DEMAND AND SUPPLY - A power crisis will top our sorrows

If you think we have an energy crisis now, you ain't seen nothin‚ yet. At least there is no supply shortage just yet in the global oil market. That will come soon enough if the world does not curtail its appetite for oil or at least keep it in pace with the discovery of new reserves or availability of alternative resources.

The high growth economy of the US is largely responsible for the sharp increase in energy demand. The dot com economy is power intensive, a reality California experienced this summer. All those computers require power, and so do the air conditioners that must keep those computers cool.

Here in Erapland, the problem has more to do with price affordability than availability. That could change with the OilEx. There is also another aspect of the energy crisis we have not yet given our full attention: Power supply.

The power sector is a bit more complicated and is actually a time bomb with a fairly short fuse. We could end up almost without notice, back in the days of massive power failures in the midst of a supposed surplus of generating capacity. The financially compromised Napocor had been unable to keep its transmission capability in step with economic growth.

It would indeed be ironic if we woke up to find ourselves suffering a power shortage even as Napocor and Meralco continue to pay their independent power producers for power that could not be dispatched due to inadequate transmission capacity. If this happens, that will be the last nail to seal the coffin of this country's economic hopes.

Let's look at some numbers. Total installed plant capacity in the Luzon Grid is 7,500 MW. But the ability of Napocor to transmit is only in the vicinity of 5,450 MW. Peak demand is at 5,317 MW, giving us a very small leeway of only some 133 MW or just about 2 1/2 percent. That's so thin to be almost non-existent. A Valentine's Day kind of rush to Metro Manila motels at between 12 noon and 2 p.m. could be enough to cause automatic load shedding all over the Grid, even in our present non-robust economy.

Napocor, under the appointees of ex-President Ramos, focused blindly on building power plants to the point that it now pays for power it cannot use. As a result, based on grid plant capacity of roughly 7,500 MW, we have quite a substantial theoretical reserve. The ERB mandates a reserve of 32 percent on generating capacity and we have more than double that. But someone forgot that all those generators are useless but expensive and overpriced hulks of metal unless the power they generate can be transmitted.

This inadequacy in our transmission capacity had been unnoticed thus far because our economy's far from robust. And if analysts are right to predict that the rest of Erap's term will be a sleeper, we have just that amount of time to correct the deficiency. Based on timeframes of power-related projects, three years is not very much time.

It would help if Congress passed the long-delayed power reform bill. That would serve as the basis for the creation of a National Transmission Company that may be privately owned, in part or as a whole. With the bill in legislative limbo, and Napocor in financial hell, so is our future in a precarious state.

In fact, unless the yet-to-be formed National Transmission Company moves quickly, the $2-billion Shell invested to develop the Malampaya natural gas field will be for naught. So will the $1.3 billion that First Gas Power and another similar investment magnitude by Kepco in power plants that will use the locally produced natural gas.

Given the need to reduce our dependence on OPEC, the use of Palawan's natural gas is a must. This large natural energy resource would account for about four percent of our energy requirements two years from now or 16 percent of total power supply. Before the prices of oil zoomed up, the savings in foregone oil imports were calculated at half a billion dollars. That is definitely worth a lot more now.

Napocor should in fact, be in the process of fully testing the now ready First Gas power plants (temporarily using condensate) to make sure these plants are fully debugged, thus ensuring trouble-free operations once the Palawan gas is available. But due to transmission constraints, coupled possibly with some amount of short sightedness, they can't fully transmit the power the plants can generate.

One last thing. Here's an unbelievable surprise. Based on Meralco sales figures, the economy is actually inching up despite all the griping by the Makati Business Club. So, it seems, we don't have the time we thought we had to prevent a power crisis from happening.

There is nothing much Energy Secretary Mario Tiaoqui and Napocor president Freddie Puno can do quickly to address the situation they inherited. They seem to be the good guys trying to save a bad situation. Simply put, the last administration goofed by neglecting our transmission capability and by concentrating on graft-prone power contracts.

It is a terrible legacy from the Ramos years: A surplus of generating plant capacity which Napocor must pay for whether used or not. Yet, we are in danger of experiencing blackouts because of inadequate transmission. Utter waste. Those Ramos era officials ought to be brought up on charges of economic sabotage, because that is what it really is.

Pre-need

Here's an e-mail from reader Gloria, who used a pworld e-mail address.

Thank you for keeping a keen eye on CAP, and the pre-need industry as well. Like you, I also have two daughters with CAP plans. However, the eldest is just three years old, while the other is two. My hubby (who is 43) and I (36), married late in life, so we decided to pool our hard earned earnings to buy the kids CAP plans, so that, just in case something happens to any or both of us, the kids' education will not suffer.

Needless to say, we expect CAP will outlive us as well. We know it will, if only management will have enough conscience to realize that parents entrust their child’s future to them (CAP). That parents shelled out their savings in exchange for a mere PROMISE that the company will take care of the kid’s future. The idea here is responsibility and transparency. And if CAP has really done something as palpak as investing in the real-estate business of its sister company, I hope CAP would inform the public of the damage that such investment cost CAP, and ultimately cost us, policy owners. It may have a negative immediate impact on the public, but in the long run, it will be beneficial for a company who thrives in the name of CREDIBILITY. After all, honesty is still the best policy, di ba?

Flight to Egypt

Dr. Ernie E sent this GP (general patronage) joke for today.

Teri asked her Sunday School class to draw pictures of their favorite bible stories. She was puzzled by Kyle’s picture which showed four people on an airplane, so she asked him which story it was meant to represent.

"The flight to Egypt," said Kyle.

"I see...And that must be Mary, Joseph, and Baby Jesus,"

Ms. Teri said. "But who’s the fourth person?

"Oh, that’s Pontius – the Pilot!"

Boo Chanco's e-mail @ [email protected]