February 3, 2020 | 9:49 pm By Bienvenido S.
Oplas, Jr.
Last week I
attended two energy fora where some important data and issues were discussed.
First the “Market Operations 2019,” a media briefing by the Independent
Electricity Market Operator of the Philippines (IEMOP), on Jan. 30 at the
trading floor of the Wholesale Electricity Spot Market (WESM). Second, the
Keynote Speech of Senator Sherwin Gatchalian, Chairman of the Senate Committee
on Energy, at the “Forum on Competition in Developing Countries” on Jan. 31 at
Sofitel Philippine Plaza, sponsored by the Philippine Competition Commission
(PCC).
During the IEMOP
briefing, an important chart was shown where power undersupply relative to
rising power demand in April-July 2019 resulted in high generation prices
expressed as Effective Spot Settlement Price (ESSP) in WESM of P5 to P6+ per
kWh, vs average prices of P2-P4/kWh in non-peak demand months.
See that the rising
average ESSP from 2016 to 2019 in the Luzon-Visayas grids as both annual
electricity consumption and system peak demand keep rising. I added here data
from the Department of Energy (DOE) on dependable capacity (see Table 1). The
bottom line — insufficient supply when demand is high and rising would lead to
both higher prices and frequent “yellow-red” alerts by the National Grid Corp.
of the Philippines (NGCP).
At Mr. Gatchalian’s
presentation, he focused on “limited competition” by the few big domestic
players, and that retail electricity suppliers (RES) and distribution utilities
(DUs) are supposed to compete with each other by offering more affordable rates
but does not happen in some cases. I summarized his three charts here.
Other competition issues during the good and cool PCC conference, I will
discuss in the next few weeks.
Now, three points to
clarify in Mr. Gatchalian’s claim of limited competition from the “big five.”
One, prices spike
mainly because of power undersupply thanks to old, ageing baseload plants that
go on unscheduled or extended shutdowns and no new peaking plants to provide
the sudden big supply gap. This was very clear in March-July 2019, five months
of occasional, sometimes daily, “yellow-red” alerts by NGCP.
Two, DUs are already
highly regulated by the Energy Regulatory Commission (ERC), the Department of Energy,
and even Congress because they need a Congressional franchise to operate. RES
are less regulated but Retail Competition and Open Access provision of the
Electric Power Industry Reform Act of 2001 — better known as the EPIRA law —
remains suspended by the Supreme Court for three years now.
Three, the Philippines’
“big” power companies are actually medium-sized, even small, when compared with
energy companies in the region. See the total power generation in
terawatt-hours (TWH) of the Philippines in 2018, which was only 47% to 59% of
our neighbors Malaysia, Thailand, and Vietnam. I include here portions of
Platts’ 250 biggest energy companies in the world, I did not include largely
oil-gas producers and manufacturers.
We need to
significantly expand our power generation capacity, from conventional, stable,
reliable, and dispatchable power sources, baseload to peaking plants. To do
that, government, especially the ERC, should step back from too much regulation
especially in pricing.
Sector deregulation
will allow the small and medium companies to become big, the big companies to
become bigger — without state favoritism via subsidies and climate cronyism —
and the Philippines’ overall power generation will significantly expand.
Finally, bottlenecks
from the biggest power monopoly in the country, the NGCP, should be relaxed so
that more power plants, baseload to peaking plants, will be positioned near the
high demand cities and provinces.
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