Needed: A coordinating body for energy sector

Manila Standard Today

By Rudy Romero | Feb. 04, 2014 at 12:01am

After watching the televised proceedings of the Senate committee on energy’s hearing on the most recent Meralco price increase, and having read all the press accounts of that much-criticized price action by this country’s largest electricity distributor, I am left wondering what the primary role of the Department of Energy is, what is expected of the head of that department and how Meralco was able to get away with charging its 5-million-plus customers an enormous price increase.

All the energy-sector players were represented at the hearing and have had their say in the press. DoE, the Energy Regulatory Board, Power Sector Assets and Liabilities Management Corp., Wholesale Electricity Spot Market Corp., Philippine Electricity Market Corp., the National Grid Corporation of the Philippines, the independent power producers and, last but not least, Meralco were all represented. The Energy Secretary and the representatives of the enumerated entities duly gave testimony. They basically reiterated what they had already stated to the press.

A few additional morsels of essential information—chief among these were data relating to the operations of PSALM’s 600-megawatt Malaya plant and the plant’s place in the Luzon power grid—were presented, but what the Secretary of Energy, the chief executive of Meralco and the president of WESM told the senators were mostly restatements of what they had already said in other fora.

To be able to arrive at a fair and valid judgment on whether the proposal for a P4.15-per- kilowatt-hour price increase should not have come to pass and whether the government and the private sector decision-makers were remiss in the discharge of their respective responsibilities, we need to recall the admissions that were made in the course of the Senate committee hearing.

By far, the most important of these admissions was that the simultaneous shutdowns of the Malampaya plant, far from being a bolt out of the blue, had been scheduled and publicized long beforehand, that a number of IPPs —these are participants in the WESM system—subsequently announced their own shutdowns and that all these proposed shutdowns were known to DoE and ERB. It would have been reassuring to the nation at large, and to Meralco’s customers in particular, that these shutdown plans were not known to DoE and ERB, but, as already stated, this apparently was not the case. DoE, ERB and, presumably, PSALM apparently knew about them.

Another admission was that ERB, the power sector regulatory agency, did not conduct a thorough analysis of the rationale for Meralco’s proposed increase—including a query as to why the IPPs in question were planning to shut down their plants at about the same time as Malampaya—and virtually casually allowed the Meralco increase to go through.

Neither did DoE take forceful action toward ascertaining whether the IPP’s proposed shutdowns were a matter of technical life-and-death or could be deferred until Malampaya power was fully back on stream.

Which brings me to the issue of the Malaya power plant.

I am not a mechanical engineer, but I do know the meaning of break-even points and profitable production levels, and in the course of the Senate committee hearings, it was brought out that Malaya electricity was expensive electricity—I seem to recall the figure P45 per unit— that adding Malampaya-generated power would raise the WESM price very substantially and that Malaya management’s offered bid to WESM was made merely to comply with the must-offer rule for power generators.

All these issues have some merit, and the Secretary of Energy, under intensive grilling from the non-techie but highly interested Senators, tried his best to present a we-did-everything-we-could view of the government’s performance under the circumstances.

Did the government—chiefly DOE and ERB—do a good job under the circumstances? I don’t think so.

Let’s start with ERB. Quite apart from the fact that it is headed by an individual who does not possess the professional credentials required of a chief decision maker, ERB in this latest Meralco episode clearly failed to ask the power distributor and the IPPs the searching and consumer-protective questions needed to establish whether the P4.15-per-kwh increase was warranted. Truth to tell, the electricity consumers might as well just go back to protecting their interests by themselves.

Finally, there is DoE. Even if it were not specifically stated in the law that created it, DoE should have done everything it could have in the Meralco price increase episode. Stated more bluntly, DoE fell down on the job. Like the other components of the Cabinet, DoE is mandated to oversee the whole sector it was meant to look after. DoE must make it its job to know everything that is happening, and is likely to happen, in the energy sector of the Philippine economy. It must lead, it must point the way, it must make hard decisions of policy. In the Meralco case, the Secretary of Energy and his crew behaved like mere order-takers.

The furor created by the Meralco price increase would not have happened if there had been close coordination between the government and the private-sector energy-industry players. The Aquino administration needs to create a coordinating body for the energy sector, with DoE as coordinator and the heads of all the chief industry players as members. The coordinating body must receive full and timely information regarding all the matters—supply levels, price changes, operating schedules, operating plans, exploration activities, etc.—that have potential for a significant impact on Philippine consumers and producers.

Had such a coordinating entity already been in place, all the contentious issues would have been factored into the equation and a P4.15-per-kwh increase would almost certainly not have gotten to the table.   source

E-mail: rudy_v_romero@yahoo.com