Is power shortage next?
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - April 8, 2019 - 12:00am

Hopefully not. But we never really know for sure, specially when government regulators are sleeping on the job. Last week, there were five straight days of yellow alert that warned of a potentially short supply. Apparently, some power plants were acting up at about the same time.

But that’s the problem when our available power supply is too close to market demand. A particularly hot summer day plus a few power plants performing badly and we have a power failure.

Those who are old enough to remember the bad old days of Gringo Honasan’s coups plus the incompetence of some of Cory Aquino’s closest managers led to serious power blackouts. Is a replay inevitable?

Will a power shortage happen after the water shortage we just experienced? It all depends on prompt and intelligent government action.

Some of those in the power industry are complaining about the gridlock at the Energy Regulatory Commission (ERC) that could have serious consequences on our power supply. There are supposedly as many as 800 PSAs and other submissions awaiting approval at the ERC.

PSAs are power supply agreements. Under our deregulated power set-up, power generators negotiate contracts with power distributors. But all power supply agreements must be approved by the ERC.

The ERC is supposed to guard against collusion between power generators and distributors. The ERC is supposed to recognize and stop any sweetheart deals among the power players.

 But ideally, these PSAs should be the result of a bidding process. Several power producers bid to supply the power requirements of a distributor, Meralco for instance or a cooperative.

If the bidding process is above board, ERC approval should be a formality. ERC is supposed to reassure the public that indeed, the pricing in the PSA is reasonable and not lutong macao, so to speak.

The problem is, ERC had been a tainted agency over the past few years. The actions of the ERC have been questioned time and again.

ERC had been suspected of being too cozy with the power industry… regulatory capture. That it lost its chairman and the entire board suspended for a time doesn’t help ERC’s credibility.

Probably recognizing its lack of credibility and afraid of risking more legal actions against them, the ERC commissioners are afraid to do much. That’s bad simply because the industry must be able to move on. There will be serious consequences for the general public if the ERC fails to do its duty.

Approved PSAs are needed by the private investors to our power sector. They need to show their bankers that they have a market and can afford to service the significant debts they need to be in the power generation business.

Power generators can of course choose to become merchant plants and sell to the Wholesale Electricity Spot Market (WESM) but that’s iffy. Having a PSA will enable both investors and bankers to sleep nights.

Without those PSAs, the industry will grind into a halt. We may not feel the impact of this slowdown right away.  But a repeat of those dark last few years of Tita Cory looms.

Act on those PSAs, approve or reject so everyone moves on. Don’t let the more contentious of those PSAs derail everyone else.

 It also doesn’t help that we have an Energy department whose officials are fixated on reviving the nuclear plant. In a recent meeting of the energy committee of the Management Association of the Philippines (MAP), it was pointed out that the DOE and the NGCP do not have an updated five-year plan that tackles the power supply and demand requirements.

Reviving the nuclear plant is distracting our energy officials. The cost of reviving it may not make economic sense given many alternatives.

I am not anti-nuclear. I like that nuclear plant. I worked on it during my stint in the old Ministry of Energy. I am confident the containment building is probably the strongest building in the country that could withstand pretty strong earthquakes.

But that is all. Everything else in that plant is about 40 years old. So much tech development has happened in the meantime.

Instrumentation will have to be changed from analog to digital. Miles and miles of wiring will have to be changed as well. Some elements of the plant’s design will probably need a lot of updating. I imagine only the containment building and the stainless steel vessel are salvageable at this point.

That nuclear plant is only rated for 660 MW. Reviving it with all the redundant safety provisions required today may cost more than putting up from scratch another power plant powered by coal, natural gas or other fuels.

And we have to also train the nuclear power plant operators and that takes more time than is left in the Duterte administration. Most of the ones we trained went abroad when we shelved the nuclear plant. They are also too old by now.

We also do not have a credible regulatory agency that can handle a nuclear power plant. That’s essential.

In the meantime, there are urgent things we must do to prevent a power shortage in the short term. We must not be lulled by the mild El Nino this year.

Let us also not forget that having just enough supply to cover current demand for power means consumers must pay more in the power spot market.

I am told by some power industry players that we should be safe in the next three years even if there may be some squeeze in the short term as new coal plants are completed. Long term however requires significant investment in LNG.

During my stint at the old Ministry of Energy, we were constantly updating the power program to take into account the pace of economic growth. If this government believes its own propaganda on the economy, its energy department should show how we will cope with increased demand.

They simply do not inspire confidence they are on the job.

Boo Chanco’s e-mail address is Follow him on Twitter @boochanco

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