P-Noy has the right man in Energy

DEMAND AND SUPPLY By Boo Chanco (The Philippine Star) Updated December 15, 2010 12:00 AM

Jose Rene Almendras is one of the kaklase and kabarkada of P-Noy who entered government with him. But unlike most of the others, Almendras is competent. I had met him only once, at the Tuesday Club, when he was still running Manila Water. He seemed to be doing quite well in the Ayala subsidiary at that time but then again, his predecessor, the ever reliable Tony Aquino had just done all the tough work at the water firm.

Since he took over the job at the Department of Energy, I had heard a lot of positive reviews of Mr. Almendras. I was curious if he is as good as a number of people are saying he is. So I woke up two hours ahead of my usual waking up time last Monday and braved C-5 rush hour traffic to hear his briefing before the Foreign Correspondents Association of the Philippines (FOCAP). I was not disappointed.

I think P-Noy has the right man at Energy. Mr. Almendras seems methodical about his approach to his work, something this administration isn’t known for. He also has the experience and the training to do his work well. He took about 45 minutes to present his program for the energy sector. For someone like me who had worked 10 years in it, I thought he touched all the key buttons. For the first time since Ronnie Velasco and Mario Tiaoqui, I am confident that we have someone there who knows the entire scope of his mission.

Listening to his presentation, I was impressed with how much he has learned about the sector in the five months he has been on the job. He seems to have a good strategic view of the sector, something absolutely lacking in recent past energy secretaries who got themselves tied down fighting fires. He is also honest about the challenges of his job, refusing to sugarcoat situations which he knows are problematic.

I also like the way he seems to be planning for the worse possible scenarios. Cabinet members have a tendency to black out the possibility of bad news. It isn’t always that we get a senior government official who understands the value of risk management and incorporates contingency planning in his department’s road map. This is so important in this sector specially because we are facing some dire possibilities in future supplies of power and even oil.

Almendras is not easy to impress when it comes to trendy energy technologies like so-called renewables like solar and wind. He explained that he does not want future generations to blame him for tying them down to high cost alternatives just to look like he is fashionably green. He said he looks at the cost and the state of the technology when he makes a rational and cold decision on energy sources.

Thus, it doesn’t bother him that the energy sourcing of our country’s power sector that is now more than 50 percent green may go down to less than half by next year when new coal power plants go on line. There is no choice but to use coal for power at this time but I am sure he is also making sure that the new coal fired power plants employ the latest scrubber technology to keep its emissions as clean as possible.

His big problem these days is next year’s power situation in Luzon. Strictly on the basis of numbers and what they know about the reliability of existing power plants, we will be short 300 megawatts during the hottest months of next year. But he is hopeful the summer will not be as hot as this year and that the hydro dams will still be operational.

The problem with next year, he said, is that the decisions to put up new power plants should have been made three or more years ago. There is little that he can do now because a new power plant will take at least three years to build. He didn’t say it outright, but it seems his predecessors under Ate Glue were sleeping on the job.

The most important hurdle he has to meet in order to avert a more serious power supply crisis three years from now is financial in nature. He knows that the only way government can attract much needed investors in the sector is to have consistency of strategy and policy.

The Aquino administration has to reassure a potential power plant investor that the policy regime is such that he can make a decent return on investment. No one makes a billion dollar investment without reasonable assurance of a stable regulatory regime. It helps that Almendras was formerly a banker, so he speaks the language of the potential investors and their financiers.

In formulating the Energy Reform Agenda, Almendras said he looked for strategic solutions that consider the complex interrelations among sector stakeholders. His agenda, he said, addresses 1) Energy Access in terms of availability and affordability, 2) Energy security, 3) Optimal pricing such that the rate is not too low to attract investors and not too high as to have a negative socio-economic impact and 4) Sustainable energy plan.

The other big investment he wants to make is setting up facilities for LNG or liquefied natural gas. He sees LNG as a potential source for transport fuel as well as for power plants. The price of LNG has not gone up as much as LPG simply because more and more LNG fields are being discovered. He wondered aloud how come his predecessors failed to see LNG’s potential. They should have invested in LNG logistical facilities we can use today, he mused.

Going back to the potential for a power supply crisis next year, Almendras said they will start using the submarine transmission cable that connects the Leyte geothermal fields to Luzon. He is confident Cebu will have more than enough power so that they can reverse the flow of electricity to Luzon. He has also asked the power plant operators to do their maintenance shut downs now instead of next year because we will need everything they can produce in 2011.

He admitted that oil smuggling is a big problem and calls it one of his major burning issues. Because a large part of our consumption is not recorded, he said it becomes difficult to do any real planning for the petroleum sector. He said he cannot offer any assurance of price relief for petroleum products as international prices go on an upward trend. But he will make sure the retailers are kept honest.

On ethanol, his other burning issue, he admitted there is still this ongoing debate about food versus fuel. He expects this to continue for so long as the alcohol refiners are located near traditional sugar areas and planters can decide what to do with their produce based on market prices. He wants to put up new sugar plantations dedicated to making fuel alcohol and gear the economics of the project to fuel rather than food prices. They are looking at an area in Isabela for this, he said.

On nuclear, he said they still want to learn more about this source and as such he remains non-committal on this power source. The Energy Department is contributing P100 million towards the completion of an Asean-wide study that would give Asean governments on how to best approach the nuclear option. He doesn’t think a decision could be made in the next ten years.

My general impression of Almendras is that he has done his homework and appears to be a quick learner. If he stays in Energy, I think the country will be in good hands. But I have heard talk that he might be moved to Malacañang as Executive Secretary so he can put some reasonable system in place at the top. But he said he is not interested in moving to the Palace. He said he is not even interested to serve out the whole six years in government, as he is eager to return to the private sector.

In closing, he observed that we have to increasingly isolate Energy from the usual politics if we want to fix things up.Remember, he said, that every time politicians defer energy charges, we pile up costs that will be paid for by future generations. Speaking like a true economist, he said there is no free lunch. We have to make the right decisions so as not to burden our grandchildren with the cost of our mistakes, he emphasized.