Tall electric rates and short attention spans

Ben D. Kritz

Ben D. Kritz

The eruption last week of public outrage and putative official concern over the astonishing increasing in electric rates to be billed by the Manila Electric Co. (Meralco) over the next couple months was, it seems, just the latest manifestation of a depressingly predictable pattern in this country:

An issue that has actually been a problem for a long time suddenly reaches an acute level, and commands the attention of the public, media, and relevant institutions for a period of time; protests are staged, hearings are conducted, and at least one office or agency pledges to “probe” the matter. The problem in question, however, never actually gets solved before the next crisis arises and national attention is diverted toward a new outrage.

Whatever thievery is being perpetrated is thus allowed to continue, simply because the national attention span is too short to focus on more than one thing at once. The hike in electric rates seems to have accomplished that for the accursed “Disbursement Acceleration Program” (the postponement of hearings on the issue until February by the Supreme Court may very well have been advance notice of its intention to rule in favor of it), and the pointless public feud between Interior Secretary Mar Roxas and Mayor Alfred Romualdez of Tacloban might have provided sufficient cover for the electric rate crisis; and if not, whatever happens this week (because civic life in the Philippines is nothing if not an adventure) almost certainly will.

As a matter of fact, Energy Secretary Jericho Petilla has already provided a timeframe within which the accusations of collusion and price-fixing among power suppliers will be swept under the rug or buried in an unmarked file Cabinet, as he announced toward the end of last week the Department of Energy’s “probe” into the alleged collusion would be completed “in two weeks.” With the holidays and the from-out-of-left-field order from the Commission on Elections for more than 400 elected officials, including many members of Congress, to vacate their posts due to irregularities in filing campaign finance reports interrupting any further legislative attention to the electric rates issue, the smart bet is virtually no change to what is now considered “business as usual” for the Philippines’ electric industry will happen.

And in reality, the charge of collusion among power producers and the country’s largest electricity distributor would be a challenge to prove without the credible testimony of one of the generators involved. Contrary to the impression being given by most media reports, the nine power plants whose “unexpected” shutdowns drove up prices on the Wholesale Electricity Spot Market (WESM) were not actually off-line simultaneously; the shutdowns were staggered, whether by arrangement or coincidence, so that only a couple were completely shut down at the same time, and the record of power demand and availability from the period in question (mainly the month between November 10 and December 11) tends to show that power supply was not at risk or even significantly outside the normal range during that time.

What might be a legitimate question worth investigating, however, is the allegations that have come to light in the past few days that contrary to the publicized terms of the supply agreement between Aboitiz-owned Therma Mobile (TMO) and Meralco, TMO only provided 100 megawatts of the 242 megawatts (MW) it had contracted to Meralco from its Malabon-based power barges, and sold the rest through the WESM. If this is true, and if Meralco eventually purchased this power against its 242 MW demand at a much higher price than the contract price, then both companies will have quite a bit of explaining to do.

Even if that comes to pass, any outcome will do nothing to solve the bigger issues of a power sector that is lagging in technical development, falling way behind the curve in building medium- to long-term capacity, and going absolutely nowhere in developing sustainable energy. The reaction of most of the thinking class to the insult of excessively high power costs is to demand that the Electric Power Industry Reform Act of 2001 (Epira) be repealed or comprehensively revised, and that is obviously a good place to start. But just as obvious is the grave risk that a reactionary solution that might emerge from an overhaul of Epira might have the unintended consequence of removing the few remaining incentives to invest in the Philippines’ power sector.

Solutions will not come easily or quickly, because every viable idea comes with a catch. For a relatively small investment, the Bataan Nuclear Power Plant (BNPP) could be started within a year or so and provide abundant, reasonably inexpensive electricity—but it is still a 30-year-old facility, in a country with precisely zero expertise in the safe operation of a nuclear power system. There is, on the other hand, plenty of available technical expertise and enthusiasm for alternative energy systems such as solar and wind power—but these sources of energy have significantly higher costs (in terms of the cost to consumers; nuclear, however, is still and probably always will be the most extravagant in terms of development costs), and have not yet developed to the point where they are anywhere close to being reliable sources of primary grid power. Hydroelectric power is cheap, reliable, and environmental-friendly—but because of its large physical footprint development costs are also rather high, and in any case, the Philippines has already virtually tapped out its hydroelectric potential.

Despite the challenges, the country must do something, and must do it immediately; if not, within about five years (sooner, according to most estimates) there will not be enough electricity available no matter what, and what is available will be priced beyond what the average consumer of small business can reasonably afford. The only way any development will take place is if the various stakeholders and advocacies within the power sector are willing to compromise and use a little imagination. Energy traditionalists are going to have to be willing to accept and support sustainable solutions like off-grid solar, small wind or biogas generation for areas at the village or municipality scale, and research and development in promising—but at this point, still technically and economically challenging—technologies like tidal power. By the same token, sustainable energy advocates must be willing to accept that some stopgap measures such as starting the BNPP or increasing coal-fired generation capacity may very possibly be necessary to avoid a near-term supply crisis that will make everyone’s work that much harder to accomplish.

And above all, the policymakers must accept that the Philippines needs outside help; leaving the power industry to the care of the Lopezes, the Aboitiz, the Alcantaras, et al., has been a dismal failure for anyone who doesn’t happen to sleep in those houses. Repairing the flawed regulatory structure of the power industry—ensuring the legitimate, balanced independence of bodies such as the Energy Regulatory Commission and the Philippine Electricity Market Corp. (PEMC)—is the first task, and should be followed at once by opening up the sector to tap investment and expertise, whether from within the Philippines or without, outside the oligopolic cabal that controls it now.



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  1. The problem with renewable energy sources is that they are away from the metro. The nearest wind farm project I know of is in Mauban, Quezon. Diesel barges and coal plants can be put up almost anywhere a ship can dock. But I still believe that a nuclear power plant is a very efficient source of electricity. It is just unfortunate that this country would never realize that, thanks to the black propaganda of those who control the diesel and coal power plants.
    The power generators and distributors has long been abusing the customers. And this article is aptly titled by the way.

  2. I wonder why geothermal is not being mentioned as a sustainable and polution free energy source consicering that we have the experience, expertise and resources for this energy generation in this country. Unless China has overtaken us the Philippines has the largest geothermal generation next to the USA. There is a geothermal project in Biliran Leyte that is well advanced in prosecution it is being undertaken together with experts from Iceland. Sec Petilia should look into it particularly since he is from Leyte himself.