Special report: In the dark on the Mindanao power crisis (First of two parts)

MANILA, Philippines – Energy Secretary Carlos Jericho Petilla said he is losing his hair because of the Mindanao crisis. As he said this, in a recent meeting with Mindanao-based electric cooperatives, Petilla drew laughter from the crowd.

And yet, while Petilla may be exaggerating, the seriousness of the problem is not lost on the people of Mindanao.

The Mindanao power crisis, after all, is a pressing issue. Some parts of the island are suffering from seven to 10-hour rotating blackouts.

In Tawi-Tawi, the outages last seven hours, in the dead of night and in the scorching summer afternoon.

The situation is telling. Data from the Department of Energy showed that from January to March, the total average capacity – from coal, oil-based, geothermal and hydroelectric — in Mindanao stood at 1,267 megawatts, 1,243 MW and 1,124 MW. This is against an average demand of 1,306 MW in January, 1,305 MW in February and 1,311 MW in March.

The situation is likely to stay the same until 2015. According to DOE data, projects committed in 2014 would translate to 150 MW in additional capacity and an additional 300 MW in 2015.

For this year alone, the energy department is counting on the Iligan diesel power plant to come on stream by mid-year and provide at least 15 MW in additional capacity and a full capacity of 98 MW.

However, the Alcantara Group said it would be tough to restart the Iligan diesel power plant in Mindanao by September 2013 given the 30-year old plant’s poor maintenance records and scarcity of available parts.

“It is a tough order, but we will try our best to deliver the most we can in the shortest possible time,” said Ruben Ramilo, the power plant manager tasked by the Alcantara Group subsidiary Mapalad Power Corp. (MPC) to supervise the rehabilitation and operation of the power plant.

The company said the plant’s diesel generating units needs an overhaul, but the company has been having a difficult time determining which units need major or minor repairs due to the lack of proper maintenance records.

Mapalad has already signed off almost 90 percent of its full capacity via power sales agreements (PSAs) with the distribution utilities.

The Iligan plant was originally developed and operated by the Alcantara Group thru its subsidiary, Northern Mindanao Power Corp. (NMPC), under two energy conversion agreements with the National Power Corp. (NPC) through the build, operate, and transfer (BOT) schemes.

The agreements expired and eventually, the Iligan City government decided to invite interested parties to bid for the ownership and operation of the power plants in 2011.

The Alcantara Group subsequently won the contract through a negotiated bid, which was subjected to a “Swiss Challenge.”

Economic implications

Today, with the blackouts, businesses in Mindanao are complaining.

They are saying that they could incur a loss of as much as P300 million because of lower sales and higher power costs.

Rey Billena, vice-president of the General Santos Chamber of Commerce and Industry, said in a statement that the biggest losers are the General Santos-based canning factories and the deep-sea fishing vessel operators.

He said the power failures are forcing companies to operate their own generators and pay workers even when the factories do not operate because there is no electricity.

Billena said these factories need to use power generators so they can keep operating at a cost of P2 million a day in fuels and man-hours.

His own ice cream factory business incurred P500,000 a month in additional costs, he said.

Billena believes that his fellow businessmen in the Socsksargen region plan to close shop temporarily while power outages occur daily during working hours to prevent total bankruptcy. Socsksargen groups South Cotabato, Cotabato, Sultan Kudarat and Sarangani and General Santos City.

Options

Sources told The STAR that businessmen are prodding people in Malacañang to come up with an immediate solution to the problem.

Petilla has been summoned to the Palace every so often to update President Aquino on the situation but in the end, the government is relying on the private sector to help address the problem.

In early April, Petilla met with Mindanao-based electric cooperatives to convince them to use modular generator sets, which can provide additional power of one to two megawatts.

Electric cooperatives in Mindanao would put up power generators by the end of the year after the Department of Energy approves the use of P4 billion as loans for the rent or acquisition of the gensets, the National Electrification Administration (NEA) said.

In an interview, NEA administrator Edita Bueno said 15 Mindanao-based electric cooperatives have agreed to tap the P4-billion financial assistance from the Malampaya funds for acquisition and rental of modular generator sets.

These gensets would aid them in addressing the power supply crunch in the island. The Energy department earlier approved the use of roughly P4.4 billion from the Malampaya funds as loans to the Mindanao-based cooperatives to be administered by NEA.

She said that as of April, 15 out of the 21 cooperatives in Mindanao have agreed to tap the loans. Out of the 15, nine cooperatives would be renting the so-called modular generating sets or gensets while six cooperatives would procure the equipment. The rest of the cooperatives have yet to decide on the matter.

Bueno said the equipment could be in place before the end of the year, after the DOE bids out the contracts in May.

“Given the circumstances, the modular gensets can help the Mindanao power shortage. We’re not just looking at this as the final solution but it is a good stop-gap measure,” she said.

One cooperative would need one to two megawatts in additional supply, which they could get from the gensets. They would need at least P1.4 million for the rental fee.

Data from NEA showed that the 15 ECs could add at least 93.5 MW in additional capacity.

Mindanao-based electric cooperatives source part of their power requirements from the Angus-Pulangi hydropower plant but this is not enough.

The energy department has said that the Mindanao grid would need additional 38-MW this year.

NEA has been trying to help electric cooperatives improve their financial viability.

However, Bueno said even with the use of gensets, there is no assurance that there would be no more brownouts in the island.

Some parts of Mindanao are experiencing seven to 10-hour rotating brownouts. She said the long-term solution is to have new power plants, but these are expected to come in only by 2015.

Furthermore, electricity rates in Mindanao could go up to as much as P9.56 per kilowatt-hour from the current P6.20 per kwh rate in the island with the genset option.

Based on DOE computation, rental option would translate to an electricity rate of P9.56 per kwh. This is based on the rental fee of a genset of P1.4 million per MW and the estimated fuel cost of P41 per liter for diesel fuel.

On the other hand, the acquisition to be financed commercially would translate to a new rate of P8.45 per kwh. This is estimated to cost P22 million per MW, with a two-year warranty.

The cheapest option is acquisition with financial assistance from NEA, which would translate to an electricity rate of P8.09 per kwh.

From the trust fund, NEA would provide a loan for the genset with a proposed interest rate of six percent.

Government think-tank Philippine Institute for Development Studies (PIDS), in a study by senior research fellow Adoracion Navarro, has warned that the Mindanao power crisis of 2012 may stage a comeback in next year’s summer season given that there had been no additions to the baseload capacity.

According to Navarro’s study, consolidated forecasts for the electricity demand for the period of 2010-2019 show an annual average demand growth of 4.28 percent in Mindanao, which is higher than the national rate of 3.63 percent in the same period. Citing 2012 data from the Energy department, the PIDS study said the Mindanao grid at present has 37.31 percent baseload generating capacity, a far cry from Luzon’s 63.94 percent and Visayas’ 71.88 percent. (To be continued) –Iris C. Gonzales (The Philippine Star)