Napakamahal ang singil ng MERALCO sa kuryente ninyo? HERES THE TRUTH BEHIND THE HIGH ELECTRICITY RATES After twenty-eight (28) years since the popular People’s Mob Rule (EDSA People Power 1 of 1986) and following the occurrence of another People’s Mob Rule (EDSA People Power 2 of 2001) almost thirteen (13) years after the passage of the R.A. No. 9136 or EPIRA (Electric Power Industry Reform Act of 2001), the so-called Concerned Group of Retired National Power Corporation’ Power Engineers, Economists and Lawyers has at last break their silence about Presidential Blunders and Government Policy-Direction Useless! A. PREAMBLE The electric power supply industry from 1986 to date has undergone a progressive deformation leading to the present high, volatile electric rates and its management virtually in the hands of a few profit-oriented private corporations rendering the government practically helpless in alleviating the situation. The economic outlook is bleak - industries are now reeling from the high rates, now the highest in Asia, losing their competitiveness in the global market and exacerbated by diminishing foreign investments. The Department of Energy (DOE) has expressed that it welcomes suggestions on amendment of the EPIRA. Instead, our group of retired NPC executives propose that DOE directly take the bull by its horns and order a study on the corrective action on the factors that led to the deformation of the electric power supply industry before it is too late. The task is daunting but it must be done. A task force (think tank) composed of knowledgeable and dedicated power engineers, lawyers and economists must be created to study the task of lowering the rates and restoring the stability of the industry - to study the correction of the mistakes made by previous administrations starting with President Corazon Aquinos mothballing of the nuclear plant to President Gloria Arroyos EPIRA, the major cause of the electric power supply industrys deformation. Our group of retired NPC executives opted to break out from our shell of silence and bring out the truth behind the high rates for the sake of the future of the next generations. B. HISTORY OF THE HIGH RATES In hindsight, we recite the mistakes that gradually led to the state wherein the country is in now: 1. Stage 1 - The mothballing of the 620-MW $2.2 billion nuclear plant. President Corazon Aquino, despite the warning of then NPC President Gabriel Y. Itchon on the disastrous effect of aborting the 98% complete nuclear plant, heeded instead the advice of two of her political advisers in the Senate, and proceeded with her infamous decision. The decision disrupted the power program. Electric power supply became precarious and power plants scheduled for retirement (e.g. Sucat and Bataan thermal plants, which were no longer being maintained and with no spare parts programmed for logical reasons) had to be maintained on line. Whenever these plants, because of their deteriorated state, bog down, Luzon experienced 4 to 12-hour brownouts. The nuclear plant did not generate a single watt of electricity despite its cost of $2.2 billion, and the country was saddled with the huge debt plus the additional expense incurred in maintaining it for several years after it was mothballed. It is an ironical situation of politics prevailing over common sense at high levels in the government. When President Fidel V. Ramos assumed office, he had no choice but to adopt the only logical alternative to end the brownouts at the earliest possible time – buy power from IPPs (Independent Power Producers) using diesel, bunker oil and naptha power ship/barges, the only types which could provide power in the shortest possible time. Major plants have a gestation period of 5-6 years and, hence, not immediate alternatives. The country could not afford to wait that long. The tenet was expensive power is better than no power. The brownouts ended but the corrective action created the 1t stage in the rise of electric rates and instability of electric supply. 2. Stage 2 - Unregulated Development of Generating Plants under President Joseph Estrada – Power development by NPC (National Power Corporation), not DOE, has for decades followed a sound program utilizing as guide for generation and transmission planning long-term 20-year and 10-year load forecasts and detailed 5-year load forecasts all using elaborate mathematical methods. NPC faithfully followed the generation program and constructed power plants in a timely manner - a plant is programmed to go on line at the proper year so that there is always an ample reserve above the forecasted demand and with no unwarranted excess generating capacity. Power supply was very stable. NPC observed a Return on Rate Base (RORB) policy and electric rates remained low. During the 50s to the mid 80s, the incumbent presidents adhered to the prepared generation/transmission programs, constructing in series major hydro plants - e.g. Maria Cristina, Ambuklao Dam, Binga Dam, etc.. President Ferdinand Marcos made a bold decision to harness geothermal energy - e.g. Mak-Ban, Tiwi, Tongonan, Bacon Manito geothermal plants, etc. - and the nuclear plant. These hydro and geothermal plants came in, all following NPCs generation power program and so would have then the nuclear plant. Electricity rates remained low and at par with those of neighboring countries. lower than Japans. During President Estradas term, he approved the construction of power plants whose timetable did not follow the power program. These resulted to the electric systems generating capacity well above the demand - there was a big excess in generating capacity and correspondingly large unused energy. But alas, banking institutions in funding power projects invariably require a Minimum Off-take (take or pay) provision representing 70-85%of the forecasted revenue to assure payment of the project loan. President Estradas deviation from the time-tested generation programming resulted to an excess energy which had to be paid though not consumed under the Power Purchase Adjustment (PPA) clause in the power supply contracts. These payments for unused energy were passed on to consumers. It reached a point where payments for unused energy almost equalled those for used energy. This created the 2nd stage in the increase in rates. When President Arroyo assumed the presidency, to alleviate the effect of President Estradas PPA on consumers, directed NPC to limit the PPA to be passed on to consumers to P0.40/kwh and NPC to absorb the balance of P0.85/kwh from the P1.25/kwh PPA. This resulted to losses to NPC of about P29 billion/year from 2002 and NPCs accumulated debt reached trillions of pesos which NPC is still paying as stranded debt up to the present. (And NPC which has, for decades, competed with SMC as the No. 1 corporation in the Philippines, dropped to its lowly position in the totem pole, to the dismay of NPC executives peeved with the monetary loss being aired derisively as due to management inefficiency.) 3. Stage 3 - The Passage of the EPIRA a) Progressively increasing rates. Now the highest in Asia, and volatile – Of all the mistakes incurred in the electric supply industry, the EPIRA takes the cake. President Arroyo railroaded its passage in Congress despite the strong arguments against the bill. Now, the country is reeling from the high rates, the highest in Asia, higher than Japans and is very volatile. Our commercial rate for industries which were at par then with those of neighboring countries is now higher by P3/kwh. Colgate-Palmolive transferred to Vietnam and Close-Up to Indonesia. Texas Instruments was on the verge of following. Fortunately, it did not. Our prevailing rates discourage foreign capital investments and our export industries are reeling from the high rates and unless firm measures are adopted to lower the rates, our export industry is in danger of collapsing in the not-too distant future. The advocates of EPIRA then argued that with the stock-market nature of WESM (Wholesale Electricity Spot Market) created under EPIRA, competition among generators is expected to result in lower rates. When proponents of EPIRA were conducting their campaign in NPC, NPC vice presidents challenged them to a debate on national television to argue the EPIRA bill. They explained that in Western Australia where the seed of the WESM concept was born, when a power plant trips out, the remaining plants double their prices. Why adopt it? They cited Californias experience in deregulating their electric supply industry and found out, albeit painfully afterwards with resulting high rates, that deregulating the electric supply industry does not follow the success of deregulation of other industries, e.g. shipping. The challenge to debate the issue was unheeded and not long afterwards the EPIRA was successfully railroaded by President Arroyo in Congress. The disastrous ramifications followed – rates progressively increased coupled by power shortages in Central Visayas and Mindanao. From Meralcos effective rate of P4.87/kwh in 2000, it rose to P11.44/kwh in 2013 and with a P4.17/kwh poised for imposition in 2014 which Meralco is imposing allegedly due to utilization of diesel and bunker oil for generation in lieu of the non-operation of natural gas-powered plants which use Malampaya natural gas.
Posted on: Mon, 03 Feb 2014 07:24:42 +0000
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