- Mike Baños
Cheap electricity: A possibility for today's poor? (Part 1)
Atty Jose Edgardo Uy chairs the 3rd quarter meeting of the City Price Coordinating Council. Also attend ing was Kag. George Goking, chair of the SP Committee on Trade & Industry (photo by Mike Baños, NPN)
Resurgent contributor Mike Baños examines a unique power prospect that may benefit the greater majority. Will the Duterte Administration consider it?
The electric power industry in the Philippines has made impressive strides in the past two decades to address the demand-supply gap that has often meant rotating brownouts, especially for the less privileged sectors of society.
The Philippine Rural Electrification Program championed by former Vice President Emmanuel Pelaez initiated the lighting up of the countryside from a few hundred households to seven million connections which now benefits about 45 million Filipinos after 38 years. The Expanded Rural Electrification Program sought to attain 100% barangays electrification by 2008 and 90% household electrification by 2017.
However, during a recent public hearing of the Committee of Appointments, while the Department of Energy (DoE) claimed 100 percent of the country’s 42,036 barangays barangays now have electricity, Senator Panfilo Lacson later found it many sitios in those barangays still have no power. (Casayuran, 2016)
In fact, Sen. Loren Legarda disclosed the program has only electrified 89 percent of households in Luzon, 79 percent in the Visayas, and a mere 56 percent in Mindanao. Urban electrification was 94 percent, while rural electrification was only 73 percent.
She noted that most of those who have no access to electricity live mostly in the rural areas, (which account for 4.4 million households living in remote areas) as well as in the outskirts of Metro Manila and Davao. (Torregoza, 2016)
The Department of Energy is working on the development of a social development framework for the energy sector aimed at raising the quality of life of people at this “base of the pyramid”.
The Base of the Pyramid (BoP) is the largest, but poorest socio-economic group. In global terms, this is the three billion people who live on less than USD 2.50 per day.
US business school academics CK Prahalad and Stuart Hart argue that poverty can be eradicated by providing goods and services for the 4-billion people who live on less than USD2 a day - the group known as the “base of the pyramid.”
“We are now drawing up President Duterte’s vision for consumers, especially lowering the rates for electricity and the eradication of brownouts,” Energy Undersecretary Benito L. Ranque told participants at a round table discussion on the development of a Social Development Framework for the Energy Sector hosted by the First Bukidnon Electric Cooperative Incorporated (FIBECO) and facilitated by Balay Mindanaw last 13 September 2016 at Maramag, Bukidnon.
“We are here today in behalf of those households which cannot even afford the benefits of electricity, whose experience has been a cycle of one disconnection after the other, because of their incapacity to pay,” Ranque stressed. “Now that we have a president who understand the need for social development, let’s take advantage of this opportunity to take up the cudgels for these unfortunates whose plight may never have been discussed in the DOE, the ERC or in Congress.”
Ranque noted how the Philippines’ energy industry has made billions for a few which are ironically being paid for by millions who share very little of those profits.
“Ideally, we are looking at how we can restructure this unfortunate situation perpetuated by the R.A. 9136 or Electric Power Industry Reform Act of 2001 (EPIRA) so those who earning billions from this industry share the profits which they keep for themselves instead of pursuing social development, and passing on risks to the government and consumers.”
Ranque requested Balay Mindanaw, a long-time development NGO partner, to organize the event with stakeholders from around the island including grassroots organizations, rural electric cooperatives, consumer organizations, energy think tanks and consultants.
“The idea here is to have a gathering of people who are passionate, knowledgeable about the sector, to have a round table discussion (RTD) where everyone is considered a resource, and who can guide us in our discussion,” said Charlito Manlupig, Balay Mindanao chair.
“In coming up with a social framework for the energy sector, we wish to define the role of government in capitalizing on opportunities present in the industry, to promote social development, especially in the grassroots,” said Fr. Edicio de la Torre, RTD facilitator.
Energy autonomy for Mindanao to allow Mindanaoans to determine their own energy future was a recurring theme for the wide range of proposals put forward by the participants in the ensuring discussions.
“It’s ironic how non-Mindanao residents have been deciding our energy future in Manila for so long,” observed David A. Tauli, president of the Mindanao Coalition of Power Consumers. “Allowing us to have first dibs at how our energy resources should be developed, distributed and priced is a huge step forward to helping more people have a say in determining their own future.”
Tauli said the MCPC’s development agenda includes the creation of the Mindanao Power Corp. (MINPOCOR) to develop large hydroelectric resources in Mindanao, and get local governments to develop small-scale RE projects, to ensure it remains cheap since the private sector players often imposes a very high rate of return.
Former 1-CARE Party List Representative Edgardo R. Masongsong presented a comprehensive plan to update the EPIRA including the creation of the MINPOCOR which would enable the people of Mindanao attain energy autonomy by operating the Agus-Pulangui hydroelectric complex (APHC) to bring down the cost of electricity in the island.
Another measure proposed was the active participation of energy stakeholders in determining their energy future through the creation of local energy boards within the franchise areas of power utilities. Such boards would continually update the franchise energy plan and enable DOE to have a more realistic “bottoms up” Philippine Energy Plan (PEP) that would precisely address the energy needs of residents, businesses and industries based on their actual needs at realistic, affordable prices.
The energy planning boards, already piloted in local legislations passed by the Cagayan de Oro City Council and Misamis Oriental Provincial Board, would also help reduce the backlog and workload of the overburdened ERC which only has eight hearing officers to determine the price setting petitions of 119 electric cooperatives, 16 privately owned utilities and five LGU-owned utilities, not counting additional cases filed by generation and transmission companies, residential, commercial and industrial consumers.
“Maraming problema, malaking problema. Why do we have the most expensive electricity in Asia?” Ranque asked. “A new Energy Code for the Philippines is a logical first step in the direction we can continue on. I am happy we are hosted by FIBECO which has a social conscience. I wish all our electric utilities also be like them.”
Meantime, Senate Energy Committee Chair Sen. Sherwin Gatchalian has filed Senate Bill 1188 (“Recoverable System Loss Act”) which seeks to lower electricity rates by as much as 15.67 centavos per kilowatt hour through the reduction of charges passed on to consumers by power companies.
If passed, the law would lower the system loss cap – the amount utilities can charge consumers for electricity lost in distribution from the receiving point of distribution utilities to the consumer’s metering point – from 8.5 percent to five percent for distribution utilities, and from 13 percent to 10 percent for electric cooperatives.
DUs would also be stopped from passing other charges to consumers like non-technical system losses caused by electricity theft or pilferage, the electricity company’s own power expenses, and provide value-added tax (VAT) exemptions for system loss charges.(Romero, 2016).
While laudable, similar bills have languished in Congress and taken eons to navigate the legislative process, often extended by the lengthy process to draw up Implementing Rules and Regulations.
In contrast, the Association of Mindanao Rural Electric Cooperatives (AMRECO) believe it is possible to reduce the cost of electricity for residential households in Mindanao immediately despite the previous regimes of skyrocketing power rates through a simple executive order.
AMRECO will ask the Mindanao Development Authority (MinDA) to request stakeholders in the Mindanao Grid to allocate the entire output of the Agus-Pulangi Hydroelectric Power Complex (APHC) for residential consumers.
During a press conference held 18 October at a hotel in Cagayan de Oro, AMRECO President Sergio Dagooc said the association would formally request the Mindanao Power Monitoring Committee (MPMC) Technical Working Group meeting on November 15 to implement measures which will make available to distribution utilities the remaining capacity of the APHC for exclusive distribution to residential consumers.
The MPMC was created through Executive Order No. 81 as an attached special body of the MinDA to spearhead and coordinate efforts of the national, regional, and local governments, and power industry stakeholders to improve the power situation in Mindanao.
“Instead of being allocated to industries and the systems operator, the cheap hydro power should be allocated to distribution utilities (DUs), whether electric cooperatives or private, because the DUs are the ones serving the poorest of the poor, who are the targets of this administration for the reduction of electricity rates,” Dagooc stressed.
“Industries can easily absorb any additional cost this may entail since power constitutes but a fraction of their production cost,” he explained. “This is less than 20% of their generation mix since they have had a diminishing allocation for Agus and Pulangi.”
If even 1MW from Agus-Pulangi is allocated to a distribution utility like Moresco or Cepalco, this can already service thousands of households. That’s the basic idea behind this initiative, Dagooc added.
“Congratulations AMRECO for taking this initiative to enable residential consumers in Mindanao to enjoy cheap electricity from the Agus and Pulangi hydro plants!” said David A. Tauli, president of the think tank Mindanao Coalition of Power Consumers (MCPC).
“It is the PSALM-NPC that has the power to allocate to residential consumers the generation from Agus and Pulangi. They can do this anytime because they have not contracted out the generation of the remaining PSALM-owned generating plants in Mindanao.”
“So the petition to allocate the Agus-Pulangi to residential consumers should be addressed to President Duterte to order the PSALM-NPC to make the allocation, which should be placed into effect immediately, and should be effected in perpetuity, for as long as the Agus and Pulangi are generating electricity,” Tauli advised.
In addition, AMRECO will also ask the MPMC to ask systems operator National Grid Corporation of the Philippines (NGCP) to source its ancillary requirements elsewhere to free up the allocation it is now getting from the hydros.
At present, Engr. Glenn Jay Reston, MPMC officer-in-charge, said only the Agus IV and Pulangi IV hydroelectric plants can supply the regulating reserve needed by NGCP.
“However, this only requires 55 megawatts (MW),” Reston explained. “The 300MW ancillary reserve the system operator is required to maintain doesn’t necessarily have to be contracted from Agus-Pulangi and can now be easily sourced from other sources given the surplus in supply in Mindanao grid.”
“Under the Philippine Grid Code, the NGCP as grid operator is responsible for procuring the ancillary reserve for a particular grid. So instead of going to consumers, a big portion of the power mix coming from the Agus-Pulangi goes to NGCP as regulating reserve,” Dagooc explained.
“Now that there’s a surplus of power in the grid, we will ask NGCP to get their ancillary reserves elsewhere, so the cheap power coming from Agus-Pulangi can be allocated to the coops and private utilities serving households who rightfully deserve to benefit from the island’s patrimony which rightfully belongs to the people.”
Should the AMRECO petition be approved by the president, the electricity price from thermal power plants in Mindanao is likewise expected to fall given the increased competition for the surplus electricity now available from the grid (300MW) plus another 700MW that would be freed up by DU’s from their contracts with private power generating companies, making available a total of 1,000 MW to benefit industrial users and the systems operator.
Besides lowering electricity rates for residential consumers outright, this scheme can even lower electricity rates further during the rainy season in Mindanao should the DOE and ERC restore dump power rates when excess power from the island’s hydroelectric power plants becomes available.
Until the early 1990s, the Mindanao Grid then operated by the National Power Corporation (Napocor, now taken over by the Power Sector Assets & Liabilities Management Corporation or PSALM) offered “dump power” rates when there was more water available from the Agus and Pulangui River than could be accommodated by the Agus and Pulangui hydroelectric power complex.
It was termed “dump power rates” because instead of simply throwing away the excess water available from Lake Lanao and Pulangui River, industrial consumers were allowed to apply for additional loads and were billed at only 50 percent of the current generation rate for the additional power they consumed compared to the same period last year. (to be continued)