Brownouts

Energy Secretary Jericho Petilla has flipped and flopped like a drunken clown on the country’s 2015 energy outlook.

Recall he began with the direst scenario, brownouts stretching for 8 hours — about the same length of daily power deprivation the country experienced in the last years of the Cory presidency. Such a scenario will certainly contract our economy, the same way it did during the first Aquino presidency.

The solution, Petilla pronounced, is to give President BS Aquino “emergency powers” to lease generators to prop up our power supply. The Electricity Power Industry Reform Act (EPIRA) explicitly prohibits government from getting into the power generation business so as not to distort the market.

Last week, the DOE appears to have dropped the idea of government leasing generators, an extremely expensive proposition to begin with. In a previous column, I warned that mobile generators might not even be available at any price simply because they were too costly as power sources and production of these ceased. This is a dead option.

Meanwhile, foreign investors warned they would pull out their investments if the energy outlook remains grim. That will wipe out jobs and even push down our economy. Recall how the power shortages during the Cory years brought our economy into a long bout with recession. Our manufacturing sector never fully recovered from that devastating episode.

Faced with the threat of investments pullout, the DOE suddenly revised its 2015 energy outlook, this time claiming that we will still have a thin power surplus. The militant congressmen seized on this statement, arguing that if we still have a surplus then there is no need for “emergency powers.”

Both sides are wrong. A thin “surplus” may be produced on paper if we add up all the existing generating capacities of all the power plants. Engineers, however, will caution against declaring a “surplus.” This is because most plants never run to their full capacities. Too, when a plant breaks down, there will not be enough surplus power to cover the shortfall this implies.

The real argument against “emergency power” is that its only justification is to allow the President to lease expensive mobile generators. Since those generators are not even on the market anywhere in the world, then there is nothing to lease.

Makers of these expensive mobile generators stopped making them because they figured no country could be so stupid as to mismanage its energy supply to such extent they would want to lease such costly power. They underestimated our capacity for mismanagement, especially under this presidency. Imagine picking an obscure provincial politician to head up a most critical government department.

This week, the DOE once again revised its 2105 energy outlook.

Instead of the 8-hour brownouts, which might scare away investments, the DOE is now saying that we will have rotating brownouts of 3 to 4 hours. This led some congressmen to remark, sarcastically, that the DOE must be put under oath next time they make a forecast.

There is now little appetite for “emergency powers” since these will not introduce any new capacity anyway. Right now, all the eggs are in the basket of the “interruptible load program” (ILP).

The ILP is a curious demon. It involves getting consumers of electricity to generate the power themselves. Businesses with reserve generators will be asked to run these on peak hours to offset demand. Government, in turn, will pay these businesses a subsidy for running their more expensive generators.

The Senate is contemplating a resolution allowing the President to use P1 billion in Malampaya funds to subsidize the ILP. That seems too small to cover the added cost of a massive power shortage (estimated at 900mw).

This is the last nail on the coffin of our economic future, however: it appears that ILP can only muster about 200mw. That is well short of the forecast shortage.

Since government is at a loss on how to compel generating companies to introduce new capacity, only death, taxes and brownouts are certain.

Buyout

Here’s another Cabinet secretary talking through his hat.

DOTC Secretary Joseph Abaya confidently forecasts that the equity value buyout of the MRT3 will happen January 2015. Everybody else wonders where he draws his confidence, considering he has not even talked to the owners.

Sen. Francis Escudero then reveals the P53.9 billion Abaya thinks is in his pocket to pursue the buyout is actually “unprogrammed” funds from this year’s budget. There is no appropriation in the 2015 budget related to buying out MRT.

“Unprogrammed” funds can only be accessed under any of three conditions: a) if there is excess revenue; b) if there are revenues from new tax laws or new non-tax measures; and, c) when there are newly approved loans for foreign-assisted projects. None of these conditions pertain.

Then there is the matter of the international arbitration case filed years ago by the MRTC against the Philippine government (for non-payment of rentals). A final decision on this case must first be reached before any transaction can happen. After that, an order of judicial recognition of the arbitration case must be issued by a Philippine court. This could take years.

The only way for Abaya to get his hands on the P53.9 billion in “unprogrammed” funds this January is for BS Aquino to declare the money as savings and have Butch Abad reallocate this for the buyout. That, however, will require DAP-like powers which the Supreme Court declared unconstitutional.

Perhaps, Abaya’s confidence draws from the Congress redefining “savings” in the most obscene manner that would allow P53.9 billion to be commandeered from the “unprogrammed” category. Let’s see.