(The Philippine
Star) | Updated December 13, 2016 -
12:00am
Power rates are up this jolly
month of Christmas, and this time, the culprit is the strong dollar, thanks to
US president-elect Donald Trump and a sense of collective euphoria sweeping
America as it looks forward to its own version of change.
Of course, the strong dollar is
also responsible for many other recent price increases that have whittled a bit
the Yuletide spirit of Filipinos enjoying their 13th month bonuses, or the
higher peso equivalent of remitted currencies sent home by our overseas working
countrymen.
We saw pump prices of petroleum
products, including cooking fuel or LPG, leap up by a few pesos, regarded as a
“phenomenon” during an era of soft crude prices. The price of imported goods
has also increased, the most notable being vehicles lifted from abroad and
wholly paid for in dollars.
But the topic of the strong US
dollar is reserved for another day. Today, we look at power rates, not just as
a function of a weaker peso of recent days, but in relation to a forecasted
manufacturing sector resurgence, not by our ever-optimistic Department of Trade
and Industry officials, but by the more credible Ayala Corp. chairman and CEO
Jaime Augusto Zobel de Ayala (JAZA).
High value manufacturing hub
For those that missed this news
bit, the Ayala honcho had intimated to media during a recent forum that the
Philippines was in a unique opportunity to reinvent itself into a high-value
manufacturing hub by relying on its solid footing in the electronics components
industries.
Specifically, JAZA singled out
the global automotive industry’s recent revolution involving automation and
electrification, one that has increasingly brought a vehicle’s content of
electronic components to more than half of all its parts.
Smart cars are now becoming the
new reality in mobility, but the trend to introduce electric vehicles, either
partially or fully running on electricity, as well as technical breakthroughs
in bringing self-driving cars to the streets in the near future, are bringing
about new radical changes.
Automation is also becoming
apparent in many other industries, and while this has had a lesser impact, it
nevertheless contributes to changing the landscape of the global manufacturing
sector.
Correctly, this change is an
opportunity that the Philippines has a better chance of seizing given its
stronger economic footing compared to other countries in the region, and the
reality of double digit growth in the local automotive industry.
The Ayala scion pointed out
challenges, among them the need for a unified roadmap by the government that
would pave the way for this transformation. Broadly, he mentioned
infrastructure and capability building, both by the downstream business sectors
and human resources.
High power cost
Not singled out, but not
necessarily a problem, was the high power cost in the country. In the Asian region,
the Philippines continues to have one of the highest rates in power generation,
a fact that has deterred our dream of becoming an export-oriented manufacturing
hub for decades.
Even our strong electronics
industry complains of this burden which is only offset by the unique advantage
of having a compliant, relatively intelligent, and cheap workforce. Otherwise,
these electronics firms would rather operate in other countries that have
electricity rates sometimes just a third of what is charged here.
Therefore, we could reasonably
expect to grow our electronics manufacturing sector to make it one of the
significant export hubs in the world, but it will remain perpetually challenged
by the competitive advantage of low electricity rates offered in other countries.
This is why other manufacturing
industries like chemicals, metals, glass, petroleum, paper and plastics have a
difficult time competing abroad. These industries are able to survive primarily
by catering to local demand, and do not attempt to produce products for export.
Extend period of stranded cost recovery
Is there a solution? Inasmuch as
our businesses always point to the high cost of power as the biggest barrier to
Philippine competitiveness, finding appropriate remedies need to be prioritized
by the Department of Energy until competitiveness in power rates is achieved.
One big component in the current
pricing structure continues to be the stranded cost burden resulting from the
gargantuan losses incurred by the National Power Corp. (Napocor) accumulated
during the period before the 2001 Electric Power Industry Reform Act (EPIRA)
was passed.
At the time when EPIRA took full
effect, the estimated stranded cost was at $6 billion. This amount was expected
to be reduced with the sale of Napocor assets. The remaining amount was to be
shouldered by consumers over a 25- year period.
While the remaining stranded cost
has now dropped to an estimated $1.7 billion, the apportioned amortization is
still contributory to the high electricity rates we experience today.
If the Philippine government will
not be able to generate additional funds to bring down the stranded costs,
which had resulted primarily from the ineptness of its policies to artificially
price electricity and incompetently operate power plants, then perhaps it is
high time to consider extending amortization of this cost over a longer, say,
50 years, period.
Stop costly power shortages
Another problem that contributes
to high electricity rates is the recurrence of outages, or what we call
brownouts. By all means, the DOE must encourage more investment in power
plants, even those controversial “dirty” coal generating units, to prevent
costly power shortages.
New coal-fired power plants have
steadily adapted to advanced technological innovations to significantly reduce
their pollution to the environment. They remain one of the lowest priced power
generation plants to build and operate.
Keeping hopes alive
I’m sure there are more schemes
open to our government officials that can help bring current electricity rates
to levels that will truly give the country’s dream to become a manufacturing
center in the region more teeth. But this has to be done quickly.
As JAZA said, this window of
opportunity would remain open only for a short period of time. While our
skepticism is already perhaps rearing up, knowing how slow our government acts
on things that really matter, we’d like to keep our hopes alive.
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