistance
The DOE intends to pursue this, amid strong opposition from ECs.
The Philippine Rural Electric Cooperatives Association Inc. (Philreca) and the Philippine Federation of Electric Cooperatives (Philfeco) said the proposed entry of private investors into the rural-electrification program is based on a wrong premise—that there are nonperforming ECs which are considered barriers to total electrification.
They stressed that ECs are not ineffective. Citing official data, the groups said only 8 percent of the total 121 ECs in the country are ailing or underperforming, but definitely not nonperforming.
“And these are, likewise, not caused by our perceived operational inefficiency, but due to events and situations beyond our control, like natural calamities, political strife, insurgency and more often than not topographic challenges,” Philreca President Presley de Jesus said.
Notwithstanding these difficulties, de Jesus stressed that most ECs have delivered on their mandate to help the government promote sustainable rural development through electricity. Therefore, they cannot be expected to peacefully yield their jobs anytime soon to the private sector.
“We in the electric cooperative industry stand firm in our dogged resolve to fulfill the mission of providing quality service to the country’s rural communities and meet the original objective of total electrification. Because we can, we will stay the course and finish it,” de Jesus said.
While they welcome competition, the EC leaders feared that a state policy on the entry of deep-pocketed private firms in rural electrification lays the groundwork for their cooperatives to give up the ghost, so to speak, affecting the welfare of their stakeholders.
Reynaldo Lazo, president of the Philippine Association of Board of Directors of Rural Electric Cooperatives (Pabrec), thus, called on the government to protect the ECs against private companies that have vested interest in potentially auspicious communities.
“I am okay with the pronouncement of the DOE, knowing it will benefit the member-consumers in areas that are not yet electrified. Encouraging private [sector] participation is fine, as long as it does not interfere and encroach on the operations of the ECs,” Lazo stated. “Because the way we see it, it’s the start [for private investors] just to be in, and then later on they are going to be wielding their power and influence at the expense of our co-ops. We hope this will not happen but that’s how we see it.”
National Center of Electric Cooperatives Consumers Inc. (NCECCO) Chairman Akmad Mamalinta shared the same perspective,
adding that future investors must ensure that their participation is purely based on the intent to give the public better options and not fueled by their greed.
“I believe the regulations are in place before any project can be undertaken. There must be some terms of reference [before they can proceed], which should be the case. They can’t do it just like that,” Mamalinta noted.
“They [private investors] have to work closely with our state regulators to make sure that the other aspects and component of [their] operations will be done in the context of government efforts to provide better electricity services at lower cost to the consumers,” the NCECCO chief added.

Review
A lawmaker is calling for a thorough review of the country’s national-electrification program, with the aim of assessing existing strategies in closing the gap in the number of households across the country that have yet to be energized.
“We want to check on the status of electrification of the country to assess and possibly revise the national electrification strategy,” said Sen. Sherwin T. Gatchalian, who filed Senate Resolution 695.
At present, the government is employing three methods in pursuing the total electrification agenda. The first is through grid extension by ECs, which is carried out by the NEA. The second is by missionary electrification in off-grid areas, which is being implemented by the National Power Corp. The last method is through the entry of qualified third parties in remote and unviable areas.
The said methods are being subsidized, either through government appropriations or pass-on charges to consumers through the universal charge for missionary electrification.
From 2016 to 2018 the government allocated P5.45 billion for sitio (village) electrification and P3.97 billion for the supply of electricity in missionary areas. In addition, around P73 billion has been remitted from the universal charge for missionary electrification collection, as of December 2017.
Despite all efforts, however, Gatchalian said a total of 2,399,108 of unserved households are still not connected to the power grid, equivalent to 16 percent of households in the entire country. The majority of this number is found in Mindanao (1,345,116 households), while Luzon and the Visayas share the remaining half (529,952 and 524,040 households, respectively).
“It is necessary to review the national electrification project of the government by identifying which communities are economically viable for grid extension, how much government appropriations are necessary to complete the extension, and in how long the construction can be accomplished,” he said.
Gatchalian, chairman of the Senate Committee on Energy, also urged the NEA to take advantage of latest technologies, such as the micro-grid systems, to reach far-flung areas that have no access to power grid and still remain unserved.
“It is likewise important to know which communities are best for off-grid electrification, what technologies are suitable for them, and how fast the entry of qualifies third parties in the remote and unviable areas can be facilitated,” he added.
Gatchalian also said some private distribution utilities have already expressed interest in building micro-grid systems in areas or sitios left unserved or underserved by the ECs.
“Micro-grid systems are now available here in the Philippines and we can take advantage of this to fill in the gap under the sitio electrification program. But if there’s an opportunity for the private sector to come in, then, let’s embrace it,” he said.

Supportive
Power firms are interested to help the government’s electrification program.
“We should help ailing ECs. That way, they can improve service,” Aboitiz Power Corp. President Antonio Moraza said in a text message.
SMC Power, Semirara Mining and Power Corp. and AC Energy, likewise, indicated they are supportive and will extend their assistance in any way they can to help achieve the government’s electrification program as soon as possible.
For 2018 the NEA aims to complete at least 1,817 sitios with a budget allocation of P1.817 billion. This is based on the company’s approved budget under the 2017 General Appropriations Act and the 2018 National Expenditure Program.
Under Phase 2 of the Sitio Electrification Program, a total of 19,740 sitios nationwide have been energized. In Luzon 6,541 (33 percent) areas now have electricity; 4,664 (24 percent) in the Visayas; and 8,535 (43 percent) in Mindanao.
While the DOE and the ECs have yet to settle their differences, authorities are keen on making their goal happen. “We will always look at the legal option of the government,” Fuentebella said. “The end-goal here is to remove all barriers so that we can achieve total electrification.”

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