News & Events

October 7, 2014

THE FREEMAN: Power Crisis Plan prone to Corruption

This was how the LPG Marketers' Association described government's plan to lease and operate diesel-fired modular generator sets to cover the Luzon grid's projected 600-megawatt  power supply deficit next summer.


Offhand, the plan is vulnerable to corruption, particularly in the selection of the foreign supplier of some P6-billion worth of gensets


Hundreds of millions of pesos, possibly billions, worth of fuel supply contracts will also be up for grabs.


We presume the gensets and the fuel supplies will be acquired under emergency conditions. Thus, all existing policies and rules meant to ensure the integrity and fairness of the procurement process may be put aside.


Once Congress authorizes Malacañang to install the additional generating capacity supposedly needed to address the power shortage, Ty revealed that the Department of Energy  intends to enter into an emergency lease agreement with a foreign supplier for the delivery of the gensets.


The P6 billion for the lease of the gensets does not include fuel costs and other expenses needed to run the gensets. And all these costs are bound to be passed on to consumers.


The DOE plans to tap the Power Sector Assets and Liabilities Management Corp. to charter and drive the gensets.


I doubt the PSALM's capability to carry out the plan, considering that the state-run entity is facing garnishment of some P62 billion in assets intended as compensation for National Power Corp. employees illegally terminated in 2003.


The DOE foresees an emergency on account of the Luzon grid's estimated 600-MW supply shortfall over a period of five months, from February to June 2015.


Upon the recommendation of Energy Secretary Carlos Jericho Petilla, Malacañang has decided to invoke the emergency provisions of the Electric Power Industry Reform Act of 2001, to enable government to establish the required additional generating capacity under such terms and conditions as Congress may authorize via a joint resolution.


Like Speaker Feliciano Belmonte Jr. and Majority Leader Neptali Gonzales II, I also doubt the need for emergency powers to contract the extra generating capacity, noting the availability of vast supply reserves through the Interruptible Load Program.

The standby generators owned by large private enterprises and registered with the Energy Regulatory Commission are capable of producing an aggregate of 1,800 to 2,000 MW of electricity, which is more than sufficient to cover the expected 600-MW supply deficit.


Even without emergency powers, government is in a position to harness and deploy these privately held standby generators via the ILP, while providing fair compensation to their owners.


In fact, the Manila Electric Co., through the ILP, has already managed to secure the delivery of some 300 MW of additional supply between February to June 2015, thus reducing by 50 percent the originally anticipated 600-MW deficiency.


The Philippine Chamber of Commerce and Industry (PCCI) is also pushing for an expanded ILP to fully cover the remaining 300-MW deficit, as the program will cause the least increase in electricity rates during the shortage.


Based on initial calculations, the use of the gensets to be leased and run by the PSALM could lead to an add-on electricity charge that is at least double the surcharge that may be passed on to consumers under the ILP.


Congress must now judiciously consider the appeal for emergency powers, and ascertain the best possible cure for the menacing power shortage.


We have to ensure the full and stable supply of electricity throughout next summer, at the least possible extra cost to industrial, commercial and residential consumers.


Rep. Arnel Ty

House Deputy Minority

Leader and LPG-MA Representative

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