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Last Wednesday, after about four power plants conked out, energy reserves for the Luzon grid went down to exactly zero. What saved us from brownouts, we are told, was the deceleration in demand just as supply fell.

Nevertheless, we seem to be crawling slowly towards energy apocalypse. Economic expansion is pushing demand up even as delays are pushing back schedules for new power capacity to come online.

The danger of shortage pushed government to run the expensive Malaya power plant. Fed by diesel, the ancient plant produces the most expensive power. Government has been trying to privatize this plant but there are no takers. The reason is obvious: Who will want to own this obsolete technology?

When the plant is run, government loses money. When it is not used, government spends millions just maintaining it. This is heavy junk hanging on our necks.

At any rate, the reliance on Malaya to run on a sustained basis in order to stave off shortage will force up electricity prices. That will aggravate the current surge in prices of nearly all other vital commodities, including rice, fuel, sugar and even garlic.

About 58% of our electricity bill goes to generation charges. The rest go to transmission, distribution and VAT charges. The 144 distribution utilities and electric cooperatives have no choice but to pass on generation charges to about 9.9 million household and commercial consumers.

Power distributors take only thin margins and earn on volume. There is no way they can possibly absorb higher generation costs. The spike in generation charges will hit home quickly.

Regulators have been pressuring the distribution utilities to take out more power supply contracts as a means to moderate the power cost spiral. It is doubtful, however, if this will solve the problem of costly electricity.

Generating plants can still conk out, whether or not their supply has been contracted out. The thin reserves will still bring us to darkness.

Power supply agreements (PSAs) do not really ensure energy price stability. A major cause of price volatility is the cost of fuel. PSAs routinely feature a clause that adjusts the costs of generated power based on the prevailing fuel price at the moment of generation.

That clause is indispensable. Fuel prices are constantly moving. If the long-term price for generated power is fixed and fuel prices move, either the generation company or the distributor will lose vast amounts of money.

At the same time, distribution utilities need to insist on the regular performance of efficiency tests of generating plants. This is to ensure that the charges for fuel consumed is accurate. Profiteering could happen if generators charge for more fuel than actually consumed.

Another factor of volatility is the currency exchange rate. Some generators carry dollar-denominated debt or have foreign-currency denominated operational costs. The exchange rate, as we know, moves every day. It is to everyone’s advantage that exchange rate movement is reflected in PSAs.

In addition, the distribution utilities assume costs in ensuring enough backup power in case generators conk out or produce less than expected. Provisions for backup power adds to the operating costs of wholesale buyers.

It should be evident that PSAs will not necessarily bring energy price stability. There are simply too many factors of volatility in this industry. Every item of cost is variable. Remember that electricity cannot be stored. It is consumed at the moment it is generated. Costs vary from moment to moment.

Therefore, the best mechanism for efficient pricing of a volatile commodity remains the wholesale electricity spot market. Its efficiency will be enhanced by ensuring there is enough competition among power suppliers. There can only happen if more investments are brought in and more robust power reserves are available.

This is where government fails our consumers. Power investments fall short of expectation. Government has an interest in making money for the dinosaur plants it controls. Under these conditions, consumers have no leverage.

Deluged

Understandably, the whole hoard of cases relating to the pork barrel scandal swamped the judicial system, including the Supreme Court where urgent petitions are being filed. There was enough of a case backlog to begin with. That backlog has now become overwhelming.

The deluge of cases will cause delays in resolving many petitions previously filed with the High Tribunal. Some of these are of equal urgency.

The delay in the issuance of a ruling on the constitutionality of the DAP funds is an indication of this. There is a petition for a Writ of Kalikasan to stop construction of the Jalaur, Iloilo “killer dam” that threatens indigenous communities with eradication and surrounding towns with the possibility of a dam breaking.

There are, obviously, implications for major infra projects brought to court, most usually for bidding procedures perceived injurious to public interest. The most outstanding of these is the Cebu-Mactan airport project.

A senator filed a petition at the Supreme Court seeking to nullify the award of the project to a consortium due to serious questions about the background of the winning bidder as well as clear violations of the bidding rules. Until the issue is resolved by the High Court, the project labors under the possibility the deal might be voided.

The Filipino-Indian consortium DOTC awarded the multi-billion airport project to is scheduled to take over airport operations at Mactan October this year. Upgrading of the existing terminal facility and construction of the new terminal is due to begin February 2015.

Because of the sloppy bidding process conducted for this project, everything could be held up indefinitely pending resolution of the petitions filed with the Supreme Court.