Economists: No to 'emergency powers' for Aquino

Editor's Note: This is a statement from the public advocacy organization Foundation for Economic Freedom (FEF) on President Benigno Aquino III's request for emergency power from the Congress. Do you agree with them? Let us know in the comments section below.

MANILA, Philippines - Energy Secretary  Carlos Jericho Petilla has raised the alarm on an impending electric power shortage in the Luzon grid in the summer of 2015, projecting a reserve deficiency of  400-500 MW in the March-May period, translating into two or three-hour rotating outage during that period. 

Petilla proposed, and President Benigno Aquino III wrote a letter asking Congress to pass a “joint resolution authorizing the President to establish additional generating capacity.”

Aquino's  letter said: “The DoE (Department of Energy) reports and projects a critical electricity situation in the summer of 2015 arising from among others, the expected effect of El Niño phenomenon, the 2015 Malampaya Turnaround, increase and continuing outages of power plants and anticipated delays in the commissioning of committed power projects.” 

Additionally, in various pronouncements, the Secretary has proposed the additional contracting of 450 MW of solar power, and 200-300 MW of wind.

The Foundation for Economic Freedom (FEF) cautions that the actions taken by the government to respond to this possible short term shortage and not  load the system – and the consuming public –  with expensive quick  fixes that will burden us  for a long time. 

“Short-termism” and narrow view of key stakeholders led by the authorities, underlie in most part this temporary thinness of reserves and possible outages in the summer months.  This includes:

More recently, there seems to be inconsistent and incoherent policies where government is proposing every expensive solution to raise electricity supply, even as its regulatory arm is seen as flip-flopping on market pricing rules that make some of the existing peaking plants uneconomical to run, which thus limits supply.

In particular, we caution against quick fixes with lasting cost consequences that some participants in the power industry, including government, have put forward:

The case on how these unreliable power sources address peak demand shortages in the system when supply depends on when the whims of sun and wind is for solar, at best tenuous, and for wind, non-existent. The RE proponents trying to take advantage of this temporary supply situation to lock in their 20-year windfalls have said wind at P8.53 is cheaper than P13/kWh diesel.  

What they have not said is you pay the P13 to run the diesels only when needed while you pay P8.53 whenever the wind produces electricity whether you need it or not, and there are no guarantees they will operate when you actually need them, so you will still need the diesels for those times.

These quick fixes will ultimately hurt not only the industrial sector but also the household sector. Instead, we fully support the following initiatives already being implemented in a partnership between government and the private sectors to address the immediate shortages.

Addressing more fundamentally the remaining constraints that impede power supply and prevent lower prices:

In requesting for “emergency power,” Petilla said the more grievous sin is not to do anything. We disagree. We think the greater sin is to do something costly but ineffective, or worse, harmful. While leaving unattended fundamental long term constraints. -