Government mulls return to power sector to boost reserves

MANILA, Philippines — Struggling to attract power investors, the government is looking into venturing back to power generation to speed up reserve building as part of a permanent fix to a seasonal supply crunch during the dry season.

The plan, which is still in its early stages, would have the state “build the plant, operate it as a reserve, and privatize it as we go along,” Energy Secretary Alfonso Cusi told a Senate hearing on Tuesday.

“We cannot continue operating like this,” Cusi said. “Right now, we are trying to reopen the economy and I’m sure there will be high demand for power and that is again a challenge for all the industry players to meet.”

“But I know the industry players are working hard, they are cooperating. But we need to do more, we need capacity,” he told legislators.

Whether or not the plan will materialize remains to be seen, but what is sure is that the process can be tedious and controversial. For one, Energy Undersecretary Felix William Fuentebella admitted the proposal “may require an amendment” to Republic Act 9136 or the Energy Power Industry Reform Act that privatized the power sector.

“We are also exploring whether PNOC-EC (PNOC Exploration Corp.) has the capability (to do this),” Fuentebella said. PNOC-EC is a government-owned company.

In effect, what Cusi is mulling is a partial rollback of that law, enacted in 2001 for the very purpose of removing from the government the costly burden of running powerplants, while ensuring cheap access to power. Of those two goals, only the first was achieved, although some P381.7 billion in power obligations as of last year are yet to be completely erased from government books.

Fuentebella declined to speculate about the likely impact of the state operating power assets again, which can be expensive and tended to rack up debts. “It is still to early,” he said by phone.

The second goal of EPIRA— affordable power to consumers— had so far not materialized, deterred by varying problems including insufficient supply. Cusi himself lamented that while the Philippines has an energy market where open trade takes place, “what do you trade if there is no stock, no power supply?”

This, in turn, leads to expensive costs blamed at times, to price manipulation of limited number of players to the detriment of end-users.

As of last year, the National Grid Corporation of the Philippines, the private firm that operates the transmission grid, has contacted only 727 megawatts of the required 2,604 MW in ancillary reserves— or power utilized when transporting energy from generators to consumers. This is crucial, since in doing so, some amount of electricity get lost leading to system losses which are then charged to power bills.

Across the archipelago, Luzon corners the bulk of reserves at 563 MW, while 164 MW were contacted in the Visayas. Mindanao has no ancillary reserves.

The good news is at least for this year, the energy department assured lawmakers that power outages are not expected to occur even at the height of dry season when people trying to cool themselves trigger a spike in power demand. In the most populous island of Luzon, for instance, peak demand reached last April 20 only hit 10,543 MW, 11% lower than projected by regulators because of a return to lockdowns in Metro Manila that closed down some offices.  

“While we still have challenges in the provision of sufficient supply as well as efficient implementation of our grid operating and maintenance programs, we are optimistic that for the entire year, we will not encounter major challenges or alerts that will result into insufficiency of supply,” Mario Marasigan, energy director, said.