Sunday, September 23, 2018
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Thrower of power

Energy Secretary Alfonso Cusi just called for mountains of investments in the electricity sector, timing his sales pitch with the 50th Asean Summit.

He said in a business forum that if the Philippines should catch up on infrastructure, it would need more power plants in the next 20 years.
His estimate: new capacity of 43,000 megawatts (MW).


The administration of the motor-biking Duterte Harley has already bandied around its ambitious P8-trillion infrastructure program, matching it with the mantra “Build, Build, Build,” even without digging a single speck of dirt.

Cusi’s 43,000-MW capacity would be more than double our present capacity. Based on the construction cost of $1,500 per kilowatt of capacity, the Cusi sales pitch would entail an amazing price tag of at least P3 trillion.

Where in the world would we get the money? From foreign investors, based on the electricity gospel according to Cusi.

Given the Cusi scenario, the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) would have to do a lot of hard work.

In the last 15 years of the Electric Power Industry Reform Act (Epira), hailed as our salvation from high electricity prices (the second highest in Asia), prices even went up by about 130 percent.

All this time, did we hear from either the DOE or the ERC, even a lip service at that, for a cursory review of the Epira?

Then and now, the biggest problem in the electricity industry would still be this monster called “cross-ownership” between generating and distribution companies.

By the way, the original Epira draft shunned cross-ownership. An influential lawmaker fought for its inclusion.

The monster allowed power companies to go into sweetheart deals among themselves anytime and behind closed doors. Locked!


Thus, the open market Wholesale Electricity Spot Market (WESM), designed to set prices based on conditions in the market, suffered from erectile dysfunction.

On the average, so-called bilateral contracts between generating and distribution companies accounted for 89 percent of electricity consumption, while the WESM only got 11 percent.

Based on official figures, all three sections of the power sector recorded drops in prices in the past six years. Yehey!

From March 2016 to March 2017, our typical electricity bill would show a drop of 0.68 percent, with transmission rates down 17 percent, and distribution down 14 percent.

Surprise! Generation showed an increase of 2 percent, which almost wiped out the reduction in transmission and distribution rates.

The generation component is so big, it normally accounts for 60 percent of our bills.

Certain groups surely defended “bilateral contracts” as the safeguard against spikes in prices. They forgot to say that the contracts would also tie us down for several lifetimes.

Historically, WESM showed much lower prices. Last December for instance, WESM quoted a price of P2.1 per KWh versus prices in bilateral contracts of P3.67 to 4.35 per KWh.
WESM quotes were more than 50 percent lower than what they were about six years ago.

Clearly, the open market could offer better prices, yet almost 90 percent of the electricity supply still came from these sweetheart deals.

The DOE and the ERC would have to find ways to scrap those contracts.

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TAGS: 50th Asean Summit, Alfonso Cusi, Business
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