• 2014 rising: Power Failure

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    Giovanni Tapang, Ph.D.

    Giovanni Tapang, Ph.D.

    In trying to distance itself from the recent Meralco power hike, the Aquino government admitted its uselessness as a defender of the interests of consumers. By saying that “there is no magic wand to wave,” Malacanang is also giving its tacit approval to the increase as well as the Epira mechanisms that brought us— and will still be bringing us— these very high electricity rates.

    Deputy presidential spokesman Abigail Valte tries to pass the buck to Congress by pointing to its power to amend the Energy Power Industry Reform Act (Epira) but refrains from certifying measures calling for its repeal as urgent measures. This is not surprising as President Aquino has not lifted a finger since he assumed power to reverse the privatization of the energy industry. This is despite a decade-long failure of the policy to lower energy rates and secure energy supply in the country. From around P 5.76 per kilowatt-hour in 2001 prior to the Epira, electricity prices have risen to a little bit more than P11 per kilowatt-hour for our household’s 200 kWh usage. This is still without the power hike since it was stopped by a TRO granted by the Supreme Court to a the suit filed by the Makabayan bloc.

    Junk VAT, ease consumer burden
    Power rates have increased due to various recoveries (a.k.a. pass-on costs) derived from the generation companies as well as the transmission and distribution costs of the power utilities. On top of these is a value added tax imposed across all the chain— adding more to an already high power price paid by consumers. If one removes the value added tax on energy, the price of electricity would decrease by more than one tenth. Contrary to Valte’s handwaving, this is one immediate relief that the Aquino government can give consumers.

    Yet Valte is correct in pointing out that one of the real reason for the failure in power is the Epira.

    The Epira sought to restructure the electricity industry and privatize the assets of the National Power Corporation or the Napocor. Supposedly, the government’s objective in privatizing Napocor is to cut losses from loans and pass on the burden of power infrastructure investment to the private sector, while earning revenues from the sale.

    But as we now experience, the Epira has not caused any real decrease in power rates nor any stability in supply. Instead, we see the onerous Purchased Power Adjustments from the independent power producer’s contracts being embedded in the now unbundled rates. Even with the establishment of the wholesale electricity spot market (WESM), bilateral sweetheart contracts between distribution utilities and power suppliers are still the norm.

    ERC surrendered its function
    What happened in the WESM recently is not new since speculation and the lack of generation capacity has already driven electricity rates to ridiculous levels in 2010. A similar situation has also happened in the Visayas WESM. Since the Energy Regulatory Commission has surrendered its regulatory function in allowing various alphabet-soup automatic recovery mechanisms named as GRAM, ICERA, AGRA and the like, we are forced to accept without benefit of a public hearing these increases due as pass-on charges. Utilities can automatically recover and pass on to consumers currency fluctuations, fuel cost fluctuations and contract obligations by simply submitting these to the ERC.

    We should not forget that they also pass-on system loss charges including technical losses, pilferages, and company use or electricity used by distribution utilities such as the Meralco. Because the Epira is geared towards satisfying the profit margins of power industry players rather than consumers, it is not surprising to hear from Luis Miguel Aboitiz of the Philippine Independent Power Producers Association, Inc. (Pippa) describing a threat of a blackout if the increase in generation rates are not granted.

    Electric power is a basic service that is needed by households in everyday activities and is equally important for industries to operate. The failure of the government to provide electric power was evident when the country faced massive blackouts during the first Aquino presidency in the late 1980s and early 1990s due to a shortage of power supply. The response of the government to this power crisis was not to build the necessary infrastructure to meet the demand but to contract out power generation to the private sector through independent power producers or IPPs.

    Now a few decades after that power crisis, we are faced with a government powerless, and unwilling, to control electricity prices and a people saddled with disasters— both economic and natural. This power failure can be reversed if we reverse the basic policy of power privatization. Government can plan, regulate and ensure affordable and stable electricity if it would be nationalized under a regime that looks out for the people’s welfare rather than private profit and personal gains.

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    8 Comments

    1. wilmer andrada on

      There are so many debates about this topic but i have not seen a real solution. What I propose is to shift our focus on alternative ways to reduce the demand for gas or electricity We have the technology to light up our streets with high intensity solar bulbs.We can install solar panels in all our government buildings. We can use some of the DAP and Malampaya funds to subsidise the mass production solar energy to be used in most of our homes.. I heard of some charitable group that is helping the poor with this technology and the Aquino government should take the opportunity to partner with them in expanding this project.

      • “Solar bulbs” to light up the streets? That would be cute but not feasible. There are several variants of these solar-powered things now peddled in the market. Let me address the more mature one – the photo-voltaic conversion of solar energy into electrical energy. The solar cells. We see smaller version of these devices used to power calculators, cars and so on. But the electrical energy you would get our of this technology costs around 40 times more than what you pay using the conventional sources. There is also the issue of where you would install your solar panels. Typical area of a residential roof is not enough to hold the needed panels that would produce all household electrical energy you would need.
        On the nuclear power plant, with thorium as the fuel, the fission reaction takes place at the usual atmospheric pressure. Not in a highly pressurized region as what happens in the conventional uranium-based nuclear plant. On immediate advantage of this situation is that the possibility of meltdown is greatly reduced almost to zero.

    2. Our government should look for cheap, clean, safe, and reliable source of electrical energy. It should put more money on nuclear power. One nuclear power plant can be allocated for Cebu for instance.One such plant generates around 600 MW which is enough to cover the voracious need of this island province for years to come. Presently Cebu needs around 250 MW, increasing annually around 40 MW. There is a variant of nuclear power technology that is proven to be safe and reliable. The fuel it uses is thorium. Not uranium. The technology for this thorium-based power plant were already established as safe and reliable. Although its further development was cut short by the Nixon govt back in the 70’s because it did not jibe with the more urgent need of the U.S. back then, which was to produce more fissile materials to be used in making bombs. A uranium-based nuclear power plant generates as by-products, highly radioactive materials like plutonium. A thorium-based nuclear power plant does not produce such radioactive materials.

      • wilmer andrada on

        The Philippines is in the Pacific Ring of Fire. This nuclear stuff is dangerous and is not very advisable. With all the earthquakes, and fast moving tectonic plates we are experiencing in our area, coupled by super typhoons to come and these unpredictable climatic change, it is better to go GREEN. Solar, And Wind Technology, Just look at Japan, they are still cleaning up after their nuclear disaster and remember Chernobyl in Russia ?

    3. Oh my gosh i do agree with your evaluation regarding power. Sana habulin din ng gobyerno yung mga gumaqa ng utang na yan sa NAPOCOR na matapos makinabang ng biyaya aa napocor eh ipapasa na lang sa mga consumer nung di umubra ibebenta naman sa private companys HAY wawa naman sambaynang pilipino

    4. Ricardo Harina on

      I hope Giovanni Tapang can spread this around in his next news or opinion column.

      The EPIRA law must be amended that will mandate the National Government to build State of the Art Combined Cycle Power Plants in Luzon, Visayas and Mindanao that will generate power approximately at Levelized Cost of Energy of P4 per KWH even at P45 to $1 exchange rate and address power requirements and environment concerns when completed in 2016-2017. Even if Government will charge Electric Cooperatives at P1 to P2 per KWH above the Levelized Cost of Energy, the Government will still make billions of pesos operated under a clean government management.

      With no assured substantial, stable and low power rates, how can you attract and encourage foreign and local investors in the Philippines under our present conditions?

      Our Nation can never and will never attain the economic progress that Filipinos and Non-Corrupt government officials are dreaming or hoping for if our Nation’s economy is controlled by few greedy and crooked power providers and businessmen in collusion with corrupt government officials and corrupt elected representatives of the people.

      Our government with the cooperation of our Congress should sit together and plan for building State of the Art Combined Cycle Power Plants for Luzon, Visayas and Mindanao that will provide substantial and stable power, reduce the power rates, address environment concerns, attract and encourage foreign and local investors that will provide economic impetus, job and business opportunities that will prevent Filipinos seeking jobs abroad and encourage those working abroad miserably return back because they will see a better Philippines in the near future and alleviate the sufferings of poor Filipinos where our Government will provide affordable and stable power to propel us to economic progress that Filipinos are still dreaming and hoping for..

      This is where we should put into better use the PDAF declared by the Supreme Court unconstitutional and putting up Elevated Water Pass along Pasig River that will mitigate flooding in Metro Manila during rainy season and can be use also as Express Way to lessen traffic problems in Metro Manila.

      Other smaller countries have been doing this that makes them more progressive and attain high economic status in the Forbes list like Austria.

      If we can do this, Filipinos working together under a better and clean government may realize the dream they are hoping for in the near future by starting these projects in 2014.

      • wilmer andrada on

        Your ideas are very good and very progressive but we need fresh blood to run our system. We need technocrats not actors ,athletes and pretty people with no brains and no vision ..We do not need career politicians, political dynasties and people who have big ambitions to accumulate instant wealth in government service through corrupt practices. and thievery.
        I also noticed that we tend to make original untested ideas to solve our problems instead of looking at the success of other nations that we can emulate…Examples are :The waste management of Singapore and Tokyo, The Settlement and Kibbutzim system of Israel to rehab our squatters, homeless, jobless and hopeless citizens,the Universal Healthcare System of France, Canada and other progressive countries Transform Pasig river like the clean waterways of Amsterdam or even Bangkok. We need a National Student Assistance Program. to help our students achieve their dreams.We need a practical and forceful Family Planning Program to curve our population explosion which is one of the greatest in the world. More funding for better intense intelligence gathering like the KJB, CIA,FBI,and Mossad to aid the NBI to catch all the crooks ,sleek practices,and professional government kleptocrats. in all levels of the government. We need a more aggressive Justice System to replace our antiquated, red taped and bureaucratic and politicized system that we currently have..The politicians should shift their efforts from local projects to gain political patronage to national projects like the once I have mentioned above. We need a Marshall Plan and a Blueprint to follow to be implemented by whoever sits in office.in the future.With our modern technology, we can brainstorm, gather good ideas and put them into practice.

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    5. Primer Pagunuran on

      It is high time to do the math in a conference called for the purpose of actually finding out why, among others, systems loss has to be passe don to the consumers.

      The formula or computation used must be defended to rigorous tests given that the application of systems loss or everything related to it might just turn out to be highly anomalous, onerous, and prosperous on the part of the MERALCO.