Gov’t should focus on power generation

ON DISTANT SHORE
By Val G. Abelgas

Agus Hydropower Plant

In the last two weeks, business groups and two prominent businessmen reminded the Aquino administration to start taking a serious look at the country’s power supply problem to enable the country to gain inclusive growth and industrialization. The reminders came amid extended power outages in Mindanao and Northern Luzon, and one-hour rotating brownouts in Metro Manila, Visayas and other parts of Luzon.

Where before the precarious power supply situation was mostly limited to Mindanao, now the problem has crept all the way up to most parts of Luzon. With the water levels in Angat Dam and four other dams in Luzon – La Mesa Dam in Quezon City, Binga Dam in Benguet, Magat Dam in Isabela and Caliraya Dam in Laguna — falling below critical levels, it may take a few more weeks into the rainy season before the dams become fully operational again to distribute water to irrigation canals and power plants.

But it would take more than normal water levels in the country’s dams to bring back normal electric supply for homes, commercial establishments and industries. The power plants are simply not generating enough to supply the country’s growing needs brought about by growing population and growing economy.

The country’s power plants are few and old. Most of the time, they break down and with the working plants’ reserve power very thin, intermittent brownouts have become a common occurrence, especially during the summer season when the dams are not supplying enough for power generation, and offices and homes are using more electricity.

For years, power generation was the monopoly of the government with all the power plants publicly owned. The landmark Electric Power Industry Reform Act of 2001 changed all that by liberalizing the power generation industry.

Almost 13 years to the day after its passage on June 8, 2001, only one power plant has been built by the private sector, and the gap between supply and demand grew wider, and consequently, the price of electricity soared even higher. Obviously, EPIRA has failed in its twin objectives of increasing power generation while lowering prices.

And the government has not come up with alternative solutions, nor has moved to solve the defects of the law, if there are any. And for years, the country has not come up with a long-term solution to the nagging problem of brownouts.

The Philippine Chamber of Commerce and Industry (PCCI) the other week urged President Aquino to work on achieving power supply security and competitive power rates to allow the country to realize inclusive growth and industrialization.

Prominent businessmen Manuel V. Pangilinan and Erramon Aboitiz echoed the same call. Pangilinan said the high cost of power, as well as the lack of infrastructure, remain major hurdles to the country’s economic growth. Aboitiz said that delays in the construction of power plants might slow down economic expansion.

“It’s time to worry. Investors are always forward-looking and when they see projections of a potential power problem, they’ll decide to put their investments somewhere else,” said Aboitiz, president of Aboitiz Power Corp.

Pangilinan, chairman of Manila Eelctric Company, said Meralco is building a 600-MW power plant in Subic but construction has been suspended since 2010 because of legal tussles. In contrast, he said Meralco took only five months to acquire and operate a 600-MW power plant in Singapore.

Aside from the usual bureaucratic red tape, many power plant investors are stopped by numerous court cases filed by environmental groups that oppose the construction of coal and fossil-fueled power plants. The delay in the disposition of these cases has stalled the building of new power plants that could generate power needed by industries and the ever-growing population.

The power needs of Luzon alone have increased by 47 percent since 2001, from 5,646 megawatts to 8,300 MW. The only one power plant that has been built since, the GN Power in Mariveles, generates only 495 MW.

As a result, the Philippines has the highest price of electricity in Asia, replacing Japan. An October 2010 study by the International Energy Consultants showed that the average retail rate of electricity in the Philippines was $0.181 per kilowatt hour as against $0.179 per kwh in Japan.

In 2010, a factory in the Philippines likely paid more than twice as much for power than a factory in Indonesia and Vietnam, and almost twice as much as a factory in Malaysia and Thailand, according to the Association of Filipino Franchisors Inc. (AFFI).

A report by Enerdata noted that in the 1990s, the Philippines’ foreign direct investments were at the same level as fellow emerging economies Thailand, Indonesia and Malaysia, and 25 years later, it stayed at a level of US$1.5billion per year while the other three countries’ FDI went up to between US$7 billion per year to US$18 billion per year.

The country’s failure to attract more foreign direct investments can obviously be partly blamed on the excessively high electricity costs and the uncertainty of power supply.

These foreign investments could very well go to manufacturing, which many analysts believe should be what the country should aim for if it wants to sustain growth that would generate jobs for millions of Filipinos. It is not a coincidence that manufacturing slows down as power costs go up because factories use a lot of electricity.

Sen. Sergio Osmena III, chairman of the Senate energy committee and author of EPIRA, blamed both former President Arroyo and President Aquino for not doing enough to implement EPIRA and to increase power generation, adding that the lack of power generation is one of the major reasons the country is not generating enough foreign investments.

The government cannot afford to be complacent in addressing the country’s power supply situation. If the Aquino administration is serious in achieving and sustaining inclusive economic growth, it needs to find ways to build more power plants and rehabilitate the existing ageing ones.

One can get lost on a dark “daang matuwid.”

(valabelgas@aol.com)