Petilla: In case of emergency only

It is better to have emergency powers to deal with a potential power shortage next year and not need it, than to need it and not have it. That, in gist, is how Energy Secretary Ikot Petilla explained why he publicly sought emergency power even before P-Noy was convinced he needed it.

EPIRA prevents government from building power plants or even leasing power generators to provide for shortfalls in supply. The declaration of a state of emergency would, among other things, allow the government, through PSALM to tap additional needed power capacity.

Accused of crying wolf, Sec. Petilla explained that he felt an obligation to alert the public about the possibility of rotating brownouts starting March to May so they can take precautionary measures. The Energy chief said we are running out of time and options. Petilla said he needs a declaration of a state of emergency in the power sector by September. 

Citing figures, Petilla explained that the Philippines will need 9,100 megawatts of power next year, higher than this year’s demand of 8,700 MW. The quick pace of economic growth, specially in the manufacturing sector, has brought about increased demand for electricity.

Looking at the supply and demand outlook for next year, it is clear that reserves are dreadfully thin. One fairly large power plant being knocked out of the grid for some unexpected technical problem is enough to cause blackouts.

Starting in the third week of March 2015, net reserve is projected to decline enough to put the grid into yellow alert. By the first week of April, net reserves turn negative for two weeks, pushing the grid into red alert. By the second week of May up to the end of May, net reserves turn red again, but not as bad as the two weeks in April.

A red alert means there is severe power deficiency that will result in blackouts. A yellow alert means contingency reserves are below the minimum level set by the regulator, but does not necessarily mean power outages or blackouts.

Except for the second week of April when the net reserve is negative by 285 MW, the deficiency for the other weeks of summer range from 180 MW to a low 37 MW. If we don’t factor the probability of a plant outage during the period, one can even say the problem is manageable.

But I like the fact that the Secretary of Energy thinks of the worse possible scenario and plans for it. From my experience as a manager, I’d rather have an official who prepares for the worse than one who sounds very positive in public, believes his own propaganda and he is unprepared when things get really bad.

Secretary Petilla told me, Cito Beltran and The PhilStar energy reporter Iris Gonzales that his gut feel is that things are manageable. In seeking emergency power, he just wants to make sure it stays that way.

Indeed, if First Gen’s 100 MW Avion power plant to be set up in Batangas goes on line by March, that is so much cushion for the grid. Powered by natural gas, a second Avion plant is now in the works and its total output may likely be bought by PSALM for eventual trading in WESM.

But Sec. Petilla explained that without emergency power, the March delivery schedule for Avion is not possible. First Gas itself promised delivery by October at the latest and that’s too late to do any good for the summer deficiency. The Energy chief said he needs Sec 71 of EPIRA to fast track the usual approval process for Avion.

Other than Avion, there are no really reliable new power plants expected to start operations by March 2015. A 200 MW plant to be built in Quezon originally set for commissioning by December 2014 has been delayed.

Initially the problem had to do with local government requirements but lately, turbine delivery date had been postponed twice. The Energy secretary is no longer banking on it to be of help this summer.

The Malaya plant in Pililia has finally conked out and is now undergoing serious repair. Completion is not expected until June 2015. That is a pity because it should have been ideal to have in reserve to take care of any shortfall.

They have also looked at all the other mothballed power plants, including those in Sucat, and they have determined that they are better off building new power plants. Those are even older plants than Malaya and have serious problems in the years before they were decommissioned.

The Interruptible Load Program, Sec. Petilla explained, can also help alleviate the impact of short reserves next summer. But without emergency power, its implementation is largely voluntary.

SM alone has 135 MW of standby generation power and Robinsons has another 60 MW. The idea under ILP is to ask those with standby generators to switch off from the grid and switch on their generators when called upon to do so. If they can take 300 MW of demand off the grid, for example, through ILP, blackouts may even be avoided.

But many of these companies with standby generators already have commercial arrangements with some power generating companies. They may be held liable to pay the power companies anyway for power they did not use.

So, the Energy secretary needs to invoke emergency power under Section 71 of EPIRA to require mandatory participation in ILP. This will prevent the power companies from charging their customers who complied with orders from the Energy department to generate their own power in an emergency. This frees them from their contractual obligation with their power company supplier. Section 71 will also enable the Energy department to set the terms for compensating companies under ILP.

The other way of averting the power shortage next summer is through increased energy efficiency. Everyone must do his share in reducing electricity demand. But that is easier said than done. Without emergency power, everything is voluntary.

With emergency power, the Energy department can order building administrators to set the thermostat of their cooling systems to 25 degrees Celsius. Or, large users of electricity can be ordered to switch off during peak hours and move operations to non peak hours.

The absolute last resort, Sec Petilla said, is leasing 30 MW land-based generators. They cannot do this without invoking Section 71. They are looking at a company that provided these facilities to Japan in the wake of the Fukushima problem.

This is expected to cost about P750 million to P1 billion per 100 MW per year for a 2-year contract. Producing power will cost another P11.50 per kwh using diesel. PSALM is supposed to take care of contracting and selling through WESM.

The way I size things up, it is best to be ready. There is a chance things can turn from bad to worse. Malampaya is scheduled for maintenance again during the critical March to April weeks. I understand this schedule is non-negotiable because it may put the production volume of Malampaya at risk.

Leasing those 30 MW generators isn’t cheap. But having no power is even more expensive. The Energy secretary has made his recommendations and it is up to the President and the Congressional Energy Oversight Committee to make up their minds… the sooner the better.

NAIA

NAIA gen. manager Bodet Honrado had a letter to the editor published in this paper last Saturday. He accused me of spinning the bad news about the state of NAIA. But he didn’t answer the basic issues from overcharging taxis to icky facilities plaguing the country’s international gateway, reputed to be the world’s worst.

My son just returned from a month and a half tour of Africa. He observed that the airport in Addis Ababa was nicer and more civilized than NAIA 1 where he disembarked. 

I get the feeling the reason Honrado is deluded to think he is a good airport manager is that he has not traveled enough. But the Filipino today is well travelled and that explains why we feel embarrassed every time we disembark from our planes at NAIA.

It is probably in order to congratulate DOTC and NAIA officials for the slow move to Terminal 3. It is finally happening. Here, the blame for the delay is more on DOTC.

I know that Ping de Jesus already reached an agreement with Takenaka before he resigned. I can’t understand why Mar Roxas and then Jun Abaya had to re-negotiate all over again. I doubt they got a better deal. Oh well!

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco