DOE submits draft of resolution on Noy’s emergency powers

MANILA, Philippines - The Department of Energy (DOE) has finally submitted to Congress its draft of the joint resolution that would give President Aquino the authority to enter into negotiations to acquire additional generation capacity for the country in anticipation of a power shortage in the summer of 2015.

President Aquino formally asked Congress to approve the joint resolution last month before Congress adjourned session for a three-week break, but the request was not accompanied by any parameters the legislators need as guide.

After several weeks of prodding, Energy Secretary Carlos Jericho Petilla finally submitted the draft resolution to the Senate committee on energy during its second hearing on the issue.

Based on the DOE’s draft, Congress would authorize the President to “negotiate contracts for the acquisition of additional generation capacity which may include the construction, repair, rehabilitation, improvement or maintenance of existing power plant projects and facilities or its rental.”

Given that it would be a direct negotiation, it would be exempted from the provisions of Republic Act 9184 or the Government Procurement Reform Act.

However, Sen. Sergio Osmeña III, chairman of the energy committee, remains unconvinced the grant of special powers to the President is necessary because there is enough power available from the private sector that would reduce the demand from power distributor Meralco during the peak periods in the second quarter of 2015.

Osmeña is convinced that big business would be able to cover for the projected shortfall in the power supply next year under the interruptible load program (ILP), based on his consultations with their representatives over the past weeks.

Based on his own computations, Osmeña said big business would have some 3,163 megawatts of power from their generator sets as backup power whenever there are power outages from Meralco.

Depending on how the government negotiates with these firms, Osmeña said as much as 1,500 MW of power could be committed by big business under the ILP.

The ILP involves big businesses such as the malls, factories and other heavy power users to operate their generator sets at certain periods so that they would no longer have to source from Meralco and consequently, reduce the overall demand.

Osmeña said a lot of the private firms have no problem with helping out and participating in the ILP.

However, the problem is that a lot of these corporations have little information about how the ILP works and so they are hesitant in making any commitments to the government, Osmeña said.

Osmeña explained most of the big business participating in the ILP expect to be compensated for running their generator sets since this would mean significant costs on their part, such as the use of diesel fuel and maintenance of equipment.

Based on the experience of Cebu, which tapped the help of the private sector in 2013 after Typhoon Yolanda damaged the power plants in Leyte, Osmeña said the firms that participated in the ILP were paid P14 per kwh for running their generator sets.

Petilla said the DOE is in the process of meeting with groups such as the Semiconductors and Electronics Industries in the Philippines Inc. (SEIPI) to discuss the rules and terms of the ILP.

Based on the draft joint resolution, the projected shortfall during the summer months of 2015 would be 900 MW based on the high demand, El Niño phenomenon, the 2015 Malampaya turnaround, increase in outages of power plants and delays in the commissioning of committed power projects.

“The imminent threat of electric power shortage in the months of 2015 is a threat to the country’s economic and social life,” the joint resolution stated.

Among the measures proposed in the resolution are the adoption of measures designed to boost the supply of electricity such as the purchase or rental of additional capacities, the tapping of self-generating facilities or the reduction of demand through energy efficiency and conservation or a combination of all of these.

Petilla noted that 450 MW out of the 900 MW requirement should be covered by the plants that have signed up to provide additional generating capacity and those that would be on stream by the first quarter of 2015.

This means that what is left for the government to source is between 200 MW to 500 MW in order to avoid blackouts from taking place during the summer months.

The joint resolution noted the additional generation capacity under the rental or purchase option would be reduced depending on how much power the government gets from the participants of the ILP, bilateral contracts with independent power producers and committed new capacities of merchant power plants to be introduced to the Wholesale Electricity Spot Market (WESM) to be available on or before March 1, 2015.

For the rental option, the DOE said only rental agreements for additional generation capacities, which can be made available before March 1, 2015 would be considered and these should carry the shortest possible contract duration.

In the case of the purchase option, the DOE said the Public Sector Assets and Liabilities Management Corp. (PSALM) or any other government agency designated by Congress would be allowed to purchase additional generation capacity, which they can do under negotiated agreements.

After July 31, 2015, the additional generation capacity would be maintained by the national government and would serve as backup generator that would run only in instances of critical supply situations.

Since this would be a backup generator, the additional capacity would not be counted in the country’s power supply and would be on top of the ancillary reserves.

Osmeña said a technical working group meeting would be conducted on the joint resolution before he takes up the matter with the other members of the committee at the Senate.

He expressed confidence that once his colleagues hear his explanation, they would also be convinced there would be no need to grant the special authority to the President as proposed by the DOE.

Use the Malampaya Fund

Instead of purchasing or leasing generator sets, environmental groups called on the government to just use the Malampaya Fund to finance renewable energy projects in the country.

Gerry Arances of the Philippine Movement for Climate Justice said the government should fund renewable energy projects rather than spend money on temporary solutions like the lease of power barges and generator sets.

“Malampaya Fund can be used to kick-start renewable energy projects. It can steer us away from fossil fuel dependence, and be a shining example to the world that the Philippines has acted on the call (to veer away from the use of fossil fuels),” he said.

Arances was reacting to Senate President Franklin Drilon’s earlier statement that Congress may authorize President Aquino, through the proposed emergency powers, to use as much as P10 billion of Malampaya Fund to address a possible power shortage in 2015.

Drilon said in a radio interview earlier this week that Aquino, if allowed by Congress to tap Malampaya, may use it to purchase or lease generator sets.

The generator sets will serve as temporary solution to the power shortage while additional power plants are still being constructed.

Arances, however, said only private firms, which he said have repeatedly benefited from the soaring electricity prices in the country, would benefit from the use of temporary energy sources.

Arances proposed the government should start adopting renewable energy projects instead of financing lease of power barges or construction of coal-fired power plants.

“We don’t need emergency powers,” Arances said. “They make it appear that it is a choice between additional power plant and power shortage. There is a third option: renewable energy sources.” – With Janvic Mateo, Jess Diaz, Rhodina Villanueva