POWER GENERATION

First Gen seeking tenders for gas supply

delinked from oil
First Gen Corporation of the Lopez group is soliciting tenders for gas supply preferably
those de-linked with oil prices to cater to the long-term fuel needs of its gas-fired power
project expansions.
For the 414-megawatt San Gabriel power project, First Gen president and chief operating
officer Francis Giles B. Puno noted that they are still looking at firming up a gas sale and
purchase agreement (GSPA) with the Malampaya consortium if there would be additional gas
that can be extracted from the field.
But for the next phases, the company is certainly placing itself on safer grounds with its
planned liquefied natural gas (LNG) terminal proximate to its power plants so it can bring in
the gas from international sources.
The facility will not only serve the requirements of its new gas plants, but also the existing
Santa Rita and San Lorenzo generating units because of the lapse of their gas supply deals
by 2023-2024 and due to the forecast decline in gas supply from the Malampaya field.
What were doing is looking at that opportunity and buy gas from the international market,
Puno has noted.
He expounded that we are in discussion with a number of suppliers of replacement gas,
including the portfolio players who may even source it from North America or directly
contracting it from North America itself that is a possibility.
The North American jurisdiction is considered the domain of shale gas revolution, which so
far changed the gas pricing landscape from the typically global oil-connected to a more
regionalized or jurisdictional setting.
The contracting strategy that First Gen has been exploring is on having a gas price
decoupled with oil, or whatever that may eventually come closer to the envisioned regional
spot pricing for gas in the Asian market.
We are hoping that at some time down the road, we will have a regional spot pricethey
are doing that in Singapore and Japanso the idea possibly is, that will be the source of gas
for the future, Puno stressed.
If anchored on market realities, he noted that the gas price must already be de-linked with
oil compared to the traditional gas supply that were inked in the 1990s including the GSPAs
that they have with Malampaya.
Right now, we are talking with suppliers. And the suppliers are actually giving us partiallylinked to oil; and partially-linked to US gas prices, the First Gen president noted.

He stressed that if their option will be to source gas from North America, theres a
possibility of de-linking that with oil.
For the consumers, that eventually may redound to cheaper electricity rates because
prevailing gas prices had been pushed lower compared to the previous oil price-anchored
contracts.

by Myrna Velasco
August 15, 2014
Source: First Gen seeking tenders for gas supply delinked from oil

Posted in
Tagged

Power Generation

First Gen, Malampaya, Power Generation

Higher solar installation to hike Meralco rates

Power utility giant Manila Electric Company (Meralco) has cautioned regulators over a
proposal to increase solar installation to 500 megawatts saying this will result in rate hikes
that will be passed on to customers.
In its comments submitted to the Energy Regulatory Commission (ERC), Meralco stressed
the higher installation for solar will compel it to make additional investments to prepare its
network for such massive technology incursion, on top of anticipated swell on its operating
costs.
These capital and operating costs incurred by a DU (distribution utility) would be recovered
from its load customers. As a result, distribution rates to load customers would go up, with
the increase in rates becoming more pronounced as the penetration of RE (renewable
energy) generation increases within a DUs system, Meralco stressed.
Its costs will similarly jack up because it will be managing increased system volatility,
noting that the entry of RE will affect the forecasting of power supply and demand within
the DU systems, given the intermittent or variable nature of RE and how these RE
connections will be embedded among DUs end-users.
Meralco thus requested the Department of Energy (DOE) to provide data as to the
magnitude of added charges as a result of the solar installation adjustment, primarily on the
feed-in-tariff allowance (FIT-All), which will start showing up in the consumers electric bills
next year.
The utility firm has also been apprehensive of the March 2015 timeframe cast by the DOE as
to when the additional 450 megawatts of solar capacity would be coming on stream given
the scale of adjustments that have yet to be done at the DUs networks. The original
installation cap set for solar was just at 50MW.

Specifically, Meralco said it will need to increase the capacity of some of its substations or
substation equipment, such as breakers, to accommodate the solar load increase.
The proposed additional capacities will cover not only ground-mounted but rooftop
installations, and it is expected that many of the projects will connect and utilize the
distribution system.
Among the needed supplementary investments cited by Meralco are metering facilities and
their operations, as the rules prescribe that all FIT-eligible plants, including those
embedded within the DUs systems, will need to become WESM (Wholesale Electricity Spot
Market) members.
Taking off from that, Meralco said there is a need to deploy WESM-compliant meters; incur
communication costs to read the meters remotely on a daily basis; incur operating costs to
validate daily meter readings and upload them to the WESMs systems; as well as the need
to deploy corresponding information systems for meter data storage and analysis.

by Myrna Velasco
August 17, 2014
Source: Higher solar installation to hike Meralco rates

Posted in
Tagged

ERC, Meralco, Power Generation, Power Rate

ERC, Expensive Power Rate, Meralco, Power Generation, Solar Power

Aug18

CLEAN COAL TECHNOLOGY ANSWER TO

POWER WOES
TAIPEI. The use of clean technology in coal-fired power plants remain as a very viable
solution to the Philippines looming power crisis, Taiwan-based Formosa Heavy Industries
Corp. (FHIC) said.

Jovy Manrique, local FHIC business development head, said in a briefing with reporters that
there are a lot of opportunities in the Philippine power sector given the need for more
electricity in the country.

FHIC strongly believes that with current advances in technology, coal-fired power plants can
live in harmony with host communities.

Two of the companys coal-fired power facilities, specifically the Hwa-Ya and Zin Shin power
generation facilities in Tao Yuan, Taiwan, are in the middle of a bustling metropolis.

Manrique said clean coal technology is a very viable solution to the Philippines power
problem, then same technology that keeps Taiwan fully energized to support its soaring
investments.

Recent controversies regarding the acceptability and environmental impact of power plants
and the price of electricity have been hounding the local power sector.

To date, Taiwan has 48,000 megawatts (MW) of installed capacity compared to the
Philippines 17,000 MW. A large portion of this capacity comes from coal-fired power
generation facilities.

However, Taiwans population is only 23 million compared to Philippines 100 million.

We hope that the advances made in Taiwan in as far as the power industry is concerned will
also be enjoyed in the Philippines, Manrique said.

He assured Filipinos of the companys continuing support in ensuring a more robust

Philippine power sector.

Manrique admits the timeframe within which the expected power crisis may be too short
but that the long-term solutions involving power plants are necessary.

He said the stalled 600 MW Subic power project of Redondo Peninsula Energy (RP Energy)
that was supposed to go online next year to boost the power supply in the Luzon grid could
have plugged the reported 500 MW deficiency forecasted by the government.

RP Energy is a consortium composed of Meralco PowerGen Corp., Aboitiz Power Corp., and
Taiwan Cogeneration International Corp. FHIC was formerly involved in the project.

The power project has yet to push through until the Writ of Kalikasan case pending with the
Supreme Court is resolved.

Filipinos must remember that the most expensive kind of power is still no power, Manrique
said.

FHIC said the Taiwan government monitors the operation of all their plants by having direct
access to their computerized control panels to ensure that the plants do not exceed the
required standard for emission levels.

These facilities validate our belief that there can be harmony between power plants and the
community, Manrique said.

By ANGELA CELIS
August 18, 2014
Source: CLEAN COAL TECHNOLOGY ANSWER TO POWER WOES

Posted in
Tagged

Power Generation, Power Rate

Expensive Power Rate, Power Generation

Aug18

Korean firm poised to win Malaya deal

STX Marine Service Co. Ltd. of Korea submitted the lowest bid of P302.149 million for the
operation and maintenance of the 650-megawatt Malaya thermal power plant in Pililla, Rizal.
STX Marine, a leading global marine service provider, topped SPC Power Corp.s bid of
P428.777 million for the operation and maintenance service contract.
SPC Power is the current operator and maintenance provider of the Malaya plant, but its
contract is set to lapse in October this year.
Award will be made after completion of the post qualification of the lowest bidder. This
process may take a while but it should be completed before the expiration of the existing
OMSC of Malaya on Oct. 25, Power Sector Assets and Liabilities Management Corp.
president Emmanuel Ledesma Jr. told reporters.
SPC Power has been operating and maintaining the Malaya facility since October 2011, after
winning the bidding for the contract three times.

PSALM offered the one-year operation and maintenance contract for the Malaya thermal
power plant on Aug. 6.
The Malaya procurement has an approved budget of P451 million which shall be sourced
from PSALMs corporate operating budget.
The Malaya power plant is being managed by PSALM while it awaits privatization. The
Energy Department has yet to decide whether to privatize the Malaya plant.
The facility is now being used as a must-run unit which could add capacity to the Luzon
grid.
It consists of a 300-MW unit, with a once-through type boiler and a 350-MW unit fitted with
a conventional boiler.
It was rehabilitated in 1995 by the Korea Electric Power Corp. under a 15-year rehabilitateoperate-manage-maintain agreement.
PSALM is set to overhaul the 300-MW unit and aims to make it operational by summer next
year.

By Alena Mae S. Flores

Aug. 15, 2014 at 12:01am
Source: Korean firm poised to win Malaya deal

Posted in
Tagged

Power Generation

Power Generation, PSALM, SPC Power

Aug15

Aboitiz seeks recall of Naga plant award

The Aboitiz firm which was originally declared the highest bidder in the privatization of the
153-megawatt Naga thermal power facility is seeking the nullification of the assets award to
SPC Power Corporation.
In a letter to asset-seller Power Sector Assets and Liabilities Management Corporation
(PSALM), Therma Power Visayas Inc. (TPVI) of the Aboitiz group asked that the notice of
award to SPC be recalled due to lingering questions on the validity of the right to top
exercised by the latter in the facilitys recent bidding.

TVPI noted that the award be temporarily withheld until a ruling on the petition for certiorari
filed by Senate energy committee chair and Senator Sergio Osmea III on the matter be
rendered with finality.
TVPI has asked PSALM to review its decision, as it questions the validity of SPCs right to top
the winning bidder, the Aboitiz company has noted in a statement to the media.
Whatever the outcome of the legal proceedings, however, TVPI has emphasized that it will
abide by the Supreme Courts final verdict.
Aboitiz Power executive director for business development Raymond Cunningham averred
that frankly we are amazed and deeply disappointed by the manner and haste in which the
PSALM Board of Directors decided to award the contracts for the privatization of the Naga
power plant complex to SPC Corporation despite the myriad of contentious issues that
remain unanswered and also pending with the Supreme Court.
Osmeas petition is questioning the right to top provision as it discourages interested
bidders considering the unfair advantage given to SPC.
The winning price offer of the Aboitiz group had been at P1.088 billion, but SPC resorted to
its right to top option.
The process thus warranted SPC to make an offer of P1.143 billion, which eventually became
the basis for PSALMs decision to finally award the facility and purportedly conclude its
privatization.
SPC was given a 25-year lease arrangement under the final privatization package, and a
leeway also for the plant sites purchase.

by Myrna Velasco
August 14, 2014
Source: Aboitiz seeks recall of Naga plant award

Posted in
Tagged

Power Generation

Naga Power Complex, Power Generation, PSALM, SPC Power

Aug15

Post-qualification process for Malaya power

plant under way

THE POWER SECTOR ASSETS AND LIABILITIES

MANAGEMENT CORP. (PSALM) HAS STARTED THE
POST-QUALIFICATION PROCESS FOR THE ONEYEAR OPERATION AND MAINTENANCE (O&M)
CONTRACT OF THE 650-MEGAWATT (MW) MALAYA
THERMAL POWER PLANT.

The Malaya thermal power plant in Pililla, Rizal. BW File Photo

PSALM President Emmanuel R. Ledesma, Jr. said the company received two offers during the
auction held last Aug. 6.
Two proponents submitted bids. A bid was declared lowest as read but this is still subject to
an ongoing post-qualification evaluation, he said via text message on Wednesday.
Mr. Ledesma, who refused to identify the bidders, said the company will announce the
winning firm as soon as the notice of award and notice to proceed are issued.
SPC Power Corp. confirmed its participation in the bidding but likewise declined to name its
competitor.
SPC has been operating the Malaya facility since Oct. 2011. The O&M contract is being
auctioned off every year and the current one will lapse this October.
PSALM, according to Mr. Ledesma, will award the new contract before the existing one
expires.
Last month, the state-run power firm allotted P451.301 million for the one-year O&M of the
power facility located in Pililla, Rizal.
PSALM was formed under Republic Act 9136, or the Electric Power Industry Reform Act of
2001, to assume ownership of and manage all National Power Corp.s (Napocor) assets,
liabilities, contracts with independent power producers, real estate and other disposable
assets.
The state firm is also in charge of privatizing and disposing of these assets to liquidate
Napocors financial obligations.

Source: Post-qualification process for Malaya power plant under way

by Claire-Ann Marie C. Feliciano

August 13, 2014 11:17:00 PM

Posted in
Tagged

Power Generation

Power Generation, PSALM, SPC Power

Aug14

DOE expects 560-MW capacity addition before

2015 summer
The Department of Energy (DOE) is expecting generation capacity addition of aggregate 560
megawatts that will be synchronized to the Luzon grid until February or before the strike of
full summer next year.
Based on the Power Supply Outlook of the department, new power plants will be coming online starting August 2014 until February 2015; and the next ones will be getting on stream
from March until November also next year.
In fact, the DOE outlook indicated that the 100-megawatt Avion plant of First Gen that it has
been expecting to save the grid from summer brownouts will only be on-line around
September 2015.
The energy departments outlined capacity additions will likely add to the muddle as to
whether there will be capacity shortages to be experienced summer of 2015, especially so
since Energy Secretary Carlos Jericho L. Petilla just estimated capacity shortfall of 240 to
270MW vis--vis the anticipated additional capacities of more than 500MW.
Stakeholders in the power industry reckoned that the feared brownouts are anchored only on
artificial shortages that may be triggered by forced outages of big generating units of
power plants. The DOE has been citing historical data on such assumptions.
For this year alone, the department noted that 383MW of new capacities will be added to the
grid starting with the 18MW expansion phase of the Northwind power project in Northern
Luzon.
Around October and November, the department is eyeing grid synchronizations of the 135MW coal plant of the Trans-Asia and Ayala joint venture; plus the phase one 150-MW
capacity expansion of the Calaca coal plant of the Consunji group. A biomass plant of 20MW
is also expected coming on-line before year end.
By February 2015, the 87MW Burgos wind power project of the Lopez group is expected on
stream; plus the 150-MW phase 2 of the Consunji groups coal facility expansion.
Given realities that wind power facilities can just be relied upon on November to February
window for electricity generation, it will be the coal capacity additions that could expectedly
beef up grid supply.

Around March, the capacities that will add to grid supply will be another 18MW biomass
facility and the 81-MW Caparispisan wind power project in Ilocos Norte.
By June next year, the department is expecting the first 200-MW unit of the liquefied natural
gas (LNG) facility of Energy World Corporation, but this is seen not reliable due to
implementation hurdles being encountered by the project sponsor.
The 135-MW second unit of the Trans-Asia and Ayala coal plant is also scheduled for
synchronization to the grid around November 2015.

Source: DOE expects 560-MW capacity addition before 2015 summer

by Myrna Velasco
August 13, 2014

Posted in
Tagged

DOE News, Power Generation

DOE, Power Generation

Aug14

MPIC goes into renewable energy

MANILA, Philippines Pangilinan-led Metro Pacific Investments Corp. (MPIC) is venturing into
renewable energy for the first time through a waste-to-energy project that will address
issues on solid waste management and increased demand for electricity.
The infrastructure conglomerate is looking at creating a portfolio of waste-to-energy facilities
with a generating capacity of 300 megawatts (MW) in the coming years, company
executives said.
MPIC president and CEO Jose Ma. K. Lim said the company has partnered with technology
provider Global Green International Energy, an affiliate of a US entity that has built
numerous waste-to-energy plants in Korea and smaller countries in Southern Pacific.
Lim said MPIC will invest up to P700 million for its first plant in Tagum, Davao del Norte. The
facility will be able to produce two MW of power and 10,000 liters of biodiesel per day, with
an option to expand it to six MW.
Waste is an ongoing problem. We have been studying solid waste management in the last
several years and the problem is always political: not handling waste in an efficient manner
and the municipality receiving waste will not receive [waste] from other areas, Lim said.

It will help especially at the local level on the power and certainly on the waste side. It is
something the board of MPIC felt the company should do, said MPIC chairman Manuel V.
Pangilinan.
Lim said the first waste-to-energy facility will allow the company to test the efficiency and
operational requirements of the business venture before investing in a big scale for facilities
that can produce a combined 300 MW and 500,000 liters of biodiesel, Lim said.
Construction of the waste-to-energy plant, which will use the pyrolysis technology, is seen to
start late this year and completed in six months.
There are other large cities that are ready to enter into similar agreements, Lim said.
MPIC is into power generation and distribution through Manila Electric Co. (Meralco). The
countrys largest power distributor targets to build a power generation portfolio of up to
3,000 MW of fuel-efficient and reliable baseload and mid-merit plants that will help assure
adequate supply of cost-competitive power to customers.
Betty Siy-Yap, chief financial officer of Meralco, said the company initially looked at a wind
energy project but it was scrapped.
Aside from the wate-to-energy project, MPICs parent firm First Pacific Co. Ltd. is also
pursuing power production using the bagasse in Roxas Holdings Inc.s La Carlota sugar mill
in Negros Occidental, Pangilinan said.
By Neil Jerome C. Morales
August 13, 2014 12:00am
Source: MPIC goes into renewable energy
Posted in Power Generation
Tagged Power Generation
Aug13

SPC mulls expansion of Naga power complex

MANILA SPC Power Corp is keen on constructing a new coal plant within the Naga power
complex in Cebu.

Alfredo Ballesteros, SPC senior vice president, today told reporters that the company is in
discussions with Korea Electric Power Corp (Kepco) for the construction of a 200-megawatt
(MW) coal plant.
The proposed facility will be similar to the existing KSPC (KEPCO SPC Power Corp) plant in
Naga at approximately $450 million project cost, he added.
KSPC owns the 200-MW Cebu coal plant within the Naga power complex. The power facility
was completed in 2011 under a build-operate-own agreement with the government.
Earlier, state-run Power Sector Assets and Liabilities Management Corp (Psalm) awarded to
SPC the privatized 153.1-MW Naga power complex after the latter exercised its right-to-top
the highest bid for the facility submitted by the Aboitiz Group.
The power complex, through a number coal and diesel plants, is only able to produce 50 MW
due to deterioration.
Ballesteros said SPC is still evaluating the technical and commercial viability of the rehab of
two thermal power plants within the power complex.
SPC, however, has opted to rehabilitate the power complexs diesel plants.
Target completion of rehab is end of 2014 and is expected to generate 36 MW, Ballesteros
said.

By: Euan Paulo C. Aonuevo

August 12, 2014 4:20 PM
Source: SPC mulls expansion of Naga power complex
Posted in Uncategorized
Tagged KEPCO, Naga Power Complex, Power Generation, SPC Power
Aug13

DOE eyeing 2,000 private power plants to

avert shortage in 2015

The House of Representatives energy committee is now studying a proposal from the
Department of Energy (DOE) to tap more than 2,000 private power facilities in Luzon to
address the looming power crises projected to occur in the summer of 2015.

In a press conference, energy committee chairman Rep. Reynaldo Umali said that based on
the report submitted to the committee by the Energy Regulatory Commission (ERC), as of
July 22, 2014, there are a total of 2,975 self-generating power facilities in Luzon that could
generate a total of 3,642.06 megawatts.
These plants are registered with the ERC.

Umali said they are looking into the possibility of tapping the help of these facilities during
the summer months of 2015 under the DOEs proposal to implement the Interruptible Load
Program (ILP) in Luzon.

Under the ILP, big businesses such as malls and hotels will get paid by Meralco if they use
their own generating facilities during peak hours, allowing Meralco to serve other customers.

The same program has been implemented in Mindanao late last year during the power crisis
in the region.

We have to first determine if these self-generated capacities are all-existing and how much
power can be really generated from these self generating capacities, Umali said.

Umali said that based on the DOE computation about 115 megawatts can be generated in
Luzon if the ILP will be implemented.

He said his committee will meet again with the officials of the DOE and the ERC next week to
further discuss the DOE proposal.

Rotating brownout in the summer months if 2015 is not an option. We also have to ensure
that the consumers should not carry the burden, Umali said.

The House energy committee had an executive meeting with the officials of the DOE
Tuesday morning to discuss Energy Secretary Jericho Petillas proposal to give an emergency
power to Pres. Benigno Aquino III to address the looming power crisis.

Umali said that though his committee has no problem with giving emergency power to the
President if the Palace would ask for it, parameters and limitations would have to be set.

First, we must determine whether or not there is really a shortage, and then yung different
approaches availableWe have to satisfy ourselves first of the parameters. We dont want to
give a blanket power here, Umali said.

Please remember that there are embedded capacities not accounted for that we have to
determine in the coming daysBaka naman if we can tap these capacities ma-address na
ang shortage without resorting to emergency power, Umali added, citing that the ERC also
reported that there are 3,500 diesel plants in the country whose potential for power
generation may also be tapped.

Umali, however, admitted that the emergency power of the President might be needed to
compel the self-generating facilities to comply with the ILP in case it would be implemented.

We may need the emergency power to make it mandatory for the self-generating facilities
to comply with the ILP, because as of now, it is only voluntary. If the self-generating facilities
would comply voluntarily then we dont need emergency power, Umali said.

Umali said that apart from implementing the ILP in Luzon, the DOE officials, during the
executive session, also proposed two more options to address the power crisis the
implementation an energy saving policy under the DOEs Energy Conservation Program and
the renting of companies that have existing capacity to generate power.

Unfortunately yung sa energy conservation we cannot make anything out of it yet, because
there is no target. The DOE should define what the target should be on an energy
conservation program. Say if they want to target 10 percent (of power) to be conserved,
then that should amount to probably about 1,000 megawatts, Umali said.

When it comes to the third option, Im happy to hear that this is only a last resort, Umali
added.

He said that renting private companies for additional power generation might be a
disadvantage for the government due to higher costs.

Meanwhile, in a separate interview, Bayan Muna party-list Rep. Neri Colmenares urged the
government to consider constructing a government-run power plant.

Walang provision sa EPIRA (Electric Power Industry Reform Act of 2001) na nagpapabawal
sa gobyerno sa pagtatayo ng planta. Bakit ayaw nila? Ang gusto ng gobyerno ipaubaya sa
private sector, which is dangerous, kagaya ng nangyari during the time of (President Fidel)
Ramos kung kailan ang daming private power plants ang itinayo, Colmenares said.

It the 1990s then President Ramos was given emergency power to address the nationwide
power crisis.

In an earlier statement, Kabataan Partylist Rep. Terry Ridon said giving emergency power to
the president is not a solution in addressing the power crisis.

But the same [emergency powers] were used instead (by Ramos) to allow the entry of
favored independent power producers (IPP) to construct power plants within 24 months.
Ramos also approved onerous supply contracts that guaranteed the government would buy
whatever power the IPPs produced, forcing consumers to pay for electricity they did not
even use, he said.

Source: DOE eyeing 2,000 private power plants to avert shortage in 2015
August 12, 2014
Posted in Uncategorized
Tagged DOE, Power Generation

Security of Power Supply and The Futility of Sec.

71
Posted on: Oct 31, 2014

David Celestra Tan

31 October 2014
While a lot of attention is on invoking Epira Laws Section 71 to grant emergency powers to the
President of the Philippines to deal with an imminent power crisis this coming summer, there are
many larger issues that have become evident on the drawbacks of this power crisis provision and its
futility in dealing with a power shortage, much less for assuring timely and cost effective solutions.
Section 71 of the Epira Law of 2001 is called Electric Power Crisis Provision says upon
determination by the President of the Philippines of an imminent shortage of power,
Congress may authorized through a Joint Resolution the establishment of additional
generating capacity under such terms and conditions that it may approve.
The reason for this is under the Epira Law that prescribed the privatization and deregulation of the
power industry, the government is no longer allowed to own power plants or enter into new power
supply agreements. The private sector is supposed to do that and meet all the power requirements
of the country at fair and reasonable costs. Section 71 was supposed to be a fall back position to
allow government to get into power generation if there is going to be a power crisis.
Now Thirteen (13) years after the Epira Law was passed and its Implementing rules and regulations
passed in 2002, the Filipino consumers have the worst of both worlds, high power rates and
unreliable power supply. The Department of Energy has predicted that there will be a power
shortage for a few hours in a few days in the summer of 2015 and Secretary Carlos Jericho Petilla
had broached the idea of asking Congress to grant President PNoy emergency powers to rent
300mw of rental generators for two years at a cost of more than P10 billion. Later, that shortage
prediction was increased to 1,200MW in a worst case scenario.
The debate is on- going but the drawbacks and futility of Section 71 have become evident.

1. Declaring an imminent power crisis is easier said than done. We need solid numbers. Foreseeing
one in sufficiently ahead of time is not easy.
2. Getting congressional approval is contentious, political, and time consuming that by the time the
President and DOE gets one, it may be too late for a timely solution.
3. Quick and temporary solutions are both limited and very expensive.
4. The private sector cannot be counted upon to provide a comprehensive solution on their own.
They seek profit opportunities but not necessarily, as a group, undertake a total solution.
5. Despite privatization the electricity is a public service that the government must still assure and
the people expect it to step up and be responsible.
6. The public is leery and suspicious of negotiated contracts and any government official overseeing
it cannot escape being smeared.
7. Section 71 is not an adequate mechanism to assure security of supply for the country.
When The Epira law was still being framed in 2000, Section 71 was supposed to be a Security of
Supply provision that designates the government, specifically Napocor as the generator of last
resort. That was in recognition of the fact that in the end the people still expect the government to
solve any problems in power supply and high rates in this very essential public service. The vested
interests and their Congressional allies wont hear none of it because they were so afraid that if the
law opens a window for the government to hold on to some power generating assets, some of
Napocors power plants that they so craved might not be privatized. (well, the rest is history).
As long as Congress is hot on the issue of Section 71 and emergency powers, it is an
opportune time to look at the broader issue and the larger interest of the country by
recognizing these drawbacks and the futility of Section 71 and pass instead a Security of
Supply amendment, albeit belatedly. The government through Napocor should be allowed to
retain and establish strategic power generation assets with specific grid roles both to assure
supply and even to intervene in the market if the prices are going unreasonably and painfully
high for the consumers.
If the government is to be expected to step in anytime and do it cost effectively, it needs
ready capability to Maintain and build strategic power generating capability for the long term
with appropriate planning and strategy. Napocor practically gave away some key power
plants that could have been strategic in securing power supply. The only reason it still has
the 600mw Malaya power plant is there have been no takers. They could also have retained
the Naga power complex and the 100mw Dingle power plant for the Visayan grid. They could
have retained the diesel plants in Mindanao which provides strategic reserve capacity. They
did not even privatize those. They allowed them to be foreclosed by the LGU! What an
anomaly!

In any case, at this stage Congress can establish limits of generating capacity to say 15% of
installed dependable capacity. They can even be assigned to be the provider of reserve
capacity and ancillary services. Napocor still has very capable technical people and
organization.
And because it is government, it doesnt mean it has to be a losing proposition. Costs can still be
recovered from the rates but this time it can be kept at a minimum because the profit margins dont
need to be there.
Things are clear on the futility of Section 71. Things are clear on the inevitability of the
government stepping in to solve any power problem. Let us hope Congress will recognize
reality, step up to this patriotic duty, and do what is clearly essential to assure power supply
and lower rates for the countrys industrial competitiveness.
Let us turn Section 71 into a Security of Supply provision (or Law). It is a bigger and long
term Emergency!
Have a safe All Saints Day weekend.
Matuwid na Singil sa Kuryente Consumer Alliance Inc. - See more at:
http://matuwid.org/security-of-power-supply-and-the-futility-of-sec-71/#sthash.Jl8wzTwl.dpuf

Archipelagic Nation Needs Archipelagic Generation

Posted on: Feb 24, 2015
David Celestra Tan
25 January 2015
Should a country generate its power from larger power plants far away from the load center or
should it build smaller power plants closer to where they are needed?
This article is a continuation of our previous posting on Locational Strategy for power
development.
The debate on distributed generation versus centralized generation dates back to the time of
Thomas Alba Edison, the inventor of electricity, when he built the Pearl Street Station in New York in
1882.
The idea is generating power is cheaper from larger centralized though farther power plants even if
we factor in the cost to transmit them by HV power lines to the load center. Land costs in remote
areas are cheaper and the sparsely populated surrounding communities that can use the large
investment, tax, employment, and general contribution to the community economy, would be not as
resistant to environmental risks. Large coal power plants also need to be located close to the
coastlines for coal fuel handling and plant water cooling.

This debate is very relevant to our beloved Philippines, an archipelagic country with 7,107 islands
(okey in low tide), at least 15 of them are major, occupied by 85% of our 97 million population. Do we
build big and bigger power plants and string the islands with a network of long and longer submarine
power cables and overhead transmission lines? Or do we build island-centric generating plants and
only build medium voltage and strategic inter-island submarine connections for supplementary
peaking and reserve power. There is a big jump in technology and cost from a 69kv submarine
system to 138 and 230kv. Major high voltage lines of 138 and 230kv can be built for strategic
reasons like connecting the major island of Mindanao to the Visayas and Luzon grid.
In power sector parlance, distributed generation means generating power close to the distribution
centers. It is also called embedded generation when a power plant is located close to the load center
and power is delivered directly to its distribution substations and feeders without going through long
high voltage transmission lines.
The deciding factors should be power reliability and the total cost of delivered power to the electricity
consumers. This means including the cost of transmission lines. Embedded generation is embodied
in our Philippine Grid Code.
Napocor's Philosophy of Centralized Generation
The policy of distributed generation got lost in the Philippines power development strategy when the
government nationalized under Martial Law the power generation and transmission functions under
the government owned monopoly, National Power Corp. One thing that Napocors and the old
Ministry of Energys strategy got confused on was while it may be sensible for building bigger power
plants in the large Luzon island, that centralized generation philosophy was adopted also in the
Visayas and Mindanao. Consequently, under Napocor there were no major power plants built in
Negros and Panay islands. Instead, they relied on the 700mw geothermal fields in Ormoc, Leyte and
built overhead power lines to Cebu and connected Leyte, Cebu, Negros, and Panay with submarine
power cable systems.
Meralco under its original American owners (from New York) and visionary Lopez patriarch Eugenio
Lopez Sr. was building power generating plants close to the load center of Manila. Remember the
Rockwell power plant in Makati, the Gardner Snyder station in Sucat, Tegen Power Station in
Sta.Ana, and Malaya? These were feasible in their locations in Laguna Bay and Manila because
they run on bunker c which can be barged.
Even the last big power project under Martial law, the 600mw nuclear plant in Morong, Bataan was
not unreasonably far (120km) from the Metro-Manila load center. There was already a 230kv
transmission line built from Morong to Hermosa Bataan. When this power project was aborted under
the Anti-Marcos frenzy of 1986, there were no power projects undertaken to replace it despite having
a supposed power guy appointed by President Cory Aquino to the presidency of the power
monopoly Napocor.
Power Development in the Philippines was neglected during the political upheaval of 1980s and
caught up with the country just as it was starting to economically recover after the people power
revolution. A five (5) year power crisis ensued with 12 hour rotating brownouts 1990 to 1995. The

power projects undertaken under the Power Crisis Act giving new President Fidel V. Ramos the
absolute power to negotiate urgent power projects, saw the building of power plants in places where
coal unloading is feasible, where power barges can be moored, and where big power investments
are politically convenient.
From a transmission planning and system balancing point of view, many wondered why a 1,200mw
power plant, the countrys largest, was built way in the North in Sual, Pangasinan, which is 210
kilometers away from Meralcos nearest power substation feeder. It necessitated the building of an
equal length of 230kv transmission line whose cost is passed on to the consumers.
If we decide that the Bataan Peninsula is a good strategic generation area, it may be sensible to
build a submarine cable system from Bataan to the Manila and Calabarzon load centers instead of
going around Pampanga and Bulacan with overhead power lines that tend to run into right of way
problems in building them.
An archipelagic and island-centric generation strategy is most critical for the Visayan islands
because of the high cost of continually building submarine power cable systems. Its major islands of
Panay, Negros, Cebu, and Leyte, are seeing booming economies. Of these islands the weak link in
generation is the 250mw Negros where there has not been a major power plant built for 40 years
other than the ill-fated 80mw Northern Negros Geothermal project of PNOC EDC in the Mt. Kanlaon
area which PNOC, after investing billion pesos, turned out to be a 10mw area. Currently most of
Negros power comes from a coal plant in Cebu and eventually a coal plant in Panay islands to the
West which will both require the expensive expansion of the submarine cable systems from those
islands to Negros, adding to the transmission charges to consumers. We heard this is budgeted at
P5 billion to bring about 100mw of Panay generated power to Negros.
One of the emergency power projects in the 1990s was the 700mw geothermal of Cal Energy in
Ormoc, Leyte, built with a full off-take guarantee by the national government through PNOC. For
many years it was being dispatched only 50% because its power cannot be delivered efficiently
through the Visayan Grid which relies on submarine cables. During this period, Panay island and
Negros had been suffering from power shortages including Boracay. In August of 1998, Leyte was
connected to Luzon by a 440mw HVDC submarine cable system.
For power reliability in each island there has to be sufficient on-island generation. There is an
esoteric term in the power sector called N-1 which roughly means an island must be able to
maintain normal power supply even if its largest power source like a generating unit or largest
transmission system is down. This is embodied in the Philippine Grid Code as part of power
reliability formula. The Code also encourages embedded generation.
NGCP as the system operator and planner of the power grid does not push for on-island generation.
In fact their behavior suggests they are against it. They push for more revenue generating
transmission line projects. And those will continually add to the transmission charges to the
consumers.
At some point, the major islands of Mindoro and Palawan will need to be connected to the main grid.
However, the scale and cost must be sensible. NGCPs proposal to connect Mindoro island with a

P11.9 billion 230kv submarine cable is an overkill and ignores the need to maintain on-island
generation. Had they proposed a more sensible 69kv connection line to provide supplementary
power it would have been more viable. Of course, they have to address how to protect Mindorenos
from the loss of the missionary subsidies.
The same with the 250 kilometer long Palawan island, cited for being one of the most beautiful
islands in the world. It may eventually be connected to the Luzon grid because of its sheer size and
load potential. For now the major task for at least the next 5 years is building as much on-island
generating capacity as possible to meet its 40mw demand. Palawan is a wonderful place for the
government to aggressively push for Renewable Energy. It has hydro, solar, biomass, and wind
potential. Why are they insisting on building a coal plant that the Palawenos are against? It can
sabotage the clean and pristine image that the island needs for its tourism, the most logical driver of
economic development of the island.
For power reliability and lower total cost of delivered power, we need on-island generations not only
in small islands. Building expensive submarine cables is part of the cost to the consumers. Our
archipelagic country needs an archipelagic generation philosophy.
Matuwid na Singil sa Kuryente Consumer Alliance Inc. - See more at:
http://matuwid.org/archipelagic-nation-needs-archipelagic-generation/#sthash.rqy6OsaY.dpuf

Congress urged: Overhaul EPIRA

TUESDAY, 27 JANUARY 2015 18:10

Consumer network People Opposed to unWarranted Electricity Rates (POWER) yesterday called on Congress
to overhaul the Electric Power Industry Reform Act (EPIRA), saying the law has failed in providing cheap,
adequate, and stable electricity to the public.
In yesterdays hearing of the House Committee on Energy, POWER Convenor and former Bayan Muna Rep.
Teddy Casio called on Congress to radically amend or, even better, totally repeal EPIRA in favor of a law
that would strengthen regulation over the power industry and gives back to government the authority and
capacity to build and run power plants and related facilities.
Proof of EPIRAS failure, said POWER in its position paper presented to the Committee, was the
unprecedented and artificial spike in power rates of December 2013 which they said was foreseen but not
prevented by an inutile Department of Energy (DOE), taken advantage of by colluding industry players, and
then given an imprimatur by an inept and beholden Energy Regulatory Commission (ERC).
POWER said among EPIRAs many flaws are: Sections 6 and 29 declaring power generation and supply as
non public utilities and therefore not subject to regulation; Section 30 creating the Wholesale Electricity Spot
Market (WESM); Sections 32 and 33 allowing the National Power Corporation (NPC) and distribution utilities
to pass on stranded costs and stranded debts to consumers; Section 45 allowing for cross ownerships
between power generators and distributors; Chapter V privatizing the National Power Corp.; Section 21
privatizing the national grid; and Section 71 limiting the governments power to directly intervene in the
power industry.

The end result of all these are high power rates, constant supply shortages, and a government that is
helpless in the face of a crisis, Casio told the Committee.
Stressing that Congress made EPIRA. Thus it can also unmake EPIRA, Casio said a new law was needed
to establish a responsive, sustainable and state-led power industry. Among the steps that would have to be
taken are:
1. Categorize power generation and supply as public utilities
2. Re-establish Napocors role as power generator
3. Regain control of the national grid
4. Reinvigorate the electric cooperatives
5. Strengthen ERCs regulatory capacity
6. Abolish the WESM
7. Further develop indigenous, clean and renewable energy sources.

http://www.edgedavao.net/index.php?
option=com_content&view=article&id=19520:congress-urged-overhaulepira&catid=34:the-economy&Itemid=81

Congress asked to repeal EPIRA

by Charissa Luci
January 28, 2015
Read more at http://www.mb.com.ph/congress-asked-to-repeal-epira/#LGgv0MABdJRfJx8M.99
Congress has been urged to totally overhaul the 13-year-old Electric Power Industry Reform Act (EPIRA).
Consumer network People Opposed to unWarranted Electricity Rates (POWER) pushed for the total repeal of the
supposed anti-people and pro-corporation Republic Act 9136.
POWER Convenor and former Bayan Muna representative Teddy Casio said it is about time for Congress to
radically amended or, even better, totally repeal EPIRA in favor of a law that would strengthen regulation over the
power industry and gives back to government the authority and capacity to build and run power plants and related
facilities.
Citing his groups position paper on the 20 EPIRA bills and resolutions pending before the House Committee on
Energy, he said EPIRA caused unprecedented and artificial spike in power rates as of December 2013.
Such spike was foreseen but not prevented by an inutile Department of Energy (DOE), taken advantage of by
colluding industry players, and then given an imprimatur by an inept and beholden Energy Regulatory Commission
(ERC), according to the position paper the group submitted to the House panel, chaired by Oriental Mindoro Rep.
Reynaldo Umali.
The group said among the provisions of the EPIRA that must be scrapped include Sections 6 and 29 declaring power
generation and supply as non-public utilities and therefore not subject to regulation; Section 30 creating the
Wholesale Electricity Spot Market (WESM); Sections 32 and 33 allowing the National Power Corporation (NPC) and
distribution utilities to pass on stranded costs and stranded debts to consumers; Section 45 allowing for cross

ownerships between power generators and distributors; Chapter V privatizing the National Power Corp.; Section 21
privatizing the national grid and Section 71 limiting the governments power to directly intervene in the power industry.
The end result of all these are high power rates, constant supply shortages, and a government that is helpless in the
face of a crisis, Casio told the Umali panel.
He stressed that Congress should come up with a new law to establish a responsive, sustainable and state-led
power industry.

Read more at http://www.mb.com.ph/congress-asked-to-repeal-epira/#LGgv0MABdJRfJx8M.99

It Will Take a Village to Reduce Meralcos Rates

Posted on: Jan 15, 2015

By David Celestra Tan

MSK has studied and identified the various charges that have been adding up
to high electricity rates for Filipinos in the Meralco franchise area that serves
72% of the electricity needs of Luzon island. These are the basis for our Ibaba
ng P3 Campaign. Essentially what we have done is get past the justifications
of Meralco and unravel the mystery out of these high rates line by line. We
have taken the first small consumer step by filing a petition with the ERC to
pass a resolution mandating the open competitive bidding for power supply
contracts that will be passed on to the consumers. There will be more rulechange petitions that MSK will file.
We have a long way to go however before those small steps become giant
leaps for consumers, who have long been ravaged by the power industry
system that is supposed to serve them well. Obviously, MSK cannot do it by
itself. It can only act as catalyst for reform and show the way. It will take a
village to reduce Meralcos rates.
First, the Meralcos residential and commercial consumers, its captive
customers, must want the reduction and be willing to go beyond complaining
and to take action. The ERC must take cognizance and pass the competitive
contracting resolution, improve the transparency of systems loss charges, and
the reasonableness of the PBR rate making methodology. So far it appears
indifferent.
The Department of Energy will have to provide enlightened policy direction
and energy mix strategies. Most urgently it needs to improve the trading rules
of the WESM specially the market settling price, the must run unit (MRU)

policy, and market manipulation safeguards. The DOE must further recognize
and work to close the loopholes in the law that have been allowing the
monopolization and domination of the generation sector specially Rule 11
Section 4 of the Implementing Rules and Regulations of the Epira Law.
Our Senators and Congressmen must rise up to the challenge and amend the
law to close the loopholes and amend the IRR accordingly. They must be
willing to cleanse the Epira Law of 2001 of its anti-consumer flaws. They must
rectify the consumer betrayal of Republic Act 9511 which erroneously threw in
the Systems Operator authority to NGCP as part of its transmission line
concession. We must rationalize transmission line charges while we still can.
NGCPs P0.95 per kwh charge includes P0.36 per kwh for ancillary services
that have been of doubtful benefit to consumers.
The BIR and Department of Finance must be willing to rationalize the VAT
taxation of power. The E-Vat Law of 2004 added P1.30 per kwh to our
electricity bill. The DOE and JCPC must give Napocor a longer term
missionary electrification mandate so that it can adopt more cost effective
solutions to island power generation. Costly Temporary Rental generators are
proliferating all over the islands. The DOE must be judicious in administering
the missionary subsidies and discourage unscrupulous competitive biddings
and power supply contracts. All these result to high Missionary subsidy that
has added P0.19 per kwh to Meralco consumers and rising. So are the
stranded contracts and assets of PSALM. They too will be hitting the
consumers with more universal charges.
The big players in the industry, who are mostly diversified conglomerates,
must similarly cooperate and recognize that it is to their long term interest to
help the country become energy competitive, strengthen the economy as a
whole, and improve the purchasing power of the consumers. They cannot
strangle the geese that lay the golden eggs for their various businesses in
shopping malls, real estate, telephone services, water, transport and etc.
Malacanang will have to provide the leadership and set the tone for a national
resolve to reduce power costs. We are aspiring for Asian Economic
Community integration but our power cost will be a big handicap. High power
cost is an Achilles heel of the BPO and Call center industry which drives
professional employment, middle class demand and the real estate boom. It is
still two years before a new leadership comes in after the May 2016 elections.
Let us hope the current government will not let the consumers down and do
enough to put the country on the road towards rationalized power cost and
competitive rates, a lasting patriotic legacy.

And there is the most important which is Meralco itself. It must embrace least
cost power as its mantra as a public service utility. It is within its right to
develop a cost efficient energy mix and subject its purchases of power to
competitive bidding instead of negotiating with itself and monopolizing the
power generation supply of Meralco. It must rid itself of this conflict of interest
and do business in arms-length basis. It is within its capability to shepherd
and manage the contractual obligations of its power suppliers specially the
uptime and reliability obligations of their power plants. Meralco only needs to
want to.
In the P3.00 per kwh feasible reduction in Meralcos power cost, fully P2.20 or
73% is within Meralcos own control and capability to initiate and achieve.
(generation cost, systems loss and distribution charges). They only need to
find it in their hearts to be true to their mandate as a public service provider.
Meralcos Filipino management and executives must view this as a patriotic
duty. Least cost is part of its public service obligation. In the power cost
reduction village Meralco is the center.
Reducing the Philippine power cost especially in the Meralco area by P3 per
kwh is an achievable dream. We however as a people must want to and
cooperate and row in the same direction. MSK hopes it is showing the way
towards rectifying this unintended conspiracy against the Filipino consumers.
We have identified eight (8) varied areas for reform. It will take some doing
even for all of us working as a village to reduce Meralcos power rates.
If not us, who? if not now, when? Otherwise we have no right to complain,
bear the consequence of our own apathy, and reconcile with the unkind deed
of consigning our own children and country to a future of overpriced power.
Sad.
Maybe we all can find enlightenment, courage, and epiphany in the Popes
visit.
--David Celestra Tan is a CPA and a founder and former president of the
Philippine Independent Power Producers Assn. He is a co-convener of
Matuwid na Singil sa Kuryente Consumer Alliance Inc. (MSK) which is
dedicated to working for reforms and rule-changes in the power sector to
reduce power cost and make the country energy competitive. Follow the

issues in the matuwid.org website. Comments can be sent

to [email protected].

4 Comments

eirons1043 January 21, 2015 at 3:17 am

Almost nothing changes in this country unless there is a mammoth demonstration (the size of a
Papal Visit) at the Luneta to move any Sitting President, Congress and the Judiciary to action.
Complaining verbally, thru the internet, and newspaper columns is entirely useless. It is
irresistible to conclude that only a bloody Revolution (or anything near it) can change the gross
abuse of the government on excessive taxes and permits, GOCCs increased fees and penalties
plus the non-stop price increases of Monopolized products and services by the Oligarchs like
electricity, water, toll fees, construction materials, processed foods and even transport/airline
fares..- taken from PDI, January 16, 2015
- See more at: http://matuwid.org/it-will-take-a-village-to-reduce-meralcosrates/#sthash.nd7zemSX.dpuf

Amendments to EPIRA still hanging

by Charissa Luci
October 15, 2014
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The fate of the measures seeking to amend the 13-year-old Electricity Power Industry Reform Act (EPIRA) remains
hanging in the Lower Chamber as the countrys business sector continues to oppose it.
House Committee on Energy Chairman Oriental Rep. Reynaldo Umali said they are wooing the business groups to
reconsider their stance against the lawmakers proposed amendments to the EPIRA or Republic Act 9136. We have
to reassess strategy because the private sector is still not supporting measure. We need it so we can obtain support
of President to certify bill as urgent to ensure its passage, he said in an interview.
Umali said after the House passes the joint resolution granting President Aquino the authority to contract additional
generating capacity, his panel would start tackling the bills amending the EPIRA. I am not sure how to convince the
private sector, he explained. We need to reassess and strategize, but I am focused now on emergency powers, he
added.
In August, Speaker Feliciano Sonny Belmonte Jr. reminded the Umali panel to expeditiously consolidate the EPIRA
measures, saying that Congress should step in to address the chronic precarious power supply situation.
It would be recalled that during the opening of the second regular session of the 16th Congress, the House Chief
directed the House Energy panel to consolidate the measures to address the need for competitive bidding of bilateral
contracts, and of establishing a genuinely competitive power market that fosters a level playing field for all
stakeholders in the industry.

Read more at http://www.mb.com.ph/amendments-to-epira-still-hanging/#0ur3qMLLhMJTBWll.99

Belmonte pushes EPIRA amendments

July 28, 2014
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House Speaker Feliciano Sonny Belmonte Jr. on Monday urged the House committee on energy to expeditiously
consolidate measures seeking to amend the the 13-year old Electricity Power Industry Reform Act (EPIRA).
The House chief urged both houses of Congress to thoroughly review the implementation of the supposed antipeople, pro-corporation law.
Our countrys growth momentum is now put at risk by the chronic precarious power supply situation, he said in his
opening remarks during the opening of the second regular session of the 16th Congress.
The House Committee on Energy must now consolidate proposals to address the need for competitive bidding of
bilateral contracts, and of establishing a genuinely competitive power market that fosters a level playing field for all
stakeholders in the industry, Belmonte said.
He maintained that there is a need to amend the EPIRA to prevent the cross-ownership of the generation,
transmission and distribution sectors.
While, the Executive is empowered by the EPIRA to ensure power supply security, it is incumbent upon Congress,
exercising its oversight powers through the Joint Congressional Power Commission, to conduct a thorough review of
the implementation of EPIRA, the rules and regulations of the Energy Regulatory Commission, and the Wholesale
Electricity Spot Market (WESM), he said.
Belmonte earlier expressed optimism that the EPIRA measures could be passed this 16th Congress. (Charissa M.
Luci)

Read more at http://www.mb.com.ph/belmonte-pushes-epira-amendments/#ckptkKitbzyVDxLi.99

POSITION PAPER ON THE NEED TO AMEND OR REPEAL THE

ELECTRIC POWER INDUSTRY REFORM ACT (R.A. NO. 9136)
January 28, 2015 by Blog Administrator Leave a comment

https://powertothepeoplenow.wordpress.com/2015/01/28/position-paper-on-the-need-to-amendor-repeal-the-electric-power-industry-reform-act-r-a-no-9136/

Prepared by the People Opposed to unWarranted Electricity Rates (POWER)

for the Energy Committee of the House of Representatives
January 27, 2015

In a comprehensive report on the impact of EPIRA on the power industry

presented to select members of Congress last 2011, the People Opposed to
unWarranted Electricity Rates (POWER) came up with the following striking
observations:
Power rates doubled since EPIRA was implemented, with Meralco increasing its
rates by more than 112 percent and National Power Corporation (NAPOCOR) by
more than 95 percent in 10 years. Power rates in the country are among the
highest in the world and more increases are yet to come when consumers start
paying for Napocors stranded debts and stranded costs;
Supply remains a big problem with hardly any additional capacity implemented
under EPIRA;
An oligopoly exists and monopolistic practices abound, with only three groups
controlling 52 percent of generation capacity San Miguel Corporation (SMC),
Aboitiz and Lopez and Meralco controlling 70 percent of distribution in Luzon;
Despite selling its major power plants and assets to pay for its debts,
NAPOCOR remains mired in debt. From 2001 to 2010, it shelled out $18 billion to
service its financial obligations yet its debt hardly decreased from $16.4 billion
in 2001 to $15.8 billion.
Such factual observations are totally the opposite of the stated objectives of
EPIRA.
Of late, the unprecedented and artificial spike in power rates of December 2013
should serve as the final proof that the twin policies of privatization and
deregulation mandated and implemented under the Electric Power Industry
Reform Act or EPIRA have failed. The incident was foreseen but not prevented by
an inutile Department of Energy (DOE), taken advantage of by colluding industry
players, and then given an imprimatur by an inept and beholden Energy
Regulatory Commission (ERC). If Congress and the Supreme Court did not step
in, our people would have suffered the highest rate hike in history that would
have made Philippine electricity the most expensive in the world.
That something like that could happen is a testament to how EPIRA and its
implementing agencies have failed in its promise of providing consumers with
cheap and stable electricity.

Problem of policy
Proponents of EPIRAs neoliberal policies of privatization and deregulation say
this is basically a problem of implementation. They point out, for example, that
the government dilly-dallied in selling our state-owned power plants, resulting in
additional debts and stranded costs. That the WESM rules are flawed and its
requisites have not been met, leaving the system vulnerable to gaming. That
the ERC is incompetent and corrupt. That the DOE is short-sighted and refuses
to take on a more pro-active role. That bureaucratic red tape is still making it too
difficult for investors to put up much needed power plants.
We agree to a certain extent. But more than a mere implementation issue, the
basic problem is one of a flawed policy. Like most textbook, first world solutions
to peculiar, third world problems, EPIRA and its neoliberal prescriptions ended up
with contrary results. Privatization and deregulation were supposed to entice
new investors leading to more competition, increased supply and decreasing
prices. To protect the system from anti-market behavior and monopoly practices,
an independent ERC was supposed to police the industry.
Alas, it was too good to be true. Privatization practically transferred on a silver
platter the entire power industry to a class of conniving oligarchs and foreign
investors whose lust for profits were unbridled by deregulation. Meanwhile,
government found its hands tied in protecting consumers and the national
interest. It became content with the proceeds of Napocors fire sale and the
assurances of EPIRAs proponents that the free market would take care of the
peoples welfare.
Tailor fit for abuse
Among EPIRAs many flaws, the following stand out:
Sections 6 and 29 declaring power generation and supply as non public
utilities and therefore not subject to regulation. This is the basis for the dreaded
automatic generation rate adjustment (AGRA) mechanism that allows Meralco
and other distribution utilities to automatically pass on generation costs
however onerous;
Section 30 creating the Wholesale Electricity Spot Market (WESM), a psuedo
spot market easily manipulated by industry players to jack up power rates;
Sections 32 and 33 allowing the National Power Corporation (NPC) and
distribution utilities to pass on to consumers the burden of their past mistakes
via recovery of stranded costs and stranded debts;

 Section 45 allowing for cross ownerships between power generators and

distributors, institutionalizing connivance and anti-competitive behavior;
Chapter V privatizing the NPC, Section 21 privatizing the national grid, and
Section 71 limiting the governments power to directly intervene in the power
industry. This has led to an inutile government held hostage by private power
corporations.
The end result: high power rates, constant supply shortages, and a government
that is helpless in the face of a crisis.
While we consumers bear the brunt of EPIRAs failures, industry players make a
killing. From its reported net income of Php2.6 billion in 2008, Meralco saw its
profits grow by more than six times to an all-time high of Php17 billion in 2013.
For 2014, the power distributor expects its net income to further grow to
Php17.8 billion or almost seven times its profits in 2008.
Meanwhile the estimated average Return on Equity (ROE) of 15% in the
Philippine power industry is higher than in most industries.
Power industry too important to be left to the mythical free market
The importance of electric power to national development cannot be
overemphasized. From ordinary households to large industries, electricity is a
necessity; its cheap and adequate supply a requirement for the achievement of
various social, economic and even political goals.
This is the reason why, in most countries of the world, power is highly regulated,
owned by the state to a substantial degree, and subsidized by public funds. The
logic is that for such strategic public utilities, not only should prices be kept low
and stable but government itself, as protector and promoter of the public
interest, should have a direct hand in its planning and operation.
EPIRA repudiates this tried and tested formula. Its success is premised on the
existence of an efficient free market, uninhibited by government, where many
buyers and sellers transact to arrive at an optimum price that is both affordable
to the buyer and profitable to the seller. In such a market, governments only
role is ensuring a level playing field. Unfortunately, there is no such market in
the Philippines, at least as far as electricity is concerned. What we have is a
market controlled by a rich and powerful oligopoly that commands an
overwhelming influence over politicians and government officials.

Given the nature of power utilities as natural monopolies with immense market
power, abuse and anti-competitive behavior is expected. The 2013 incident
involving Meralcos unprecedented P4.15/KwH rate hike is a case in point.
True enough, 12 years after EPIRA, the power industry is not only concentrated
in the hands of a local oligopoly but worse, is effectively owned and controlled
by foreigners. Take Meralco, which is now controlled by the Salim group of
Indonesia and the National Grid Corporation of the Philippines (NGCP), which is
40% owned by the State Grid of China Corp. This has grave economic and
security implications for the country, to say the least.
What can Congress do
Congress made EPIRA. Thus it can also unmake EPIRA.
We in POWER feel strongly that Congress should radically overhauled or, even
better, totally repeal EPIRA in favor of a law that would strengthen regulation
over the power industry and gives back to government the authority and
capacity to build and run power plants and related facilities.
To establish a responsive, sustainable and state-led power industry, Congress
should pass a law that would:
1. Categorize power generation and supply as public utilities
EPIRA redefined power generation and supply as ordinary private enterprises not
subject to government regulation. This has opened the door to onerous passthrough charges and unconscionable rates of return. Just like transmission and
distribution utilities, power generators and suppliers are imbued with public
interest and should be strictly monitored and regulated. A mechanism for
subsidies should also be put in place to ensure competitiveness with
neighboring countries that do likewise.
2. Re-establish Napocors role as power generator
EPIRA relegated Napocor to the fringes as an operator of decrepit and
unprofitable plants in far-flung missionary areas. This has severely restricted
governments role in ensuring an adequate supply of cheap electricity where it
is needed most in the urban areas and industrial belts. Unlike private
companies that would rather wait for a supply shortage before coming in to
maximize their profits, Napocor plants can be built and operated at break even
to serve strategic national objectives.
3. Regain control of the national grid

The National Transmission Corporation (Transco) was the crown jewel of the
state-owned power industry, earning revenues prior to privatization. As a natural
monopoly and strategic infrastructure for the entire power industry, it should not
have been sold in the first place.
4. Reinvigorate the electric cooperatives
Our electric cooperatives should be overhauled and member-consumers
empowered in order to provide the best services possible. Control and
management of these cooperatives should be removed from the politicians and
vested interests in the power sector and given back to the members.
5. Strengthen ERCs regulatory capacity
The ERCs Performance Based Regulation (PBR) is too complex for the public to
effectively participate in the rate setting process even as it allows industry
players to unfairly charge consumers for future capital expenses. It should be
replaced by a rate setting mechanism based on a reasonable return on equity.
6. Abolish the WESM
Power distributors should be required to contract 100% of their supply
requirements via public bidding. The electricity spot market, if any, should be
limited to reserve and ancilliary services and strictly monitored and regulated by
the government.
7. Further develop indigenous, clean and renewable energy sources
Our reliance on imported, fossil fuel-based technologies sould be reduced to a
minimum. Considering the wealth of renewable energy sources in the country, it
will be cheaper and more sustainable in the long run to develop biomass, hydro,
geothermal, solar, wind and other renewable energy technologies.
8. Remove VAT and reduce other taxes on electricity
EPIRA alreay exempts the power sector from the value added tax but was
superseeded by the EVAT Law in 2005. There is a need to remove VAT and
reduce other taxes because lower prices benefit all consumers and the country
at large.#

Solving Phl energy woes? More power

plants DOE
By Iris Gonzales (The Philippine Star) | Updated March 23, 2014 - 12:00am

MANILA, Philippines - How do you solve the countrys power problem?

Energy Secretary Carlos Jericho Petilla, without hesitation, said the solution rests on
the private sector building more power plants.

Its really the private sector that must build more plants, Petilla told The STAR.
And they have to build plants fast to keep up with rising demand.

It is the private sector that can make EPIRA work by building more plants, said
Petilla, referring to the landmark power reform law, the Electric Power Industry
Reform Act of 2001.

I keep on telling them, if you want to make EPIRA work, build more power plants,
Petilla said.

Headlines ( Article MRec ), pagematch: 1, sectionmatch: 1

To illustrate, data from power distributor Manila Electric Co. (Meralco) showed that
in the period 2001 to 2013, the Luzon peak demand had grown by 2,659 megawatts
or 47 percent, from 5,646 MW to 8,300 MW.

Yet, no new major base load plant has been constructed and added to the Luzon
grid other than the coal-fired plant of GN Power in Mariveles, Bataan with a reported
installed capacity of 652 MW and current dependable capacity of 495 MW.

Accordingly, demand has outgrown new base load capacity addition by around
2,000 MW during this period.

It was on June 8, 2001 that then President Gloria Macapagal-Arroyo signed into law
Republic Act 9136, or the EPIRA, after more than seven years of public hearings and
floor deliberations on various versions of the measure in Congress.

EPIRA promised many things but its biggest promise was to bring down electricity
rates and to improve the delivery of power supply to end-users by encouraging
greater competition and efficiency in the electricity industry.

Consumers will be assured of adequate and reliable power supply at lower rates,
the Department of Energy (DOE) said in a briefer on the power reform law.

There will be competition between and among generating companies where prices
will be market-driven and competitive. There will be long-term contracts and a spot
market where the trading of electricity between buyers and sellers will be
undertaken, the DOE paper said.

The signing of EPIRA came at a time when the Philippines depended largely on the
National Power Corp. (Napocor), the state-owned power company, and its monopoly
of the energy sector.

Thus, the restructuring of the energy sector called for the separation of the different
components of the power sector such as generation, transmission, distribution and
supply.

The strategy is to put an end to monopolies that breed inefficiency, encourage the
entry of many more industry players, and generate competition that will benefit
consumers in terms of better rates and services, the DOE said in the briefer.

It was the same scheme that worked in other countries, and was touted by the DOE
to work just as well in the country.

In other countries, a restructured and competitive power sector has provided

consumers with lower power rates. We look around us and find that the same

pattern can be seen in local industries that have been de-monopolized and
deregulated like telecommunications and inter-island shipping, it also said.

Under EPIRA, the government had envisioned that privatization would allow it to
shift the burden of ensuring continuous financing for the construction, operation and
maintenance of hugely capital-intensive, power-generating plants to the private
sector.

Thirteen years later, however, electricity consumers are still reeling from high
electricity cost. Things came to a head in December 2013 and January 2014.

Last December, the generation charge of Meralco rose to a record high of P9.10 per
kilowatt-hour and to P10.23 per kwh in January 2014.

This was in contrast to the November 2013 rates of P5.67 per kwh and the monthly
generation charge before that which hovered around the P5 per kwh level.

Acting on a petition from militant groups, the Supreme Court issued a temporary
restraining order on the planned rate hike.

Market failure

After 13 years, EPIRA did not only fail to fulfill its promise, it also created an
environment that led to market failure.

In a March 6 order issued after months of investigation, the Energy Regulatory

Commission (ERC) said there was market failure at the Wholesale Electricity Spot
Market (WESM) because some participants did not offer their full capacities, thereby
affecting supply and pushing prices higher. WESM is the countrys trading floor for
electricity.

One reason that supply was low was because market participants did not offer their
available capacity so there was market failure, said ERC executive director
Saturnino Juan in a briefing on March 11 explaining ERCs order.

A total of 2,035 MW in average capacity were not offered at the WESM during the
one-month maintenance shutdown of the Malampaya natural gas plant, the ERC
said.

Thus, the ERC declared the WESM prices during the period as void and ordered the
Philippine Electricity Market Corp. (PEMC), operator of the WESM, to re-calculate the
prices and issue revised bills to Meralco and other concerned distribution utilities.

The ERC said prices in WESM during the November and December 2013 supply
months could not qualify as reasonable, rational and competitive and that in the
exercise of its police powers, it was ordering the voiding of the Luzon WESM
prices.

The ERC had ordered the PEMC to determine if generation companies violated
market rules when they did not offer their full capacities in the market.

The WESMs must-offer rule requires companies to declare and offer their
maximum generating capacities to prevent supply shortage.

It was not the first time that inefficiencies in the market were spotted. In 2006,
PEMC also found out that the Power Sector Assets and Liabilities Management Corp.
(PSALM) committed anti-competitive behavior.

PSALM not blameless

The PEMC, through its Enforcement and Compliance Office (ECO) and Market
Surveillance Committee (MSC), conducted an investigation into PSALMs conduct at
the WESM for the third billing month or in August 2006. PSALM is the government
agency created by the EPIRA to privatize Napocors generating assets.

The MSC, in a memorandum report dated Nov. 20, found PSALM guilty of anticompetitive behavior and abuse of market power.

PSALM, acting as one through its three trading teams, exercised market power.
They were able to set the market price to a level that they wanted during peak
hours. Since the production costs were well below the P10,000 per megawatt and
above offered during the third billing month, they abused market power during the
peak hours which market power would not have been there had the three trading
teams acted competitively and independently with each other, PEMCs MSC said in
its report.

At the time, PSALMs three trading teams or the most frequent price setters in the
market were KEPCO Ilijan, Pagbilao and Sual power plants. Three different teams but
all under PSALM were trading all these plants.

However, the ERC eventually voided the findings of PEMC, saying there was no
prima facie evidence to conclude that PSALM had indeed engaged in anticompetitive behavior.

But ERC warned Napocor and PSALM to refrain from engaging in conduct inimical to
the objectives of free competition.

The STAR columnist Boo Chanco, who had worked for the then Ministry of Energy,
said regulatory failure and not market failure was to blame for the problem.

If you ERC guys were more alert in defense of the public interest, you would have
seen market failure about to happen and would have taken steps to stop it from
happening, Chanco said.

EPIRA author Sen. Serge Osmea said the law is a good one but lamented that the
ERC has not been able to implement it well because it is full of political appointees.

The Philippine Chamber of Commerce and Industry, the countrys most influential
business organization, submitted last month a list of proposed EPIRA amendments.
It particularly urged Congress to strengthen the role of the ERC.

World Bank senior energy specialist Alan Townsend said ERC in general is probably
a bit too legalistic and process oriented and not driven enough (nor capable
enough) by core economic aspects.

(To be concluded)

1. Home
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3. Epira revisions worry investors

Epira revisions worry investors

By Alena Mae S. Flores | Jun. 18, 2014 at 12:01am
http://manilastandardtoday.com/2014/06/18/epira-revisions-worry-investors/

New power plants in the Philippines are facing funding delays as foreign banks weigh their
options amid calls to revise the Electric Power Industry Reform Act of 2001.
Lawmakers have called for an amendment to the Epira following an unprecedented spike in
power prices in the November and December supply months last year, after the Malampaya gas
production facility in Palawan was shut down.
Management Association of the Philippines energy committee chairman Ernesto Pantangco told
reporters with the economy growing at a rate of 5 percent to 6 percent annually, power plants
needed to be built to address the demand.
Many companies are still keen on building new power plants but some projects cannot take off
because of funding concerns. He cited the the expansion of the 460-megawatt Quezon power
plant in Mauban, Quezon that faced funding difficulties.
Some companies interested in expanding or putting up additional capacities could not yet select
an engineering, procurement and construction contractor because of failure to close financial
deals and regulatory risks.
They [power generators] will come in but not in time. They [power generators] are watching
how this regulatory uncertainty will pan out If you look at the foreign banks, they are
concerned [about] political risk, which falls under regulatory risk. Thats why it is important for
us to show consistency, Pantangco said
He said the Philippines must put up an additional capacity of 300 megawatts every year and the
country was already two years behind the projection.
If you introduce uncertainty, nobody is going to build, Peter Wallace, MAP governor, said
Asif Anwar Ahmad, British Ambassador to the Philippines, meanwhile, urged the government to
relax the foreign ownership rule, especially on renewable energy projects.
For the longer term, we would look to congressman and legislators to liberate the market so that
foreign investments which can be over the 30-year period, where ownership is not always
restricted, where we can partner with greater confidence than we already have, Ahmad said.
Not from a political point but from an economic point... any big project which is billions of
dollars needs certainty of ownership, you need certainty of investment return, you need to
convince bankers and financiers that you have a project that is sure over the long term and the
shareholders that take the risk can be repaid, and that is not always possible if your are in a
minority shareholder position, he said.