On the retail competition and open access (RCOA) and EPIRA

* This is my article in BusinessWorld on April 19, 2017.

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Electricity distribution, unlike generation, is defined as a “public utility” and hence, is granted as a monopoly right via congressional franchise. There are more than 120 distribution utilities (DUs) such as Meralco and electric cooperatives.

To dilute this monopoly, the Electric Power Industry Reform Act (EPIRA) which was passed in 2001 came with Section 31, Retail Competition and Open Access (RCOA) that “shall be implemented not later than three (3) years upon the effectivity of this Act,” and Section 29, Supply Sector, “The supply of electricity to the contestable market …” These are useful, anti-monopoly provisions, thanks to EPIRA.

The RCOA was finally implemented 12 years after, on June 26, 2013. The Department of Energy (DoE) and the Energy Regulatory Commission (ERC) issued orders to implement this beautiful provision.

But somewhere along the way, what should be a competitive scheme has become a “mandatory” order.

Some electricity consumers are unhappy because their choice to stay with their DUs — especially if these provide them good service and prices — has been done away with. This is why they went to the Supreme Court (SC) and asked for a Temporary Restraining Order (TRO) against the RCOA.

Below is a summary of these orders (one from DoE, four from ERC, and one from the SC).

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The SC TRO has mixed signals. It is good because (a) it stopped the “mandatory migration” to RES by contestable customers (CCs) and thus, they have the option to stay with their DUs or not, and (b) local RES will be allowed again. But it can also be bad because (a) it stopped the voluntary participation of CCs for 750kW (lowered threshold), and (b) some ERC Resolutions suspending earlier prohibitions to Retail Electricity Suppliers (RES) are also removed.

Government prohibitions should be kept to the minimum as much as possible.

These prohibitions would give people — especially those with very low technical and financial capacities — the right to become RES which might invite abuse of CCs.

2017041893842Such prohibitions should not include more RES players, the right of CCs to stay with their DUs or not, and voluntary participation of customers at 750kW.

EPIRA has provided for more customer choices, strengthened consumer empowerment, and demonopolization of electricity generation and distribution. Let this spirit stay in the succeeding orders of the DoE and the ERC.

 

Energy bureaucracy, electric cooperatives and NEA

* This is my article in BusinessWorld last March 08, 2017.

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The Philippines experienced a seemingly energy revival in 2016 and 2017 with plenty of new power plants commissioned and running. Mindanao experienced an energy surplus after many years of frequent involuntary “Earth hours” or almost daily blackouts lasting for many hours.

So it is ironic that while new power capacity were added into the grid, Luzon including Metro Manila, still incurred occasional “yellow alerts” in power supply. This indicated near-brownout situations that took place a few weeks ago since several power plants went offline all of a sudden, coinciding with maintenance and repair shutdowns that were scheduled ahead of time.

Some groups blame “collusion” of some generating companies (Gencos) to stage an artificial power deficiency and thus, command higher prices for several hours on those “yellow alert” situations. However, they offer little proof and numbers to back up this claim.

o4_030817For me, the more plausible and visible cause is the undeclared “collusion” of various groups including many government agencies and environmentalist groups to delay if not stop the installation of more power capacities to have huge reserves that can (a) cover even huge unscheduled power shutdowns and (b) bring down electricity prices further as a result of intense competition. See table below as proof.

With only 700+ kWh/person/year in 2014, that puts the Philippines slightly higher than the electricity use of poor neighbors Cambodia and Myanmar, and only half the electricity consumption of Vietnam, 1/4 that of Thailand, 1/7 that of Malaysia and 1/13 that of Singapore.

Last Friday, March 3, I attended the forum on “Institutionalizing Energy Projects as Projects of National Significance” by Sen. Sherwin Gatchalian, Chairman of the Senate Committees on Energy and Economic Affairs, sponsored by the Energy Policy Development Program (EPDP) held at the UP School of Economics (UPSE) Auditorium.

The three reactors were Dr. Ronald Mendoza, Dean of the Ateneo School of Government, Dr. Alan Ortiz, President and COO of SMC Global Power Holdings Corp., and DoE (Department of Energy) Undersecretary Jesus Posadas.

The senator recognized the problem of low power capacity of the Philippines in general, and some big islands in particular. There are many big committed and indicative power plants lining up but they often encounter bureaucratic delays.

20170307a5df3A paper, “An analysis of time to regulatory permit approval in Philippine electricity generation” (2016) by Laarni Escresa of EPDP showed that on the average, power plant operators need to secure 162 clearances (MBC, 2014) and 102 permits.

So the Senator’s bill will prioritize these big power plants (P3.5B or higher in capitalization) for faster approval process. For instance, agencies are given 30 days to check the documents submitted; if they fail to act on time, it is deemed that the papers are approved and permits be automatically granted.

Alan Ortiz mentioned something that’s somehow a shocking figure: Boracay’s electricity needs rose from 8 MW just 10 years ago to 100 MW today. From 8 to 100 MW in just 10 years — that’s a lot.

Undersecretary Posadas gave a good assurance that the DoE is “agnostic” on the source of energy (renewable or not) and want to see more power plants coming in. He also said that the DoE will no longer issue a 3rd round of feed-in-tariff (FiT) for wind-solar. Good announcement.

Another factor that contributes to uncertainties in power generation are those inefficient and losing electric cooperatives (ECs). They just get power from the Wholesale Electricity Spot Market (WESM) and distribute to their customers and do not pay the many Gencos that happened to supply their electricity needs.

From the Philippine Electricity Market Corp. (PEMC), here are the top three market participants or players which have unpaid energy settlement Amounts at WESM as of Feb. 27, 2017:

(1) Albay Electric Cooperative, Inc. (ALECO) P98.59M, (2) Abra Electric Cooperative (ABRECO) P63.97M, and (3) AP Renewables, Inc. P14.38M (source: http://bit.ly/unpaidwesm).

The numbers above exclude the unpaid amount of ALECO in their Special Payment Agreement with PEMC amounting to nearly P1B.

The National Electrification Administration (NEA) does not seem to properly discipline certain ECs under its belt. To have an old debt of nearly P1B and new debt of nearly P100M from one EC alone (Aleco) should be a red flag indicator that this type of prolonged and sustained inefficiency and losses have been tolerated.

The NEA should step back from this and other problematic ECs and force them to corporatize and be subjected to bankruptcy laws under the Securities and Exchange Commission (SEC).

The Philippines and its electricity consumers need stable and cheap electricity. They do not need the burden of being dependent on ECs that lose money and are unable to pay generation companies that further add uncertainties to bureaucratic delays.

Bienvenido Oplas, Jr. is the president of Minimal Government Thinkers and a Fellow of SEANET and Stratbase-ADRi.

Electric cooperatives and unstable power supply

* This  is my article in BusinessWorld last February 08, 2017.

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Almost everything we do now requires energy and if we stay in non-mobile structures like buildings and houses, everything requires electricity. Energy precedes development so unstable and expensive energy means unstable and poor economy.

Given the technological revolution the world has experienced in recent decades, it remains a tragedy that many countries still have low electrification rates and very low electricity consumption per capita.

Unfortunately, the Philippines is among those countries with still not-so-high electrification rates until today and its electricity use is among the lowest in the ASEAN (see table).

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Electricity consumption in kWh per capita is high for the following developed and emerging Asian economies: Taiwan, 10,460; South Korea, 10,430; Brunei, 9,550; Singapore, 8,840; Hong Kong, 5,930; Malaysia, 4,470 (6.5x of PHL); China, 3,770; Thailand, 2,490 (3.6x of PHL). These countries and economies also have 100% electrification rate except perhaps China.

There are two reasons why the Philippines has a relatively low electrification rate and low per capita electricity use.

First is due to its archipelagic geography.

Many municipalities and villages are located in islands that are off-grid and, as a result, their residents rely on biomass like firewood for cooking and gensets running on diesel for lighting although some do use solar.

Second is due to politics.

There are not enough base-load power plants that can provide electricity 24/7 even in major islands like Luzon and Mindanao. This is because of political opposition by certain groups to cheap and stable fossil fuel sources like coal. Also, there are many bureaucracies (national and local) that discourage the quick construction and commissioning of new power plants. There are also weak, inefficient, and even corrupt electric cooperatives (ECs) that are given monopoly privileges to serve certain provinces and municipalities.

There are 119 ECs in the country from Luzon to Mindanao plus private distribution utilities like Meralco and those in PEZA/ecozones. All ECs are supervised and regulated by the National Electrification Administration (NEA).

Of the 119 ECs, some remain financially weak and problematic until today, like the Abra EC (ABRECO) and Albay EC (ALECO). These two ECs are so deep in debt they are unable to provide stable electricity to their customer-members and have arrears with power generating companies (gencos) that supply them electricity at the Wholesale Electricity Spot Market (WESM).

According to National Electrification Administration (NEA), from 2004 to 2014, it has released subsidies to ABRECO worth P56.6 million for the implementation of the Sitio Electrification Program (SEP), Barangay Line Enhancement Program, and its procurement of a modular generator set.

For ALECO, it was badly managed and was on the brink of bankruptcy that local business and political leaders proposed and supported its corporatization and take over by more established energy players.

In January 2014, ALECO was acquired by San Miguel Energy Corp.’s subsidiary Global Power Holdings Corp. (SMC Global) and renamed it as Albay Power and Energy Corporation (APEC). ALECO then was the first EC in the country that was corporatized.

Upon takeover, SMC Global and APEC inherited a P4-billion debt by ALECO including overdue payments at WESM of nearly P1 billion.

More than two years after the takeover, the debt ballooned to P5.6 billion, mainly due to low collection efficiency. APEC said its database of customers has been sabotaged since about 80% of its customers are not on the database.

APEC resorted to disconnecting some big customers that do not pay but disgruntled ALECO employees and officers have resorted to reconnecting them.

The ball and accountability is in the hands of NEA. Why are these things allowed to continue for years, to the detriment of paying customers and generation companies that are not paid on time.

In 2015, NEA reported that it lent a total of P2-billion loans to 51 ECs to finance their capital expenditure projects, rehabilitate their power distribution systems, among others.

NEA should perhaps consider slowly stepping out of the sector and push all the ECs to move towards full corporatization with full exposure to expansion or bankruptcy. The sector that needs protection should be the electricity consumers, not the ECs.

Consumers should be protected from expensive and unstable electricity as well as disconnection because the DU or EC has been disconnected by gencos and WESM for huge unpaid accounts.

The NEA, along with other government agencies in the energy sector, should look at the above table again, and try to find out why our electrification rate and electricity use are at the level of Pakistan and Mongolia instead of at the level of Thailand, Vietnam, and Malaysia.

Bienvenido Oplas, Jr. is the President of Minimal Government Thinkers and a Fellow of SEANET and Stratbase-ADRi.

DOE not concurring with PH’s Paris agreement, good

Some PH Senators declared that the Senate will ratify the Paris Agreement of more expensive, unstable electricity “to save the planet” even if the DOE did not concur with it. Portion of the report said, “32 of the 33 agencies having already submitted their certificates of concurrence to Malacañang.”
(Phl to ratify Paris climate pact in July, Philippine Star, January 10, 2017)

The agency or department that did not concur with the PH (actually CCC) commitment to the Paris Agreement is the DOE, thanks Sec. Cusi.

“In the Cabinet, officially I have the only department that has not concurred in the ratification of the climate [pact].”

“I cannot concur on the ratification of the climate change [pact] because that can be used against DoE in approving the kind of power plants that we are going to have,” he said.

Mr. Cusi said the country’s pledge to cut carbon emissions by 70% means reaching a level that has already been met — in 2015.

“What does it mean? Wala na tayong gagawin [We can’t do anything],” he said, referring to curtailing the country’s development.”
(Energy department calls for foreign funding of global warming measures, BWorld, Dec. 12, 2016)

Many big countries like the US, Germany, UK, have not ratified their Paris commitment. Those who ratified are mostly small countries. $100 B a year of climate money transfer from developed to developing countries has become a huge extortion project that will produce huge disappointment from beggar countries. Almost ALL developed countries are already heavily indebted, they have huge public debts, don’t have enough money for their own citizens. And they will give away huge money to developing countries, many of whom are led by despots and corrupt leaders, will not happen.

The degree of climate extortion varies. While the “consensus” is $100 B a year starting 2020, some UN officials and planet saviours want $500 B a year. Less flood or no flood or more floods; less snow, no snow or more snow, that money should be given to them.

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As for energy prices, Meralco generation charges for Sept-Oct-Nov 2016 below. All these power plants are using coal and nat gas, except TMO, a peaking plant that uses oil. WESM prices are cheap, down to only P2.54/kWh last Nov. Which means FIT Allowance will be high so that pampered solar and wind plants at P8 to P10+ per kWh will remain “viable” through expensive electricity imposed on all energy consumers nationwide.

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Sec. Cusi’s energy realism should be supported against energy alarmism by other agencies and groups.

Trump transition team questions for US DOE

This is not directly related to energy issues in Asia but US climate and energy policies can reverberate strongly in Asia and other continents/countries. Hence, I am reposting this article by Willis Eschenbach, The DOE vs. Ugly Reality last December 10, 2016, about the 74 questions sent by Mr. Trump’s transition team to the current DOE leadership.

I think those question are frank and highly sensible. But there are many news reports attacking the letter and questions, saying they infringe on DOE scientists’ independence, etc., and they cite only a few of those 74 questions. Good work there, Willis, thank you
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usdoe1Questions for DOE

This memo, as you might expect, is replete with acronyms. “DOE” is the Department of Energy. Here are the memo questions and my comments.

  1. Can you provide a list of all boards, councils, commissions, working groups, and FACAs [Federal Advisory Committees] currently active at the Department? For each, can you please provide members, meeting schedules, and authority (statutory or otherwise) under which they were created?

If I were at DOE, this first question would indeed set MY hair on fire. The easiest way to get rid of something is to show that it was not properly established … boom, it’s gone. As a businessman myself, this question shows me that the incoming people know their business, and that the first order of business is to jettison the useless lumber.

  1. Can you provide a complete list of ARPA-E’s projects?

Critical information for an incoming team.

3 Can you provide a list of the Loan Program Office’s outstanding loans, including the parties responsible for paying the loan back, term of the loan, and objective of the loan?

4 Can you provide a list of applications for loans the LPO has received and the status of those applications?

5 Can you provide a full accounting of DOE liabilities associated with any loan or loan guarantee programs?

6 The Department recently announced the issuance of $4.5 billion in loan guarantees for electric vehicles (and perhaps associated infrastructure). Can you provide a status on this effort?

Oh, man, they are going for the jugular. Loan Program Office? If there is any place that the flies would gather, it’s around the honey … it’s good to see that they are looking at loan guarantees for electric vehicles, a $4.5 billion dollar boondoggle that the government should NOT be in. I call that program the “Elon Musk Retirement Fund”.

Folks, for $4.5 billion dollars, we could provide clean water to almost half a million villages around the world … or we could put it into Elon Musk’s bank account or the account of some other electric vehicle manufacturer. I know which one I’d vote for … and I am equally sure which one the poor of the world would prefer.

7 What is the goal of the grid modernization effort? Is there some terminal point to this effort? Is its genesis statutory or something else?

Asking the right questions about vague programs …

8 Who “owns” the Mission Innovation and Clean Energy Ministerial efforts within the Department?
Continue reading

CCC’s anti-coal, anti-fossil fuel lobbying

The Climate Change Commission (CCC) was created mainly to echo the UN FCCC agreements and lobbying. They may deny this of course but from its activities and advocacies, they point to this fact. Look at its target — “Survive 1.5 C” — referring to the UN target of targeted allowable global warming by 2100 compared to pre-industrial levels.

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Some of more ridiculous documents by the UN FCCC project up to 7.5 C global warming by 2100. Wow. The modern warm period (from mid-1800s to 2000s) after the little ice age (LIA) produced a warming of only 1.0 F or 0.7 C in the planet. Plateau in overall global temperature, we are moving to a global cooling phase, actually.

Anyway, the CCC organized a “Forum on National Policy Review and Framework Development on Energy” last week November 22 at Sofitel Philippine Plaza, CCP Complex, Pasay City. A friend told me about this and CCC invited some energy players in the country.

The CCC launched the “National Policy Review (NPR) and Framework Development on Energy” last June 16, 2016. The November 22 Forum was part of a series of multi-stakeholder consultations to review the country’s energy policy and develop a policy framework on energy related to CCC Resolution No. 2016-001.

Get that, CCC plans to somehow duplicate if not overrule the DOE in setting the country’s energy policy. The CCC is firm on anti-coal, anti-fossil fuel ideology while the DOE wants to increase the country’s energy capacity from as many power sources as possible, coal + oil plants + nat gas included.

The next day, November 23, there was a big business conference also at Sofitel on how to “low carbon economy”.

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The CCC, along with the UN, Al Gore, WWF, etc. of course refer to CO2 in their “low carbon” scenario. The gas that we humans exhale, the gas that our pets and farm animals exhale, the gas that our crops, flowers and trees use to produce their own food via photosynthesis, has been declared as a pollutant gas, an “evil” gas by these groups and hence, must be controlled, restricted via more government regulations, prohibitions and taxation.

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So reduce fossil fuel use in transportation, energy and industry. Really? The campaigners do not love their cars, frequent jet-setting to other countries that use fossil fuel 100%? They go to their offices and meetings on bicycles or skateboards or by walking, or hitching a ride with flying carpets or brooms? Enjoying the convenience of fossil fuel then lambasting it and still get lots of taxpayers money, cool.
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cc4Last October 21, Ateneo School of Government (ASoG) Reform Energy Project (REP) that also engages in implicit anti-coal campaign held a forum implicitly supporting natural gas.

REP’s Project Director is Tony la Vina, who was also the former Dean of ASoG and a perennial PH climate negotiator for the past two decades, since Kyoto Protocol negotiations, I think.

Look at the other speakers aside from government (CCC, DOE, ERC), from Energy Development Corp. (EDC) and Shell, both pushing for more nat gas.

I support more nat gas plants in the country. I also support more coal plants, more diesel power as peak-load plants, more hydro, more geothermal. Even more variable or intermittent renewables like wind-solar.

What I do not and cannot support are subsidies like FIT or guaranteed price for 20 years for intermittent renewables, priority dispatch in the grid, RPS, other forms of favoritism and cronyism at the expense of energy consumers like you and me.

I also do not support the government setting the “right” mandatory energy mix. Like 30-30-30-10 for coal-nat gas-renewables-oil, respectively. The ones who should set the appropriate and dynamic energy mix should be the consumers, not the government or greeny lobbyists.

Why? Because consumers would prefer cheaper, stable, available 24/7 (no blackout even for 1 minute) energy sources. If a firm goes bankrupt because of expensive monthly electricity bill, or its production is halted or damaged by on-off power supply and frequent blackouts, only they suffer the losses, not the government or the feel-good greeny lobbyists.

If people really believe that there is grid price parity of renewables now, then there is little or zero need for (a) subsidies ala FIT, RPS, priority dispatch to the grid, and (b) state-mandated and coerced energy mix nationwide.

The PH solar confederation, electric coops and Meralco

From the DOE website, some group photos showing some of the major players in the PH energy sector. Below, one solar group, the Confederation of Solar Developers of the PH, Inc. (CSDP).

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From left: DOE Chief-of-Staff Jesus Cristino Posadas, Engr. Arwin Ardon, Ret. Admiral Reuben Lista, Central Tarlac Biopower Inc. President Don Mario Dia, Equis Manager Craig Marsh, NV-VOGT Phils. President Vivek Chaudhri, North Negros BioPower, Inc. President Arthur N. Aguilar, Reynaldo Casas CSDP President, Aboitiz Equity Ventures Inc. Senior Vice President Juan Antonio Bernad, Carlos Aboitiz of Aboitiz Power, Solar Philippines President Leandro Leviste , SolarPacific Energy Corp. Senior Business Development Officer Dyna Enad, DOE Spokesperson & NASECORE President Pete Ilagan.

There is another solar lobby, the Philippine Solar Power Alliance  (PSPA) headed by Ms. Tetchie Capellan. Meanwhile,…

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From the  DOE website,

Cusi asked both agencies to “go down to the cooperatives” to resolve the issues raised by electric cooperatives namely PHILRECA, QUEZELCO and AMRECO, among others.

 Among the issues raised by the electric cooperatives were ensuring the right of way for electric projects, tax reforms, non-privatization of Agus and Pulangui complexes in Mindanao, the interconnection of SPUG areas to the main grid and the putting up of a one-stop shop and fast lane for the processing of permits and licenses for energy projects.

On the DOE-Meralco partnership in providing electricity connection to relocated informal settlers.

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When “free electricity connection” was reported in local media, I asked Joe Zaldariaga what it means — only the one-time cost of electricity connection plus meter readers are free, or also the monthly electricity bill of the informal settlers. Joe said that only the former is free. The latter, people still have to  pay their monthly electricity bill. This is low anyway because of  the  “lifeline subsidy” for consumers of only 100 kWh a month or less.

Meanwhile, I am curious why the electric  coops would oppose the privatization of hydro power plants in Mindanao? This is long overdue as EPIRA was enacted in 2001 or 15 years ago. Besides, only private players operating in a competitive environment would have enough incentives to really improve the electricity output of those hydro plants, especially when WESM in Mindanao would start operating.