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November 18, 2014

THE MANILA STANDARD TODAY: Malampaya may save day for emergency power reso

THE House of Representatives wants to grant President Benigno Aquino III the authority to use royalty payments from the Malampaya gas field to subsidize the Interruptible Load Program (ILP) to address a foreseen power shortage next year, House Majority Leader Neptali Gonzales said Sunday.

In an interview over radio dzBB, Gonzalez said Congress would grand the President emergency powers through a joint resolution before it goes on recess Dec. 20, but leave out the original request from the Palace for the authority to negotiate contracts to lease or buy generator sets.

Under the ILP, large consumers of electricity such as malls, offices, residential towers and factories will voluntarily disconnect from the grid and run their own generators when the supply of power is low, and receive compensation for running their own machines.

Gonzales, one of the principal authors of the joint resolution, said the Energy Department itself withdrew the proposal for the purchase or rental of power generators, which was expected to cost P6 billion.

“If we go by the ILP, the issue here always is how much the government will shoulder if it has to reimburse the companies for using their power generator sets,” Gonzales said. “Since the ILP is energy-related, the Malampaya fund can be tapped for some sort of subsidy.”

This, he said, would reduce the cost that would be passed on to consumers.

Another senior member of Congress, House Deputy Minority Leader and LPG-MA Rep. Arnel Ty called for the creation of a permanent National Strategic Power Reserve that would help provide the country a ready supply of additional electricity during disasters.

The strategic reserve would be drawn from the 3,000 megawatts that may be produced by privately held backup generators registered with the Energy Regulatory Commission (ERC).

“Although the ILP is voluntary in nature, Congress and the ERC may still find ways to establish the program as a stable, secondary reserve mechanism. If necessary, we may provide some financial incentives to participants,” Ty said.

“As a fixed second reserve mechanism, the ILP will be highly beneficial during catastrophic events, such as when some power plants or transmission lines are damaged due to an earthquake, thus causing a large unforeseen drop in supply,” Ty said.

“We are looking at the ILP as an enduring mechanism that could serve as the people’s electricity supplier of last resort during shortages caused by calamities such as earthquakes and typhoons,” Ty said.

But Ty’s fellow opposition member, House Senior Deputy Minority Leader and Bayan Muna Rep. Neri Colmenares, vowed to oppose the granting of emergency powers to the President.

“We hope the draft joint resolution granting President Aquino emergency powers will not be filed because we will certainly oppose it. The Malacañang sponsored emergency power in the joint resolution is very strange, since the DOE admitted during the House Energy Committee hearing last month that there is no lack of supply next year,” Colmenares said.

“The fact that the data in the joint resolution is different from those submitted to the Energy Committee is disturbing since the proposed emergency powers will not only increase electricity rates but will siphon P12 billion of public funds,” Colmenares said.

“We need to guard against wasting public funds which is better spent on social services or typhoon Yolanda victims. While we should find solutions if there is an actual energy crisis, we cannot also allow wasting public funds on a supposed supply shortage which the DOE itself said does not exist. Why should DOE ask for emergency powers if there is no evidence of an emergency? We will oppose the joint resolution which will shift the burden of higher electricity cost to the people” Colmenares said.

He said the joint resolution declares there is an “imminent” shortage but does not explain how it arrived at that conclusion.

“Imminent means the shortage is about to happen and clearly apparent. How can the joint resolution claim that supply shortage is imminent when after seven hearings the Joint Congressional Power Committee could not even decide whether the shortage is 200, 600 or 800 megawatts? Worse, in the latest hearing yesterday, the DOE and the National Grid Corp. of the Philippines cannot even agree on their data and whether there is an actual supply shortage,” he said.

“It is clear from the DOE document ‘Luzon Supply-Demand Outlook’ that the claimed shortage is a result of the maintenance shutdowns scheduled by power plants next year. Power plants will withhold their supply of about 2,340 MW in March, another 2,943 MW in April, about 1,687MW in May, 1,966 MW in June and about 2,205 MW in July next year. The immediate solution, therefore, is for the DOE to investigate whether these scheduled shutdowns are legitimate. It is possible that the supposed supply shortage is also contrived as happened during the Malampaya turnaround last year,” Colmenares said.

According to the Energy Department, Luzon faces a 700-MW shortfall over 16 weeks from March to July 2015, with the risk of brownouts happening one hour per day every week.

The Taipan Place Condominium Association Inc. has just signed up for the ILP, bringing to 30 the large private entities enrolled in the program as of Nov. 14, Ty said.

They are ready to use their back-up generators once called upon to do so by the Manila Electric Co. or the NGCP,  and make an extra 171 MW available to other consumers this summer, Ty added.

“The ILP has been operational in other countries for years. In fact, in some municipalities of America, owners of backup generators with a capacity of 100 kilowatts or more get paid just to have their units available to run during peak summer months. The owners get paid whether they are asked to run their generators or not,” Ty said.

In the Philippines, Ty credited Aboitiz Power Corp. for pioneering the ILP.

“Aboitiz Power’s distribution utility in Cebu, the Visayan Electric Co. (VECO), introduced the ILP in 2009, when the Visayas reeled from brownouts due to the failure of power producers to keep up with the surge in demand,” Ty said.

He said VECO’s ILP was also helpful in December 2013, when the Visayas suffered brownouts due to super typhoon Yolanda. The ILP at the time was able to cover 43 percent of the power supply shortfall, Ty said.

Ty said the proposed strategic reserve would be on top of the so-called operating reserve for the Luzon, Visayas and Mindanao grids.

Under normal conditions, the operating reserve is supposed to be equal to the capacity of the largest power plant plus a fraction of peak demand.

The NGCP said Luzon’s system capacity as of Nov. 16 was at 9,003 MW versus peak demand of 6,149 MW and an operating reserve of 2, 854 MW.

The Visayas’ capacity stood at 1,415 MW against peak demand of 1,374 MW and an operating reserve of 41 MW.

Mindanao had a capacity of 1,213 MW versus peak demand of 1,285 MW and a negative 72 MW operating reserve.

Isabela Rep. Rodolfo Albano III, however, said power supply could fall lower if hydro-electric plants dry up in an El Niño dry spell.

“The El Niño threat aggravates the projected power supply situation in the country next year caused by thin power reserves that could lead to power outages,” Albano said.

“These are compelling reasons for heavy power users like shopping malls, office buildings and industrial plants with power generating capacity to join the ILP to prevent power outages as outlined by a House Joint Resolution granting President Aquino III emergency powers,” Albano said.

Albano also defended Energy Secretary Jericho Petilla, who has been criticized for being “too alarmist.”

“We should cut Secretary Petilla some slack because he was trying to prepare for a worst case scenario in the event that the power reserves we have may not be enough to cover the project power supply shortfall,” Albano said.

Oriental Mindoro Rep. Reynaldo Umali, who chairs the House energy committee, said he hopes to pass the joint resolution by November.

“We are running out of time. There are tax perks, such as VAT-excemption, that need to be granted to ILP participants that would require legislation,” he said.

“We are in discussion with Senator (Sergio) Osmeña (III), who chairs the Senate energy committee, and he is willing to support the joint resolution,” Umali said.

Umali said only emergency powers will give the President powers to cut through red tape and grant tax relief to private companies joining the ILP.

“We really need the emergency powers for tax relief for the ILP participants,” Umali said.

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