YEARENDER: No shortage of energy woes in 2013

The year 2013 had been a busy year for the energy sector as it had to deal with the perennial problem of tight energy supply.

Energy Secretary Carlos Jericho Petilla, indeed, had quite a hectic year with the Mindanao power crisis, the spiraling oil prices, the tight supply in liquefied petroleum gas (LPG), the power outage in typhoon-hit areas, and now the record-high rate hike of Manila Electric Co. (Meralco).

Indeed, Petilla has his hands full, given the problems besetting the energy sector.

Mindanao power crisis

One of the biggest problems in the energy sector this year was the Mindanao power crisis.

In fact, some parts of the island are still suffering from seven to 10-hour rotating blackouts.

In Tawi-tawi, for instance, the outages last seven hours, in the dead of night and in the scorching summer afternoon.

The situation was stark and telling. Data from the Department of Energy (DOE) showed that from January to March, the total average capacity – from coal, oil-based, geothermal and hydroelectric -- in Mindanao stood at 1,267 megawatts, 1,243 MW and 1,124 MW, respectively.

This is against an average demand of 1,306 MW in January, 1,305 MW in February and 1,311 MW in March.

Although there are no more rotating power outages, the energy department said the tight supply situation is likely to stay the same until 2015.

Petilla is counting on projects committed in 2014 – which would translate to 150 megawatts in additional capacity – to come through and also the committed additional 300 MW in 2015.

A study conducted by a government think-tank, the Philippine Institute for Development Studies (PIDS), has warned of another power crisis in Mindanao next summer given that there had been no additions to the baseload capacity.

PIDS senior research fellow Adoracion Navarro said demand for power in Mindanao has continuously spiked through the years with rapid urbanization and increased industrialization.

Consolidated forecasts for electricity demand from 2010 to 2019 show an annual average demand growth of 4.28 percent in Mindanao.

Citing 2012 data from the DOE, the PIDS study notes that the Mindanao grid has 37.31 percent baseload generating capacity, a far cry from Luzon’s 63.94 percent and the Visayas’ 71.88 percent.

Root of the Mindanao problem

Many blame Mindanao’s power woes to its heavy reliance on hydropower.

Of the total 1,616 MW dependable generation capacity in Mindanao, 1, 038 MW come from hydropower plants such as the Agus and Pulangui plants, which are old facilities.

To address the problem, Navarro said there should be short-term solutions such as the rehabilitation of these hydropower plants and the promotion of interruptible load program for large consumers in the region.

For the long term, Navarro recommends the implementation of

demand-side management programs, the interconnection of the Visayas and Mindanao grids and implementation of reforestation and watershed management programs, among others.

Record high electricity rates

Aside from the Mindanao power crisis, another problem hounding the energy sector is the spike in power rates.

The 5.2 million consumers of Manila Electric Co. (Meralco), the country’s biggest power distributor, were in for an expensive Christmas given the record increase in electricity rates for the month of December due to the month-long shutdown of the Malampaya gas-to-power project in Palawan.

The shutdown prompted affected power plant operators to use the more expensive diesel in running their plants.

The three plants sourcing power from Malampaya are the 1,200-MW Ilijan combined cycle natural gas plant owned by Kepco Philippines Corp. and the 1000-MW Sta. Rita and 500-MW San Lorenzo natural gas facilities owned by First Gen Corp. of the Lopez Group.

The plant supplies electricity to three natural gas power plants in Luzon, accounting for 2,700 MW. In all, these power plants provide 40 percent of the electricity needs of Luzon.

After consulting with the Energy Regulatory Commission (ERC), the power sector regulator, Meralco started implementing a whopping increase in electricity rates stemming from a P3.44 per kilowatt-hour increase in its generation charge for December.

However, Meralco implemented a staggered billing scheme to help ease the burden on consumers.

As a result, the P3.44 per kwh hike was divided into three. As such, the generation charge for December is P2 per kwh, P1 per kwh in February and P0.44 per kwh in March.

Because of this staggered billing, the total increase in electricity rates for a 200 kwh household, which is the typical residential user, is P2.41 per kwh.

Meralco officials said aside from the Malampaya maintenance shutdown, the situation was also aggravated by emergency outages of several plants, which led to tighter supply and higher prices at the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity.

Whatever the reasons were, the public wouldn’t take it sitting down. There were protests left and right and soon after, lawmakers have joined the fray.

The House of Representatives and the Senate both conducted hearings, probing the power rate increase.

During the House hearing, Meralco officials said the increase from the use of liquid fuel accounts to just over P1.04 per kwh versus the P2.38 per kwh increase coming from WESM.

Petilla, for his part, said a tripartite team is now investigating the alleged collusion among power plant operators that implemented emergency shutdowns to create an artificial shortage in supply and drive prices up at the WESM.

“Investigation is still ongoing,” he told The STAR.

The tripartite investigation – being carried out by the DOE, the Philippine Electricity Market Corp. (PEMC) and the ERC – will end by Dec. 30, Petilla said.

PEMC is the operator of the WESM.

In the meantime, while authorities look into the root of the increase, consumers are bearing the brunt of higher electricity rates for December.

Moving forward

Indeed, 2013 has been a challenging year for the energy sector. The issues mentioned are just two of the major problems.

Petilla has continuously appealed to consumers to save on electricity consumption. At the same time, he also recognized the need to build new power plants, something the government can’t do because of restrictions stipulated in the Electric Power Industry Reform Act of 2001.

With these challenges, the years ahead will likely continue to be a difficult road for power consumers.