"Failing to deliver adequate, reliable, and affordable water and electricity will be a showstopper for the country’s economic momentum."
As Christmas lights start illuminating the traffic clogged avenues of Mega-Manila, a record number of 45 yellow alerts were recorded this year confirming warnings of a looming power supply shortage.
To put in context, National Grid Corporation of the Philippines (NGCP) records show that since the start of the Duterte administration in 2016 up to 2018, there have been a total of 39 yellow alerts. Add to that 14 days of Red Alerts and rotational brown outs compared to only eight in the last five years. Now we might hit around 50 Yellow Alerts before the new year.
The Department of Energy has seen this coming as predicted in its Luzon Demand and Supply Outlook which estimates by 2040, about 25,000 megawatts (MW) will need to be online to meet the fast-growing demand in Luzon. The DOE was expecting 1,665 MW additional capacity with the construction of five new power plants: SMC Consolidated Power Corp (150 MW), AES Masinloc Power Partners Co. Inc. (300 MW), San Buenaventura Power Ltd. Co. (500 MW), GNPower Dinginin (600 MW), and Solar Philippines Tarlac Corporation (115MW).
This would have been a great start but three of these projects are delayed either under construction or still need to pass commissioning tests. Only two power plants, San Miguel-owned SMC Consolidated Power Corp and the San Buenaventura Power Plant owned by Electric Generating Public Company (EGCO) of Thailand with partner Meralco Power Generation Company started commercial operations. Based on the DOE’s list of existing power plants as of 2018, the 650 MW of additional capacity translates to a 4-percent increase which is short of the 4.9 percent anticipated annual growth in power supply demand under the National Economic and Development Authority (NEDA) high GDP growth scenario.
Typical of stop gap measures, the DOE’s quick “solutions” such as Emergency Power Supply Agreements and the Interruptible Load Program wherein participating buildings are called to switch to their back-up generators during peak demand hours are expensive especially for the ordinary consumer who will eventually end up paying the higher power rates.
Adding to the problem is what seems to be a bureaucratic grid lock between the DOE and the Energy Regulatory Commission (ERC) regarding 6 Power Supply Agreements (PSA) with generation companies (GenCos) who won the required competitive selection process (CSP) held in October. Meralco signed with San Miguel and PHINMA Energy who won three PSAs to supply 1,200 MW of baseload capacity and another three PSAs with the same group and First Gen of the Lopez group for mid-merit capacity of 500 MW.
The rates of these agreements are lower than previous PSAs of Meralco and is seen to save billions for consumers over the validity of the contracts. If these badly needed megawatts are not delivered on schedule this December, the effect may be higher power rates should another shortage force distribution utilities to buy in the Wholesale Electricity Spot Market (WESM) suspected by consumer groups to be prone to the cartel like behavior by some GenCos. It’s basic economics: When there is not enough supply, the cost for consumers will certainly go up.
The threat of a full-blown double utility crisis with Mega-Manila now affected by a serious water supply (not distribution) problem and the shortfall in power supply projected by the DOE may become a disruptive political problem that warrants the President’s focused attention. Deflecting the blame to concessionaires won’t solve anything and will only boomerang on the government, because there will be no choice but to address these problems with real solutions. For both the water and power situation, it is a supply problem. Hence, government needs to build new sources to deliver these utilities, and these need to be up and operational fast.
For any government, political survival will be precarious when these basic public services critical to the whole spectrum of society start disrupting the already burdened way of life of its people. Failing to deliver adequate, reliable, and affordable water and electricity will be a showstopper for the country’s economic momentum and a will be a self-inflicted blow to the Duterte administration.