Friday, December 15, 2017
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Put your stinking cap on

Once again, some 15 long years after Epira, which promised to save us from extortionate electricity prices, the rates already swelled by some 130 percent.

And so the administration of the motor-biking Duterte Harley announced a “full” review of the government energy policy.

The review was the cue for one big player to put its thinking cap on and throw its weight around again in policy-making—it’s none other than the Lopez group.

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First Philippine Holdings Corp., or FPHC, had unloaded Meralco, the country’s largest power distributor, to the MVP group of Manuel V. Pangilinan.

FPHC nonetheless still has a board seat in Meralco, coming in handy for other energy interests such as First Gen, a holding company in power generation.

In its statements, First Gen called on the Duterte administration to adopt what it termed as “fuel mix” policy in power generation.

By the way, Duterte Harley was particularly critical of oligarchs—both old and new— because of their stranglehold over Philippine business.

In his first Sona, Duterte Harley also said that he would go for coal in power generation, being the most viable fuel for economic development.

His reason: coal would still be the cheapest!

In its call for “mix fuel” policy, the Lopez group, in effect, wanted the Department of Energy to impose a limit—a ceiling—on fuels used in power generation.

Such a cap would be good for the consumers, it said, as if it could be the best thing that would happen to us since the creation of the universe. There—“pro consumer!”

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The Lopez group has various interests in power generation, being one of only three companies controlling the electricity supply for the whole of Luzon.

In its policy advocacy, First Gen talked about the “volatility” in the world price of coal, which was the choice of Duterte Harley.

It ventured that the only way to protect consumers from erratic prices of would be to direct the energy sector to other fuels. You know, such as… well, natural gas.

The company even compared electricity rates from natural gas with those from coal, concluding that natural gas would have the clear advantage in the long run.

The thing was that First Gen actually operated two plants in Batangas of 1,5000 megawatts using natural gas from the Malampaya field in Palawan, with two others of 500 megawatts still in the pipeline.

It thus enjoyed a natural gas monopoly, and it was no wonder that it also had really long-term supply contracts with Meralco.

In truth, First Gen could talk about volatile coal price until it would be blue in the face, but the entire energy sector agreed that, for many more years in the future, coal would remain the cheapest fuel for power generation.

For that matter, the view in business was that the operating costs in tapping natural gas from under the ground in the middle of the sea, well, could also never escape volatility.

First Gen talked like natural gas would be the cheapest fuel until the second coming, but nobody in his right mind could actually guarantee that.

Energy Secretary Alfonso Cusi thus stood pat on the plan to have fuel mix of 70 percent base load, 20 percent mid-merit and 10 percent peaking power plants.

In effect, Cusi wanted our electricity rates to become competitive in the region by allotting the biggest portion to base load fuel like coal.

One was pricing, of course, but the other factor would be steady supply!

Look, the country would need generation capacity of more than 30,000 megawatts by 2030, meaning, we have to add some 12,000 megawatts more in the next few years.

To build such a capacity, the Lopez group would want the Duterte administration to impose a maximum limit on every possible fuel on earth? For what —so that it could tilt the competition in favor of the more expensive fuels—was that it?

In effect, we would have to bite the other fuels at whatever prices, for the simple reason that cheap coal would be out of the picture.

That, thanks to the stinking cap, would clearly not be in the best interest of the consumers, rich or poor alike.

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TAGS: Business, economy, electricity, News, President Rodrigo Duterte
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