Dark future

During the last few years of Cory Aquino’s presidency, massive power failures paralyzed the nation’s economy and made people frustrated and angry. The president of the National Power Corporation was mocked in media as the Prince of Darkness.

In fairness to the dark prince, there was nothing he could have done about it. Tita Cory’s not-so-bright boys, all lawyers, advised her to abolish the Department of Energy and she did.

Then they abandoned the 620 MW Bataan Nuclear Power Plant. They did not provide a substitute power plant to replace the 620 MW of the nuclear plant.

Their big mistake was neglecting the power sector. They also underestimated the power of the Cory magic to attract investors to the country.

Soon the economy was buzzing with activity and with it a sharp increase in power demand. Inevitably, there was more demand than could be supplied by Napocor. Then came the days of darkness.

It was a pity that they squandered the careful energy planning of the scuttled Department of Energy. I had a front row seat to observe and participate in the energy planning process. We had Gary Makasiar, a hotshot economist who questioned everything bureaucrats submitted to him for inclusion in the energy plan, which was constantly updated. Hindi ma-bola.

Forty years after, we never got another Gary Makasiar in the energy department. That’s why we may end up crowning a new Prince of Darkness pretty soon. There is nothing that can be done that will be ready instantly.

We got a foretaste of things to come some weeks ago. Energy Secretary Al Cusi was not even in his post when the red alerts happened. He was in Cebu playing politics. When he was held to account for the failure, he washed his hands and said the power plants are not under government control, but under the private sector.

Cusi is right about the power plants being privately owned now. But he is their regulator and he has not monitored their performance well.

And even if the power plants were under government control, it would have been the same if not worse. There is a clear case of failure on the part of government, DOE, and ERC.

The chickens are coming home to roost. Let me try to simplify what is happening and separate fact from excuses.

Our power peak demand in Luzon was projected to rise to about 12,000 MW in 2019 pre-COVID. With the economy shackled by lockdowns, demand did not rise as projected for 2020, but it was still rising steadily and was at about 11,000 MW when we had those brownouts and red alerts a few weeks ago.

What is the problem? On paper, we have an installed capacity of 18,761 MW… that’s how much power all the power plants were supposed to be capable of delivering. But many are old and unreliable, so we only have about 10,650 MW of more or less dependable capacity.

Against a peak load of 11,840 on that day when Cusi was playing hooky in Cebu, we clearly had a deficit. Some plants were on maintenance shutdown. Some were forced to shut down due to technical problems.

The other factor is a restricted delivery of natural gas from Malampaya, which meant the natgas power plants were not running at full capacity. Of the 3,290 MW of installed natgas power plant capacity, only 2,724 MW was available when yellow and red alerts were issued some weeks ago.

For example, the limited output of Malampaya had been blamed for the reduced production of the Ilijan power plant by roughly 430 to 450 MW within March to June. It is fair to assume that Malampaya’s gas restriction is a continuing problem.

Manila Bulletin’s veteran energy reporter, Myrna Velasco, quoted a source saying: “Gas output will not necessarily hit zero, but it will already substantially decline by next year and gas restriction will be a continuing predicament for off-taker plants this year, and will worsen next year.”

Why? There are technical issues in the aging Malampaya reserves. In layman’s language, the reserves are running out, the pressure is no longer as strong. That’s why there was a 75-day restriction in production that happened between March to June this year. The shut down in October for maintenance will help build up pressure again.

Industry analysts told me that if DOE was doing its planning right, they should have taken steps to meet a projected increase of at least 1,600 MW a year in reliable capacity in Luzon. Through 2017 to 2019, new capacities per year were just about 600 MW.

DOE also decided on a moratorium for new coal fired power plants. That made a good press release for a day, warming the hearts of environmentalists. But what did they do to replace the planned coal fired plants? Nothing.

What are we getting instead? Excuses and passing the buck on the part of DOE and ERC. NGCP is being principally blamed for the last massive brownouts supposedly because it didn’t contract enough ancillary supply as they were ordered.

But NGCP has a good point. They will have to buy that supply from the same market which is already short of supply to begin with. Problem is, investment in ancillary services is not encouraged by the absence of efficient price signals. DOE has already issued a reserves market circular, but the ERC is still dillydallying on setting out the rules.

Perhaps, the lack of competent staff at ERC explains the delays in decision making to move things in the energy sector. The ERC needs good power economists and lawyers who understand the power industry.

The only immediate remedy in the horizon is for the ERC to work with the Philippine Competition Commission because the PCC has better technical experts. In any case, the most critical issues facing ERC involve assuring good competition among industry players, which is right down the alley of PCC.

Will we crown another Prince of Darkness soon? Sec. Cusi must move more decisively or it will be him… as early as October.

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