Is ERC undermining DOE?

By Rey Gamboa (The Philippine Star), Mar 30, 2017

It’s summer, and with it comes the scorching heat – and brownouts.

The country’s power supply situation continues to be in such a precarious state, so much so that a power disruption is highly possible if one big power plant in the national grid trips or shuts down for any technical reason.

Despite the exuberance of businesses in investing in the country’s power sector, the needed new power plants that should ensure adequate electricity supply to keep up the Philippine economy’s momentum of growth are just not being built fast enough.

The projects remain stranded in the mess of ERC.

Something rotten and smelly at ERC?

The Energy Regulatory Commission (ERC), which has to approve power supply agreements (PSAs) between generation companies and distribution utilities and to issue certificates of compliance (COCs) to generating plants before they can start operations, is taking its sweet time in processing the permits.

Currently, pending with the ERC are some 4,000 megawatts of power capacity that should have been started the previous year, but for some unseen reason, continue to be passed from one bureaucrat’s desk to another in the agency for an unnecessarily long time.

The question that comes to mind is whether the ERC has the personnel qualified to process PSAs and COCs, or if there is indeed truth behind the pronouncement of Speaker Pantaleon Alvarez of widespread corruption among its officials.

Earlier, the reported suicide of ERC director Francisco Jose Villa Jr. was linked to a note he supposedly left that divulged of alleged shady deals and irregular practices in the ERC.

Risk to economic health

Perhaps, it is indeed high time to review the wisdom of having the ERC vet proposed PSAs, especially since the agency’s primary role by law is merely to set rates for utilities that serve captive electricity consumers, and to prevent anti-competitive behavior for retail electricity suppliers to contestable customers.

By sitting on PSAs and COCs for an unreasonable length of time, the ERC in effect is putting at risk the country’s economic health by exposing our manufacturing plants and commercial establishments to severe power outages in the coming years.

The suggestion of Alvarez to abolish the ERC and instead replace it with a Board of Energy attached to the Department of Energy makes sense since this will ensure that the newly created board would be within the regulatory ambit of the government and directly under the control and supervision of a Cabinet member reporting directly to the President.

The Speaker’s proposed bill, filed in February this year, provides that the created BOE will perform the functions of the ERC, but will be under the supervision and control of the DOE.

Conflicts between DOE and ERC

Conflicts between the DOE and ERC have been noted when the issue of inadequate power capacity is discussed, especially when a big power outage incident occurs. The former had been diligently identifying power projects and potential investors, but the delays caused by ERC inaction have made mincemeat of their efforts.

The ERC also passes judgment on all rules and regulations prior to the operation of the transmission and distribution grids, as well as those guiding the operations of the wholesale electricity spot market.

Many times, this situation has resulted in conflict with the DOE’s planning and policy directions, and ultimately affecting its mandate as specified by the law.

Prospective power plant operators have also been complaining about the inordinately long time the ERC takes to issue PSAs and COCs, and this after they had gone through a long process of securing permits and clearances from various other local and national government units and agencies.

The requirements and delays easily add two to three years to the timeline of building a power plant in the Philippines when it normally would have taken only five years in other countries.

DOE initiatives to untangle mess

It is understandable why the DOE is asking for the President’s approval of a proposed executive order (EO) that would declare power projects that will boost the country’s power supply level by 2019 and beyond to be of national importance.

The EO is seen to help expedite the process of securing permits for the projects, including one that will connect the Visayas and Mindanao grids by 2020. As growth areas, the two strategic island groups of the country will benefit from the sharing of power resources.

The National Grid Corp. of the Philippines (NGCP), which assumes the transmission functions of the National Transmission Corporation (TransCo), looks after grid expansion and reliability projects that are essential to providing continuous supply, efficient, reliable and best possible quality of service to its customers.

The DOE is also lobbying for a law that designates critical energy projects for the national economy as “Projects of National Significance” to address the bureaucratic red tape that is preventing the power plant initiatives to move forward.

Sen. Sherwin Gatchalian was reportedly thinking about re-filing the bill, with the same intention of speeding up the process of building power plants in the Philippines.

ERC and Mini-me

As an aside, allow me to introduce Mini-Me a character in the popular Austin Power movies. A clone of Dr. Evil, except for the size, having been created to be only “one-eighth” the size of the original, Mini-Me is regarded as a surprising tough opponent when pitted against the forces of good.

In fact, as the movie series sometimes portrays, Mini-Me appears to be a far stronger and powerful version of his larger counterpart. Is this what has happened to our energy environment? A regulatory agency with narrowly defined function more powerful than an executive office responsible for energy policy formulation and execution?