Business World, 24 February 2015


The Department of Energy (DoE) authorities warn of rotating brownouts in Luzon ranging from two to seven hours this summer. The reality is that crisis may or may not happen. So, is the energy crisis for real? Or is it just a smokescreen to cover the raid of the Malampaya fund?

Effective energy policy requires time, resources, skills, and foresight. The disputable power shortage in Luzon this summer suggests wanton neglect and lack of foresight by policy makers.

It doesn’t require a genius to figure out that the Malampaya natural gas facility in Palawan, which supplies a total of 2,700 megawatts in Luzon, should not schedule its maintenance work during summer times, when the demand for power is at its peak. But that’s what it is doing and that’s moronic. Where’s the foresight of energy officials?

Now, administration officials and their allies in the House and the Senate are scrambling for solutions to a potentially inconvenient and power-short summer.

Is Senate Joint Resolution 12 (SJR 12) the solution? Unlikely. It’s too complicated for a good performance-challenged administration.

What’s the real situation? The table is the power situation outlook as of Monday last week.

As of last week, the gross reserve is more than adequate for Luzon, but thin for the Visayas and Mindanao. New capacities are being built nationwide and the projection is that the future power supply picture in the Visayas and Mindanao will be better, while that of Luzon may be worse (for a brief period) if certain assumptions hold true.

The Department of Energy projected that in week 14 of 2015 (approximately March 29th-April 4th), a maximum projected shortfall of one thousand and four megawatts (1,004MW) is likely. Of this, six hundred megawatts (600MW) are needed to meet the dispatchable reserve, and four hundred megawatts (400MW) are needed to meet the required contingency reserve.

Moreover, DoE said that a total of four (4) weeks of yellow alert is projected in the critical period.

SJR 12 is meant to address an emerging shortage of power in Luzon for the summer months of 2015 (approximately March 1, 2015 to July 31, 2015).

The first implication for policy is that the emerging crisis, if true, is a short-term phenomenon; hence, the solution has to be time-bound rather than open-ended.

The second policy implication is that government intervention has to be simple and easily implementable. Time is of the essence: the crisis is expected to hit on the last week of March, but it’s now a week before March 2015.

The objective of SJR 12 should be crystal clear: to minimize the damages of the potential energy shortage in Luzon from end-March to end-June 2015. It should not be a means to fix all the defects of the EPIRA law. After all, congressional joint resolutions cannot amend a substantive law (the EPIRA law).

However, the list of suggested interventionist moves for the DoE, the Energy Regulatory Commission (ERC), and the NGCP in SJR 12 is too long. Which of these measures are truly necessary and which are superfluous, meaning which measures can or can’t agencies do on their own without directives from Congress?

Two quick and feasible solutions to the potential short-term energy shortage, to which I agree, are the adoption of the Interruptible Load Program (ILP) for Luzon and the “adoption and execution of Energy Efficiency and Conservation measures in both the public and private sectors.”

Every kilowatt-hour of energy saved is energy earned. For example, why can’t the government mandate that during the critical period, mall hours should open at 12:00 noon up to 10:00 p.m. rather than 10:00 a.m. up to 10:00 p.m.? This means savings of two peak hours daily.

Why can’t the government mandate that air-conditioning in government offices start at 10:00 am and that the temperature be maintained at say 28-degrees centigrade? Roughly, a one-centigrade increase in temperature may translate into an energy saving of 100 MW.

Conservation measures are required in the House Joint Resolution, but are missing in the Senate version. Why? Do senators believe that energy conservation is totally useless?

According to Sen. Sergio dlR. Osmeña III, chairman of the Senate Committee on Energy, the Luzon grid has around 3,100 MW of private gensets. If owners of these gensets deload from the grid and use their own gensets, up to 1,400MW may be deloaded during peak hours on certain days.

That’s more than the projected shortfall. With the ILP in place, and even without energy conservation, there may be no need for some measures proposed in SJR 12.

There may be no need for the CalirayaBotocanKalayaan (CBK) scheme. The cost of this policy intervention — extraordinary expenses incurred by PSALM for CBK including the expenses by the National Power Corporation for disturbance and/or displacement compensation to affected households and resort owners within the Caliraya Lake — is equivalent to the amount saved by the government by foregoing this policy intervention.

There may be no need for requiring the 1,200 MW Ilijan plant to run on diesel while the Malampaya gas facility is under maintenance. What’s the cost to the government of this proposed solution? And why only Ilijan? Isn’t this discriminatory? What about the two other power plants that run on natural gas?

In SJR12, one of the responsibilities of the NGCP is to recover the cost of ILP. What is the meaning of this? Should private genset owners who deloaded from the grid continue to pay the NGCP for the use of the grid?

The Malampaya Fund will be the main source of funding for the energy emergency powers? Why raid the Malampaya Fund? The fund was designed for developing new sources of energy for the Philippines. It should be used with frugality and caution.

What is the total cost of the policy intervention as envisioned in the Senate’s version of the Joint Resolution?

Finally, the policy measures should be simple and cost-effective. The inconvenient truth is that the government is not a paragon of efficiency, economy, and effectiveness. A complicated solution might only lead to chaos and higher expenses on the part of the government. Taxpayers should be told exactly what the hidden costs of government intervention are.

Senate Joint Resolution No. 12, in its present form, might be a classic case of government intervention turning out to be government failure.