RP may see repeat of long blackouts

MANILA, Philippines – If the prevailing power shortages will not be addressed today, the country will see a repeat of the power crisis in the early 90s, an international research firm said in a report.

A report authored by former Finance Undersecretary Romeo Bernardo and Marie Christine-Tang said that “the current electricity shortage in the country is stirring up memories of the power crisis in the early 1990s.”

But it said,” unlike the earlier crisis, however, power outages today are due largely to an El Niño-induced drought.”

The report said that the heavy reliance of Mindanao on hydropower plants is slowly taking a toll on the country’s energy sufficiency, especially in times of unforeseen weather scenarios.

“Mindanao, which is now experiencing six-hour rotating blackouts, has been the worst affected as it relies on hydroelectric plants for over 50 percent of its electricity needs,” it said.

From a macroeconomic perspective, the report said Mindanao’s less than 20 percent contribution to economic growth (versus two-thirds for Luzon), while not insignificant, is not expected to cut into the country’s overall growth.

“Even the effects on power costs and the overall inflation rate of high electricity spot prices are expected to be muted as electric utilities are allowed full recovery only on 10 percent of their purchases from the spot market, while power comprises a small share of the CPI basket,” it said.

“At the end of the day, beyond election and short-term macroeconomic risks, incidents of massive blackouts in a country that has a history of power shortage and where competitiveness is dragged down by high power costs, tend to undermine investor confidence further and raises the hurdle rate on investments,” the report said.

According to the report, the Department of Energy’s power supply and demand outlook is sadly not comforting.

The critical period for Luzon, when existing generating capacity will not be able to meet peak demand plus a 23 percent reserve margin, is expected to happen as early as 2011.

Private industry estimates range from 2012 to 2014, which nevertheless also point to the need for capacity additions today.

The critical period, meanwhile, has come and gone for Visayas, which has been experiencing rotating blackouts for a couple of years already before the construction of a new baseload coal plant.

Mindanao, it noted, is also expected to face power shortages this year.

Another challenge, the report said is how the new administration will handle the current power problem.

“Unlike fiscal sustainability which boils down to a taxing problem, it is less clear to us, based on the economic platforms presented so far by leading presidential contenders, how the winning candidate will tackle power sector issues, which are in truth much more complex,” the authors said.

“Even if the next administration learned the lesson of 20 years ago, i.e., to be anticipatory and not wait for a crisis to happen before acting which imposes huge costs on the economy, rules have changed under the Electric Power Industry Reform Act (EPIRA).  EPIRA now bars government, except with congress’s approval, from doing what the Ramos administration did in 1992-93 to solve the power crisis then, i.e., enter into energy purchase contracts with independent power producers, the report added. –Donnabelle L. Gatdula (The Philippine Star)