YEARENDER: Gov’t pins hopes on emergency powers to avert power shortage

MANILA, Philippines - 2014 will be remembered as the year when the Aquino administration made a push for emergency powers as it sounded the alarm on a looming power shortage in 2015.

Although many other developments happened in the energy sector, industry stakeholders would likely remember the issue on the looming crisis more than the others.

As of press time, however, President Aquino still does not have the emergency powers he requested from Congress.

It was in July this year when Energy Secretary Carlos Jericho Petillla announced in a press conference at the Diamond Hotel that a looming power shortage would hit the country in the summer of 2015. To prepare for this, Petilla said he would ask President Aquino to declare a state of emergency in the power sector.

This, he said then, would allow the government to tap additional power capacity for next summer.

At the time, his main proposal was to lease or rent modular generator sets.

“There is an admission that by 2015 our supply is not enough. There are projects that we feel may not push through,” Petilla said during the briefing.

Petilla said there is a projected deficit of 200 megawatts for some days in April and May 2015.

He said the emergency powers would allow the government, through the Power Sector Assets and Liabilities Management Corp. (PSALM), to contract additional power.

The Department of Energy chief stressed the measure is necessary to avoid brownouts next year as some power plant projects or expansion plans may not push through as scheduled by the summer of 2015.

Petilla noted that the Malampaya natural gas facility in offshore Palawan is expected to shut down from March 15 to April 14, 2015, which will aggravate the situation.

The Electric Power Industry Reform Act of 2001 (EPIRA), the power reform law, prohibits the government from building new power plants.

However, Section 71 of the law states that the President, upon determination of an imminent shortage of supply of electricity, may ask Congress for authority through a joint resolution, to establish additional generating capacity under such terms and conditions may approve.

The idea is for the government through PSALM to contract additional capacity by renting diesel fuel facilities similar to what Japan used during the aftermath of the nuclear disaster that hit Fukushima in 2011.

Less than two months later, President Aquino heeded Petilla’s proposal, saying he would ask Congress for emergency powers.

Aquino acknowledged this in a speech during the launch of the Pagbilao III coal power plant project in Makati on Sept. 11.

“We will formally ask Congress for a joint resolution, that will authorize the National Government to contract an additional generating capacity to address the 300-MW projected deficit, and, on top of that, to have sufficient regulating reserves equivalent to four percent of peak demand, for another 300 megawatts,” he said.

After that, the respective energy committees of the Senate and the House of Representatives commenced hearings to know more about the situation in the summer and also to determine the best solution to solve the problem.

Early on, it was clear that lawmakers were lukewarm to the idea of granting the Chief Executive special powers to lease or purchase modular generator sets.

Instead, they leaned toward the other options presented by Petilla during the hearings, particularly the so-called Interruptible Load Program (ILP).

Under the ILP scheme, big power users will be asked to run their own generators when supply is short in the summer months, instead of getting their power from the Luzon grid. In exchange, they will be compensated for their fuel costs.

The electricity that would not be taken from the grid would be available to households and other users, sparing them from rotating blackouts.

The ILP, however, is a voluntary scheme unlike the proposed lease or rental of modular generator sets.

For blackouts to be averted next summer, however, there must be total capacity of 1,000 MW from the ILP.

As of this writing, power distributor Manila Electric Co. (Meralco) has signed total captive capacity of 263.45 MW from the ILP, which will come from 38 companies with 197.55 MW and potential sign-ups of 65.90 MW from more companies.

But Meralco continues to entice other companies to sign up for the program.

It is targeting to draw in 75 MW to 800 MW of capacity by Jan. 31, 2015 to plug the supply gap next summer, Meralco president Oscar Reyes said in a recent interview.

Only the House of Representatives has so far passed its version of a joint resolution that would grant President Aquino special authority to tap additional capacity for the summer of 2015 through the ILP.

In the approved House resolution, the projected power supply gap in the Luzon grid next summer is at 782 MW, narrower than the earlier estimate of 1,004 MW.

“The highest gap is 782 MW or 135 MW is needed for regulating reserves and 647 MW for contingency reserves,” said House Energy Committee chairman and Mindoro Oriental Rep. Reynaldo Umali.

The contingency reserve refers to the needed capacity to cover for any potential power shortage that may arise should a power plant in the grid conk out. In the case of the Luzon grid, this is equivalent to the Sual power plant in Pangasinan, which has a capacity of 647 MW.

The special powers given to President Aquino to deal with next year’s power supply shortage would be effective only from March to end-July 2015 and would not be extended to avoid abuse.

Although not his original proposal, Petilla commended the House for passing the resolution.

“Needless to say, we still need the Senate to concur for this to be operational,” he said.

And indeed, the Senate has yet to pass its own version, with resistance obvious on the part of Sen. Serge Osmena.

In an interview with The STAR, Osmena said Congress should not be pressured in approving emergency powers for President Aquino. He said the situation stemmed from the mismanagement of the present administration.

“This is a private sector problem which the Aquino administration mismanaged,” he said.

He said granting emergency powers – in the original form – was impossible.

“We cannot do that because we already promised investors we will not intervene,” he said.

He is referring to the passage of the historic EPIRA which privatized the power sector and of which he is the principal author.

To date, the Aquino administration continues to wait for the emergency powers.

In the meantime, it’s still anybody’s guess on whether or not that would lead to blackouts in the hot summer months.

FALLING OIL PRICES

The year also saw the decline of global crude prices, resulting in the corresponding rollbacks in local pump prices.

Oil prices have gone down at least 26 times since the start of the year for gasoline, equivalent to around P18.30 per liter while diesel prices have gone down 31 times, equivalent to around P18.85 per liter.

Gasoline prices currently range from P39.60 per liter to P45.70 per liter while diesel prices are now at a range of P30.75 per liter to P34.10 per liter, according to the latest oil price monitoring report of the DOE.

The decline in prices is attributed to oversupply in the market. The global crude market is now flooded with supply on the back of the slump in economies that used to be big consumers of oil such as China.

The DOE said in its report that crude prices have dipped to as low as $65 per barrel or about 40 percent lower since it started to fall in June on concerns of supply glut in the world market.

But oil industry sources said the main culprit is really the growing utilization of US shale oil, an unconventional type of oil from oil shale rock fragments, which because of its lower price, is breaking the neck of the Organization of Petroleum Exporting Countries (OPEC).

“It’s really all about US shale,” an oil company executive said.

US shale, which comes mostly from North America, costs $40 to $50 per barrel, or almost half compared to the $86 per barrel cost of oil from OPEC.

But while oil companies are feeling the pinch of falling crude prices, analysts say the development can support economic growth in emerging Asian countries.

“As a big net fuel importer, emerging Asia is a main beneficiary of the recent plunge in global crude oil prices. The drop is helpful for the balance of payments and inflation, provides space for macro policy, and is supportive of economic growth. These gains bolster the region’s readiness to absorb the likely steps towards US monetary policy normalization in 2015,” the Institute of International Finance said in a recent report.

Moving forward, energy industry stakeholders can look forward to another roller-coaster year in the energy sector.

All eyes will be on the summer situation and whether or not the Philippines will be back in the era of hot days as what happened during the first Aquino administration in the early 1990s, the administration of the late Corazon Aquino.

RENEWABLE ENERGY TOWARD ENERGY SECURITY

The Energy department, meanwhile, would continue to work for energy security. It has, for instance, been at the forefront in the promotion of renewable energy in the country such as solar, wind, hydropower and biomass.

The department, under the helm of Petilla, said the Philippines is not one to be left behind in moving toward energy security through alternative fuels and renewable energy.

The 2012-2030 Philippine Energy Plan directs the country in creating a future with less carbon and one in which energy efficiency is a way of life and the use of alternative fuels and renewable energy as intelligent choices.

Toward this end, Petilla has spearheaded a solar rooftop program for schools wherein private solar companies provided solar panels to different schools in Metro Manila.

The latest project is the 96-kilowatt solar facility of St. Scholastica’s College – Manila, which Petilla inaugurated early December after La Consolacion College – Manila and Manuel Luis Quezon University.