Bring your own power

When investors look at the prospects for putting their money in the Philippines, they will likely see an abundance of cautionary tales.

The province of Occidental Mindoro, being in the news for some time now, can be Exhibit A. In the 21st century, in the digital age, the province until last Friday was getting only four hours a day of electricity.

Because the energy insecurity has been around for three decades, many sectors and enterprises in the province have invested in power generators. You can imagine the noise and stink from the gas used to power the generators when they are all in use for 20 hours every day.

Some folks have turned to solar energy. There are proposals to build alternative energy sources such as wind power. But simply drawing up and getting final approval for a project feasibility study can take years, according to Occidental Mindoro Gov. Eduardo Gadiano.

The province needs power ASAP, the governor stresses. The most viable long-term solution, he says, is to have the province connected to the national grid in Luzon. This will require underwater cables and Gadiano has been informed that this can happen no earlier than 2026.

Due to the acute power shortage, life in the province has suffered serious disruptions, affecting hospitals, schools, government and private offices, commercial establishments. Even ice has to be transported from Batangas.

The province is currently under a state of calamity to allow for emergency responses to the energy crisis.

Gadiano has been inviting investors to the province, with the warning that they will have to rely on their own power sources for consistent electricity supply. Only a handful have dared to take the risk, he sighed to “The Chiefs” on Cignal TV’s One News last Thursday.

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We interviewed him a week after President Marcos visited the province, where he had made an election campaign promise to provide reliable electricity. For the people of Occidental Mindoro, this “let there be light” campaign spiel was starting to seem like it was in the same league as rice at P20 a kilo.

But now it looks like there’s light at the end of the three-decade-old tunnel. The principal supplier of power in the province, Occidental Mindoro Consolidated Power Corp. (OMCPC), agreed to operate its three power plants, providing about 32 megawatts and making 24-hour electricity finally available in the province beginning April 28.

The agreement was reported to Malacañang by the National Electrification Administration last Friday, following a meeting on April 27 between NEA head Antonio Mariano Almeda and OMCPC president Luis Manuel Banzon. Energy Secretary Raphael Lotilla reportedly approved the scheme.

Whether the scheme is sustainable remains to be seen. OMCPC could suffer losses from the arrangement. The company operated only one power generator beginning April 13, providing 7.5 megawatts from its Samarica plant to distribution utility Occidental Mindoro Electric Cooperative (OMECO), because of unpaid subsidies from the National Power Corp. (NPC) that at one point had ballooned to over P1 billion.

NPC has pointed to red tape in the Energy Regulatory Commission’s action on the NPC’s request for a power rate hike because of the jump in fuel prices. The ERC has denied the red tape.

The NPC subsidizes private power suppliers to encourage them to operate and provide electricity in off-grid areas like Occidental Mindoro at lower costs. OMCPC wants to pass on its bunker fuel costs to consumers through OMECO. OMCPC is still waiting for an approved rate for its Samarica plant from the ERC.

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Listening to OMECO president Eleanor Costibolo narrate to The Chiefs how what she describes as an “artificial shortage” came about can make your head spin.

Here it is: in 1994, a private firm replaced NPC as power provider in the province, with a 25-year exclusive supply contract. The company’s generator set, however, broke down in 1996.

In 2013, Emerging Power Inc. came in, offering to provide 20 megawatts through a geothermal plant in Oriental Mindoro, with a back-up 20-MW bunker-fueled diesel plant in San Jose, Occidental Mindoro. EPI assigned the geothermal project to Montelago and the bunker-fired plant to OMCPC.

The bunker-fired plant came on stream in 2017, but the geothermal drilling fizzled out. The ERC had wanted a “blended rate” combining the geothermal and bunker- power generation, but it didn’t materialize.

With prospects for the geothermal project in limbo, OMECO dropped the deal and moved to contract other power sources, through competitive selection process. Costibolo said the ERC did not provide a template for the CSP so OMECO had to draw it up. For several months, the CSP was dribbled back and forth between OMECO and the ERC for comments, amendments and approval.

In 2018, the Department of Energy released amendments to the CSP. The procedures were finalized and OMECO was finally ready to award the supply contracts in 2019. It proposed a 15-year deal to provide 42 MW. The DOE cut the capacity to 39 MW ostensibly to bring down the cost, and wanted only a three-year contract duration.

OMECO protested that no power supplier would want to invest a huge amount of money for a three-year contract. The DOE agreed to five years. More amendments.

Costibolo said under OMECO’s original proposal, there were several power suppliers interested in bidding for the project. After the amendments, all backed out.

While the supply contracts were being finalized, OMECO and OMCPC were also required to get approval for renewal of the NPC subsidy every six months.

Contracts were finalized only in 2021. But in 2022, the ERC said the CSP was delayed and OMECO would be penalized for it. The power distributor was ordered to shoulder half of the subsidy to OMCPC that the NPC could not pay.

OMECO naturally protested, pointing out that it is a non-profit cooperative. The OMCPC meanwhile demanded OMECO’s part of the subsidy payment, or else there would be no power to distribute. By the time the ERC decided last November that the penalty was unfair, Costibolo said OMECO had paid OMCPC about P250 million, which the distributor is still trying to get back.

How many other similar calamities are playing out across our islands? If you were an investor, would you invest in this country? This is something that Charter change cannot fix.