Power emergency: What it means

MANILA, Philippines (UPDATED) – If you think the 3-hour rotational blackouts that hit Luzon in the aftermath of Typhoon Glenda (Rammasun) were bad, you have not seen the worst.

The country is facing a power crisis.

And it’s not because of a typhoon or any disaster, it’s simply because there isn’t enough supply.

Blackouts – running longer hours and lasting for weeks – will hit Luzon in the summer of 2015 unless the Aquino administration takes crucial steps to avert them, said Energy Secretary Carlos Jericho Petilla.

Petilla warned that the repercussions would be serious. For businesses, it means shutting operations for days, resulting in possible lay-offs of workers and losses for the economy.

For the ordinary Filipinos, frustrations will pile up: temperatures will hit extremes in the summer months, water relying on electrical pumps will run out, train schedules will be interrupted because of insufficient power supply, and so on and so forth.

Petilla endorsed what he said was the best and fastest way the government could address this problem: for President Benigno Aquino III to declare a power emergency and invoke his powers under the Electric Power Industry Reform Act (EPIRA) of 2001.

What does a power emergency mean? Why do we have such emergency? And what do sectors think about Petilla’s proposal?

Demand-supply outlook

The country has been used to the blackouts in Mindanao, but not to the ones in Luzon.

Blackouts started to hit Luzon in May as major power plants went offline for maintenance. Typhoon Glenda made it worse after wreaking havoc on power and transmission lines, and damaging aging plants. The situation normalized as repairs came along, but the energy department said supply would remain thin for the rest of the year, with more plants scheduled for shutdowns in the coming months.

The picture for 2015 is even worse. Demand is expected to grow for the obvious reason that the economy is expanding. Aside from the maintenance shutdowns of plants, committed power plant projects that were expected to come on stream in 2015 have been delayed. The El Niño phenomenon is also a threat to hydropower supply. The Malampaya natural gas facility off Palawan will also go on scheduled maintenance in March to April, affecting supply of fuel to power plants in Luzon.

The projected power demand in Luzon in 2015 is 9,011 megawatts (MW), higher than this year’s demand of 8,717 MW, according to Petilla. There will be a deficit of 200 MW next year.

Petilla said the summer months of March to May, when demand peaks, would be critical.

To address this, a buffer supply of 400 MW to 500 MW is needed to avoid rotating blackouts that he said in a TV interview could run for 20 days.

But where will we get additional supply? It takes 3 to 5 years to build a power plant.

Ernesto Pantangco, chairman of the Management Association of the Philippines’ energy committee, said it would be difficult to put up additional 500 MW by summer.

“It would be difficult for anyone to put up together the 500 MW in such a short time,” Pantangco, who has been president of the Philippine Independent Power Producers Association for the last 10 years, was quoted in reports as saying.

If power producers cannot guarantee supply, one solution to the shortage is the Interruptible Load Program (ILP).

Under the ILP, customers with large power requirements, like commercial establishments, will be asked to operate their own generator sets if the grid operator projects a need to augment generation capacity in the Luzon grid. Through this, the demand for power from the system will be reduced to a more manageable level. But the problem with this is it’s voluntary.

Rescheduling the maintenance of Malampaya earlier or later than planned is also not an option, according to Petilla. (READ: DOE: Malampaya shutdown can no longer be moved)

Emergency powers

With no assurance from the private sector, the energy chief said the government has no choice but to step in.

He asked President Benigno Aquino III to invoke Section 71 of EPIRA, which states:

“Upon the determination by the President of the Philippines of an imminent shortage of the supply of electricity, Congress may authorize, through a joint resolution, the establishment of additional generating capacity under such terms and conditions as it may approve.”

Prior to EPIRA’s passage, the government, through the National Power Corporation (Napocor), had monopoly over power generation and transmission in the country. However, mismanagement and corruption caused the state power firm to bleed dry. Its debts and the high costs of maintaining its assets were a heavy burden on state coffers and consumers.

EPIRA was passed to put an end to this. It introduced sweeping reforms, among them the privatization of most of Napocor’s power assets and the breakdown of the industry into different privatized segments. The reforms were meant to encourage competition among power players and eventually reduce electricity prices in the Philippines, now among the highest in the world.

Essentially, the law barred the government from putting up additional generating capacity and the private sector was left to do all the work.

Private sector investments took a while, however, and this is where it got problematic. To begin with, Petilla acknowledged there are 160 plus steps for approving a new power plant, which takes years to build. Investors, for their part, played it safe by waiting for how the reforms under EPIRA would play out. They refused to pour in their billions unless they were certain of demand.

Giving the President emergency powers will allow the government to contract new power capacities.

This proposal is backed by several lawmakers, among them Senator Sergio Osmeña III, chairman of the Senate committee on energy.

“I think we’re going to have to contract new plants. It is admitted we will have a crisis when we start to have rolling blackouts next summer,” Osmeña said in a TV interview.

Wary of emergency powers

But some groups expressed concern about giving the President emergency powers.

Bayan Muna Representative Neri Colmenares said: “It is very dangerous to grant emergency powers to anyone with a dictatorial propensity like President Aquino, as can be seen with his usurpation of Congress’ power and now threatening the Supreme Court after it declared the Disbursement Acceleration Program unconstitutional.”

He said the country might see a repeat of what happened during the time of President Fidel Ramos. He said the same emergency powers were exercised by Ramos, who allowed independent power producers (IPPs) to construct power plants in a year’s time. The contracts had an onerous “take or pay” provision that guaranteed the government would buy whatever the IPPs produced, even power that consumers did not use. Napocor’s debts ballooned, and the government had no choice but to shoulder the bill, triggering the onset of a fiscal crisis.

The People Opposed to Unwarranted Electricity Rates echoed Colmenares’ view. It said granting the President emergency powers would allow “quick fixes that will ultimately lead to higher prices of electricity without effectively solving the supply problem.”

“The emergency powers route has been tried before under the Ramos administration. It led to skyrocketing power rates and the ruin of Napocor whose effects we are still suffering until today,” the group said.

The group is proposing long-term solutions to the supply problem, though some will require changes in the EPIRA. These include prohibiting the government from selling its remaining power assets, and using proceeds from from the Malampaya natural gas facility to construct power plants utilizing renewable energy.

Petilla, for his part, said his department is considering a new policy that will facilitate the building of new plants by giving investors an idea of future demand. He said the policy would require distribution utilities like Luzon’s power distributor Manila Electric Company and the cooperatives outside the region to disclose their 5-year power requirements and bid these out.

But Meralco is not so keen on this. It said the bidding process could lead to delays and blackouts could still happen.

Limits

Osmeña said the emergency powers would allow the President to “do everything and anything.”

But he gave assurances that “Congress is going to put limits.”

Aquino has kept mum on the proposal to grant him emergency powers. Instead, he just announced in his State of the Nation Address that he had directed Petilla to coordinate with the Joint Congressional Power Commission, Energy Regulatory Commission, industry players, and consumer groups to come up with solutions to the supply problem.

Petilla said if they are allowed by Congress to intervene, the government would bring in generating sets.

Osmeña explained these sets would be plug-and-play, imported, and could be made operational for 6 months to a year. “It’s quicker than having to build a coal plant.”

Yet the senator warned it would be “horrendously expensive.” These generating sets will run on diesel, and power from these plants would cost around P10 to P15 per kilowatt-hour.

“I would want the President to have emergency powers, that’s the only solution,” said Osmeña.

After all, he concluded, citing an adage during the Ramos administration, “the most expensive power is to have no power at all.” – Rappler.com

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