Energy Secretary Popo Lotilla is very hopeful that 2025 will be a better year for the power sector.
It is not an El Niño year, he points out, with its drought conditions that emptied our major dam reservoirs.
With 2025 being a La Niña year, the Philippines is expected to experience above-normal rainfall conditions from January to March.
Lotilla blamed the extended periods of yellow and red alerts last year to an increase in peak demand by 10 to 12 percent to El Niño. He, however, hedged that despite the better weather this year, there are still “weak links” that can affect the country’s power supply.
The Department of Energy said that 6,841 megawatts (MW) of new power plant capacity is scheduled to go online this year.That sounds impressive except that most are VRE or variable renewable energy.
These include the 3,930-MW from solar farms; 1,320 MW from natural gas; 773 MW from wind sources; 500 MW from coal; 107 MW from hydro; 104 MW from geothermal; 76 MW from oil-based fuel and 31 MW from biomass.
Doesn’t sound too solid because a megawatt of VRE is worth much less than a megawatt of conventional baseload coal or natgas for grid stability.
According to DOE, Luzon will have a power demand of 14,769 MW this year, up by 5.4 percent from the actual peak of 14,016 MW in 2024.
For the Visayas, the peak demand is likely to reach 3,111 MW, a 16 percent increase from 2024’s actual peak demand of 2,681 MW. For Mindanao, demand is likely to peak at 2,789 MW, or 8.2 percent higher than the actual peak demand of 2,577 MW last year.
The total grid-connected power capacity nationwide was 29,697 MW as of end-October 2024, according to data released by DOE. The bulk or 12,856 MW, equivalent to 43.3 percent is from coal-fired power plants.
The numbers suggest that reserves will continue to be thin this year and anything from natural disasters to failures of aging power plants may still cause serious power interruptions.
Lotilla is right about our vulnerability because of “weak links” in our power system. But what if the “weak links” are bureaucratic failures such as regulatory logjam?
The backlog of approvals at ERC is on top of the list of industry problems for a long time now. Investment decisions for major capital expenditures of power plant operators, distribution utilities and the national grid are affected by ERC’s inability to act faster on applications. This is a major factor in our iffy supply-demand situation that results in power failures.
Lenie Lectura, energy reporter of Business Mirror, reports that “From 2021 to 2023, PSA (Power Supply Agreement) cases reached 828. However, only 381 cases were resolved during the period, representing a resolution rate of only 46 percent. There are still 447 PSA applications that remain unresolved by the commission.”
According to Ms. Lectura, from 2001 to 2023, the total number of cases filed with the ERC reached 9,546. Of which 6,847 cases have been resolved leaving 2,699 pending cases. Of the 9,546 cases, consumer related complaints top the list at 4,265. Of which, the ERC has resolved 3,630.
Aside from delays in approvals of PSA applications, there are also delays by ERC on the reset of distribution utilities and electric cooperatives, pending over and under recoveries cases, and backlog of cases carried over since the creation of ERC.
Those regulatory resets are the mechanism to reflect current costs. It is just as well that the ERC has announced reconsideration of its decision last year to skip the fifth regulatory period reset of Manila Electric Company’s (Meralco) distribution rate. It has been adjusted to July 2025-June 2029.
The ERC acknowledged that certain years within Meralco’s original 5RP have already lapsed. During a lapsed period, consumers pay charges that are no longer reflective of the current cost of the service while awaiting the approval of a new rate.
The rate reset is essential to ensure fair pricing, as it adjusts distribution rates based on inflation, operational expenses, and the Weighted Average Cost of Capital (WACC), which for Meralco is non-existent since 2015.
Costs to implement new ERC mandated regulatory requirements from net metering, retail competition open access, reduced system loss caps, etc happened after the last reset in 2010 so that’s a lot of numbers to crunch.
The utility must continue investing because its customer base is growing. Bahala na si Batman when they can recover investments through inclusion in the rate base.
If Meralco wasn’t as financially capable with its economies of scale and excellent management, provision of electricity in its area would be floundering as in the coop areas due to regulatory failure.
Delays in ERC resetting have also caused problems for NGCP. It has spent P27 billion for right-of-way for the period 2011 to 2022. That’s billions in private capital tied up to facilitate completion of a vital public infrastructure that should be quickly recoverable. Time is money.
Who bears the cost of delayed regulatory approvals? The delayed resets burden consumers if the assumptions for inflation and cost of capital no longer hold. The utilities also suffer if funds used for capital expenditures can’t be quickly reflected into their rate base. Past and present ERC officials should be held accountable for this colossal failure to perform their duty.
ERC is clearly unable to fulfill its responsibilities in a timely manner. Do they need capable staff? Do they need to cut the number of things requiring their approval?
Why, for instance, must ERC spend months to approve a PSA that has undergone a transparent public bidding known as CSP or competitive selection process? If they want to take a look, it should be fine but quickly.
ERC is not under DOE. But it’s a weak link impacting the accomplishment report card of Sec. Popo and BBM. There must be something Popo/BBM can do to fix this “weak link.”
Boo Chanco’s email address is . Follow him on X @boochanco