DOE urged to impose penalties on unscheduled power plant downtime

MANILA, Philippines - The Department of Energy (DOE) must consider imposing fines and penalties for unscheduled downtime of power plants especially during critical months when supply is deemed to be low and demand is rising, the Congressional Policy and Budget Research Department (CPBRD) said in a recent report.

The report, prepared by Ricardo Mira and Manuel Aquino of the Economic Policy Research Service, said there is a need for long-term solutions to prevent power supply shortages in the future.

“The DOE, its instrumentalities and concerned regulatory agencies must ensure that specific commitments by generating companies in commissioning their plants are followed strictly as scheduled, otherwise a corresponding penalty should be imposed,” the CPBRD said in a report titled “Averting a DOE-Projected Temporary Power Shortage in Luzon in the Summer of 2015.”

Aside from this the report urged a review of the automatic pass-through mechanism for distribution utilities such as Manila Electric Co. (Meralco) wherein they pass on the generation cost to consumers.

“There have been observations that the automatic pass through mechanism does not incentivize DUs to access the most efficient and least cost power source because of its very nature that requires customers to shoulder the more expensive power cost from even insufficient sources. Perhaps, this should also be subjected to a re-examination or a policy debate,” the report said.

In all, the think-tank said the country’s power problem requires long term solutions and not palliative measures.

Among its proposed solutions are creating a unit in the DOE to verify and check on the actual supply of available generating capacity and strengthening the rules governing the operations of the Wholesale Electricity Spot Market (WESM).

The report comes amid a looming power crisis in the Luzon grid in the summer of 2015.

In June, Energy Secretary Carlos Jericho Petilla proposed to invoke Section 71 of the Electric Power Industry Reform Act (EPIRA) of 2001, the power reform law to be able to tap additional capacity for the Luzon grid during summer.

The EPIRA prohibits the government from building power plants but Section 71 allows exceptions in emergency cases.

President Aquino has formally asked Congress to grant him special powers for the summer but lawmakers thumbed down the authority to lease generator sets. Instead, they agreed to grant authority for the Interruptible Load Program (ILP) and other measures.