Gentlemen: Start your generators!

If DOE Secretary Jericho Petilla fails to overcome the blockade being put up by certain cabinet members and Senator Serge Osmeña (who is the principal author of the EPIRA law), and if Secretary Petilla is unable to convince President Noynoy Aquino to declare a “State of Emergency” for energy requirements by September 30, 2014, then you are all advised to buy electric generators, tropicalize your lifestyle, and make plans based on Metro Manila experiencing 2 to 3 hour rotating brownout everyday in March, April and May 2015.

Aside from the “technical nosebleed” I suffered from listening to Secretary Petilla and colleague Boo Chanco, I went home constipated by information overload, arrived home wet from walking in the rain and wondering just how would I translate a 25-year saga that began in the time of Cory Aquino. I hope this explanation does not “shock” you.

During Marcos’ time FM wanted self-reliance in Energy including nuclear power but the deals were all marked by controversy and corruption. So when the Cory regime came in, they obliterated all Marcos related plans for energy sufficiency and self-reliance.  Alongside came a petroleum company executive who convinced Cory and her advisers to totally junk plans for energy self-reliance because there would always be enough fuel to run the power plants.

Then local and foreign investors started building up businesses that resulted to serious power shortages. This happened because government has the responsibility of studying, forecasting and planning economic growth, including how much electricity and how many power plants need to be built. But because EDSA 1 was a prayer rally turned revolution and Cory and her cabinet did not have anything or anyone to run the numbers by. They also had no way of accurately projecting economic growth and the required power demands and that is why we all suffered rotating brownouts from 1987 onwards.

Because it was an emergency and government still had the authority to build, own and operate power plants, they leased or procured inefficient power barges. When FVR became President their solution was to let investors come in and build the needed power plants based on the best sweetheart deals you could imagine simply because “Beggars can’t be choosers” and the government was begging for help to end the power crisis.

While government was desperate, the private sector investors were mostly predatory and manipulative. They all got “Take or pay deals” and “Minimum guarantees” on top of their cost to generate, some for a period of 20 to 25 years. This is the reason why power generators are not building more plants or increasing capacities. All they have to do is increase their reported cost but not their production and they will have more profits. Why reduce their profit margins by investing on new plants that will only result in more electricity, competition among power producers and smaller margins. Meanwhile you the poor customer can’t and won’t complain about prices because you are told that there is not enough supply and if you don’t pay the price you will suffer brownouts. In fact every maintenance shut down or breakdown immediately makes us obedient customers of the power industry.

Not only did the power producers get the best long-term deals in town, they also managed to influence legislation to force government out of the business through the EPIRA law. Back then we were all so angry at the many media reports about corruption at the NAPOCOR that we went along with the idea that government be banned from electric power generation, the law even took out price control and subsidies. They wanted to be able to dictate and the government wanted out of it. Fortunately, some people had enough wisdom to insert an “In case of fire” provision they call section 71 where the government may take any and all necessary action in the event of an “Emergency.”

According to Secretary Petilla that “state of emergency” already exists. Every time one plant goes off the grid or breaks down we are at the brink of a total system fail or rotating brownouts. This is because today’s system was the solution to yesterday’s problem. The total power generated today is the ideal quantity they needed sometime in 1987 and 1988. In the mean time, the population then has matured into actual power consumers, our population now has increased by some 20 million plus (from 78M to 100M), the economy, commercialization, construction and development has boomed beyond the normal forecasts and projections not to mention society has become more electricity dependent and driven because of telecoms and internet. In contrast the power generators have not built up new plants because no one can make them!

Secretary Petilla’s solution is to rent/lease land based 300 Mega watt generators from the same Australian company that supplied the emergency power generators for Fukushima, Japan when their nuclear power plant melted down because of the tsunami. The 2-year lease would cost between 5 to 6 billion pesos and would only be used during “Yellow alert” meaning “seriously thin supply or seriously high demand” peak hours of summer. After 2 years Petilla and PNoy won’t be around and won’t care, and hopefully, some of the “soon to be built” or “suppose to be under construction” power plants might already be finished.

The suggestion is PNoy should make the recommendation to Congress and let Congress decide. That way the ball and the potential blame will be in their hands not on PNoy. Congress is also better equipped to scrutinize what, why and who caused the emergency, why Petilla prefers to deal with the Australian company, and if the terms they offer are as good and clean as those for Fukushima. They should also review and rewrite the EPIRA law that was clearly influenced by lobbyists and vested interest. If all else fail, just wait for the next power plant to blow up! In the meantime: “Gentlemen: Start your generators!”

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