Distribution firms blamed for power crisis in Phl

By Dexter A. See

BAGUIO CITY – The failure of private distribution companies and electric cooperatives to enter into power supply contracts with power plant investors for the timely put up and operation of new power plants in the different parts of the archipelago is the primary culprit for the previous power crisis in Visayas, the on-going power crisis in Mindanao and the projected severe power crisis in Luzon by 2016, a power industry expert said here June 29.

Prof. Rowaldo del Mundo, associate professor of the University of the Philippines – National Engineering Center (UP-NEC), said it would be unfair to totally blame the government for previous and upcoming power shortages in the different parts of the country because it is not their obligation to enter into power supply contracts as the Electric Power Industry Reform Act (EPIRA) mantes the distribution utilities to be the ones to secure their respective power supply contracts that would cater to their respective power demands for a certain duration of time.

“Since the implementation of the EPIRA over 13 years ago, there was only one new power plant that was built for still unknown reasons.” Del Mundo stressed, referring to the 600-megawatt clean coal power plant of GM Corporation in Mariveles, Bataan, which was officially commissioned sometime in February this year.

Del Mundo said “it is the obligation of the distribution utilities to contract out their projected power requirements to serve as basis for investors and financial institutions to infuse the needed capital in order to put up new power plants that will prevent the occurrence of power crisis in the different grids.”

In the case of Visayas which suffered from a power crisis in 2008, the UP professor explained distribution companies waited for the power shortage before realizing the need to commission new power plants that eventually solved the possible prolonged power outages that could have been detrimental in the island’s robust economic growth over the past several years.

For Mindanao, del Mundo added the island will continue to suffer from prolonged rotating brownouts that could increase from 188 days per year this year to around 250 days next year once no new power plants will be operational, citing that “peaking power plants” such as diesel-fired power facilities will help address the problem but not in terms of lowering the power rates being charged to the consumers in the area.

In the case of the projected severe power crisis in Luzon, del Mundo said the distribution utilities, particularly Meralco that accounts for at least 75 percent of the power demand in the grid, have failed to secure their power supply contracts that would address their power requirements in the future, thus, no new power plants were built for more than a decade now.

Del Mundo recommended to the energy department to mandate all distribution utilities nationwide to submit their respective forecasts of power demand in the next five years in order to determine the available uncontracted power requirement which will be then subjected to power supply contracts with prospective power investors to allow them to work out the building of new and reliable power plants that would solve the possibility of increased rotational brownouts detrimental to the desired economic growth.

“For every one percent increase in the country’s gross domestic product, there is also an increase of around 1 percent of the country’s total power demand, thus, the need for the continuous building of new power plants around the archipelago to help address the additional power requirements caused by the improving economic situation,” del Mundo said.

He said no power generation investor was able to build new power plants previously because there was no guarantee from the distribution utilities that a portion of the power that they will produce will be bought by the companies considering the huge investment required to put up a power plant.

For every megawatt of power, he cited investors are required to infuse at least $1 million which could only be acquired through the aid of financial institutions, thus, the need for power distribution utilities to guarantee the purchase of the power to be produced in order to make the construction and operation of power plants feasible.

Del Mundo also suggested to the power distribution utilities to undergo the public bidding of their uncontracted power requirements so that they will be able to get the most advantageous offers from interested power generation companies through the least cost principle for them to be able to offer to their consumers lower rates but quality and reliable power delivered to them in the future.

He lamented the practice of Meralco over the past several decades of undergoing negotiated contracts with power producers for their power requirements which makes it difficult for the Energy Regulatory Commission (ERC) to decide on the viability of the company’s power rates.