Ungoverned

This business of giving President Aquino “emergency powers” to solve the looming energy crisis is a hoax.

It will not solve the strategic malaise of our energy sector. Even if the President is given the authority to contract out power generating units, there might not be available diesel units in the international market to save us from outages by the onset of the next dry season.

Emergency powers will only paper over the complex issues in the power industry that brought us to this crisis in the first place – crisis that will likely recur for years to come. It is an incompetent solution to the problems created by incompetence to begin with.

Let us begin with the bottom line.

The shortest we can lease emergency power generating units is 5 years. Our need for them is supposed to be only for a few months. Therefore, we will be constrained to lease these generating units even when we have no need for them, passing the costs to consumers.

The lowest estimate of rental payments for diesel generating units producing the 500 megawatts necessary to cover the shortage next year (although some estimate the potential shortage to be twice that) is about P27 billion. It could be higher since we are desperate for power, a disposition that will give the contractors leverage over us.

If we add fuel costs at their present level (assuming no external event pushes up oil prices), the total cost for this deal involving emergency generating units could run well over P90 billion. That is a large sum of money that will be passed on to consumers, of course.

If we have that much money to burn (chargeable to end-users), we might as well invest that money in renewable energy projects. Renewable energy might seem expensive in the short term but they will be free from the vagaries of sudden shifts in the prices of oil or coal. They will provide a stream of long-term supply contracts by which the other power suppliers will have to benchmark.

Our energy authorities are lying when they say the additional billing costs consumers will pay will be negligible. There is no computation that supports that if we contract emergency diesel generating units. The higher costs of power will force industries out of business and even spark rioting in the streets – considering we already have among the most expensive power costs in the world and our citizens are already forced to bear the highest taxation in the region.

Oh yes, the cost computations above do not yet include the omnipresent VAT on power.

I am told by industry sources that there might not even be emergency diesel generators available, even if we are willing to pay premium prices.

The suppliers of such generators, after we contracted out power barges over two decades ago, thought Filipinos could not be stupid enough to fall into the same desperate situation we found ourselves in towards the latter half of the Cory years. They stopped producing power barges on that assumption.

They miscalculated on our capacity for stupidity and incompetence. In the intervening years, we actually worked our way into the same desperate situation of power shortage.

There are only two companies capable of immediately supplying emergency diesel units capable of supplying the huge (and probably understated) shortfall we expect early next year. They could make us pay an arm and a leg for the generating units – assuming there are any available.

We need not have fallen into the pathetic situation we now find ourselves in.

As early as 2003, the Department of Energy issued Circular 2003-12-11 that clearly placed the responsibility for ensuring availability of sufficient power on the utilities.

The circular read: “All distribution utilities must submit to the Department no later than the 15th of March every year the annual 5-year distribution development plan pursuant to Section 4 (P), Rule 7 of the implementing rules and regulations of the Epira… (including) abstract of the terms of conditions of power supply contracts with NPC’s existing and available power supply (and) with private power producers to augment the power supply in their franchise areas and to ensure that power interruptions are minimized.”

In addition, the Energy Regulatory Commission issued Resolution 21 Series of 2005 that directed all utilities to enter into “future bilateral powers supply contracts.”

Both issuances intended to cure the problem of an ungoverned power sector by making the utilities responsible for ensuring long-term supply availability. Both issuances demonstrate that, if competence drives it, government can force some semblance of order and predictability into our chaotic power industry. That might have averted the serious power supply shortage we now confront.

Both issuances indicate that we do not need emergency powers for the President to solve problems the private sector is best positioned to solve. All we need is far-sighted governance and strong presidential direction.

Those who worked with former President Fidel Ramos in solving the power shortages of the early nineties say that they did not actually need emergency powers to accomplish the feat. They pushed all the disparate segments of the power industry into line simply because it was clear they acted with Ramos’ full backing.

Sadly, the two issuances mentioned above were conveniently ignored by the various players in the power sector, each pursuing his own narrow interest. Government failed to assert its authority to push everyone into line so that there will be less of the uncertainty that discourages investments in power.

Emergency powers will not provide the solution to the mess that is our power sector. Adept governance will.