Energy woes get attention

Energy Secretary Carlos Jericho L. Petilla has warned that the Luzon grid would require 600-700 megawatts of additional capacity each year in the next three years. If we don’t get the private sector to put up those plants, we are in serious trouble. Only the private sector can invest in power generation plants under EPIRA.

That’s what I have been saying here for the longest time. Sec Petilla’s predecessor, now Cabinet Secretary Rene Almendras had been saying that too. Judging from the past, we only get excited when massive power outage has happened.

Sec. Petilla is something of a pleasant surprise to me. His political roots made me lower my expectations. But based on what he has been saying or doing so far, it seems he has the technocratic smarts of Sec. Almendras plus the political savvy so vital for problem solving in the energy sector.

Unlike most politicians holding cabinet positions, Sec. Petilla doesn’t seek to grab headlines even when such headlines are within easy grabbing reach. During the May Luzon-wide power outage, he proved more cautious than the spokesperson of the National Grid Corporation of the Philippines (NGCP).

Based on what the NGCP spokesperson said shortly after the outage, we got the impression that NGCP was not to blame. Sec. Petilla investigated the incident thoroughly and as it turns out, there was a problem in a segment of the NGCP lines.

As a result, the upgrading work of NGCP got the focus it badly needed. While its principal owner, Henry “Big Boy” Sy, Jr has time and again reassured me that they were busy upgrading the grid as they are supposed to, it turns out they have not been up to the challenge so far.

Now that Sec. Petilla is aware of the problem, I expect NGCP to speed up its investment in upgrading the national grid. The national grid was privatized precisely because government didn’t have the money to upgrade and expand its facilities… not to deliver outsized profits to its investors.

Other than the grid, the next big headache has to do with building more power plants for the Luzon and Mindanao grids. I have time and again expressed worry that our reserves are too thin for comfort. No Energy Secretary can sleep well at night with such thin reserves.

I have mentioned here my fear that a repeat of the Cory Aquino blackouts will happen during the watch of his son, P-Noy. In both instances, the excitement over a new and honest regime translated into unexpectedly high economic growth rates. If we keep growing at seven to eight percent, the day of reckoning with a power shortage is going to happen sooner than later.

No wonder Sec. Petilla was reported to have expressed ambivalence over the good news of high GDP growth rate. He said he was probably the only cabinet secretary who gets worried with such good news.

Sec. Petilla says he expects “power plants are coming in on 2016 to 2018.” But he is counting on that controversial coal fired power plant in Subic to come in 2015 to early 2016. He warned that without that plant, “supply at that time will be tight.”

Sec. Petilla is being polite about it. Because of our thin reserves, that means we will have power outages in Luzon. Even the fear of that happening will discourage investors, local or foreign, from putting up job-creating manufacturing facilities here.

Interestingly, Time magazine had a recent feature story on our energy problems. http://world.time.com/2013/08/06/no-end-in-sight-to-the-energy-crisis-that-plagues-the-philippines/#ixzz2bS4OCB98

Time pointed out that we have 30 million more people than Thailand, but we don’t even produce half the electricity. Our problems according to Time: “Throw aging power plants and rogue debt-ridden cooperatives into the mix, and the likelihood of blackouts becomes virtually a hundred percent.”

Time also pointed out problems with what it calls the ambitious Electric Power Industry Reform Act (EPIRA) of 2001. According to Time, EPIRA “was meant to provide some relief, but its effectiveness has been negligible.”

EPIRA mandated the privatization of state-owned power enterprises, with the supposed objective of giving consumers affordable electricity and allowing “a regime of free and fair competition.” But Time observed that it “resulted in the abuse of market power — and an ineffective regulatory body have made it a toothless piece of legislation.”

“Everything was supposed to happen at a much faster pace than what has actually happened,” Sohail Hasnie, an energy specialist at the Asian Development Bank tells Time.

According to Time, “government may amend EPIRA to allow it to intervene in the sector as need arises. Petilla says the government would like to have its own power-generation facilities, for instance, so that it can bridge power shortfalls, when needed. “That stopgap ability is going to be expensive; no private sector [investor] will be willing to take that [on].”

Time cited a recent Goldman Sachs report that calculated the investment needed to set up modern power generation in the Philippines over the next few years totals some $46 billion. Yet investors are shying away because, in the words of Control Risks analyst Stephen Norris, “politically connected domestic conglomerates” hold sway and nepotism rules. Foreign investment is capped at 40 percent, another inhibiting factor. “There are not many takers,” Norris says.

That sounds like a job for an energy superman. Even as Sec. Petilla has demonstrated his political savvy in resolving the Albay power problem and smoothing out the edges of a solution for Mindanao’s power woes, he has still to face his real test. Let’s see him try touching EPIRA.

Is Sec. Petilla finally Energy’s Man of Steel or just one of the long line of energy secretaries after EDSA who failed to handle the tough issues? Sec. Petilla may have many more pleasant surprises for us in the next three years. Let’s hope and pray he delivers or else another dark age may be in our future… just like in old times. –Boo Chanco (The Philippine Star)