Bad for the economy

The rains have come but on most days, we still grapple with furnace-like heat, boosting demand for power aside from the usual economic activities – from manufacturing to construction to everything else in the daily grind. 

While we may not yet be in the midst of a full-blown energy crisis, the situation is precarious for sure, no thanks to rising demand, extreme weather changes, lack of infrastructure and perhaps, as many experts are pointing out, also because of decarbonization. It’s not easy going green for a developing country like the Philippines.

But another problem may be regulatory issues.

Take the new P20-billion transmission line project of the National Grid Corp. of the Philippines (NGCP).

Tycoon Henry “Big Boy” Sy Jr. forwarded to me an update on the project, the Hermosa-San Jose 500kV line, which is now at full 8,000 megawatts capacity.

That’s certainly good news, I told Mr. Big Boy, who leads NGCP, together with insurance and luxury car magnate Robert Coyiuto Jr.

After all, as NGCP said, the full completion and energization at full capacity of this so-called Hermosa-San Jose transmission line are critical in accommodating additional power generation to the grid to prevent Luzon-wide power interruptions.

A part of the Mariveles-Hermosa-San Jose 500kV facility, the line will accommodate an additional 2,200 MW of supply from new power plants in Bataan and Zambales to the rest of the Luzon grid, NGCP said.

Overdue recoveries

But the bad news is that NGCP needs to recover the cost it incurred for the project.

The Mariveles-Hermosa-San Jose transmission line project was filed with the Energy Regulatory Commission (ERC) at a project cost of P20.94 billion.

However, of the actual cost of the Hermosa-San Jose line component of the project, the ERC has allowed NGCP to recover only P19 million, or only 0.1 percent of the cost of the project.

What happens to the rest of the cost that NGCP needs to recover? The grid operator can only keep its fingers crossed.

“With the completion of this critical project, NGCP is optimistic that the ERC will act on the overdue recoveries applied for by NGCP,” the company added.

NGCP president and CEO Anthony Almeda hopes that NGCP will be allowed to recover its cost for the project.

Otherwise, Almeda said, it would pose a big challenge for the economy, as it would hamper the construction of new power capacity.

I take this to mean that it would be difficult for NGCP to embark on future projects that would help strengthen the grid and enable it to accommodate additional supply from the country’s power plants. Thus, there won’t be any future projects and no new transmission lines.

The next scenario, if that happens, could be blackouts.

Industries will suffer and then the country’s gross domestic product will go down. In short, it would be bad for the economy.

The project’s significance

NGCP energized Line 1 of the project in May last year to accommodate power generation in Bataan with a 2,000 MW transfer capacity. It was only a quarter of its full capacity, pending the completion of the then unfinished portion of the line.

The grid operator fully completed the project in May this year, enabling a 4,000 MW line capacity. The full completion of Line 2 will accommodate 8,000 MW in generation capacity, more than enough for existing and any incoming generation, according to NGCP.

“NGCP completes this landmark energy project under the leadership and guidance of Pres. Ferdinand Marcos Jr. This marks the full completion and energization at full capacity of this critical facility, strengthening and expanding the grid under NGCP,” it also said.

What’s in this line? The Mariveles-Hermosa-San Jose 500kV line, NGCP said, comprises 395 transmission towers, 275.6 circuit kilometers of transmission lines, two new substations and 2,000 MVA in substation capacity.

It was certified as an Energy Project of National Significance but the project still encountered various difficulties, particularly on right-of-way due to opposition of landowners, long and tedious judicial processes and protracted permitting process by local government units.

Bureaucratic cobwebs and ROW issues are also the same problems encountered by other proponents of critical infrastructure projects such as power, roads and telecommunications.

The government must also address this because it’s not only companies like NGCP that encounter such problems. Even foreign investors are frustrated over the tedious process of setting up shop around the country.

Moving forward and despite the challenges, NGCP said it remains committed to expanding, strengthening and reinforcing the country’s power grid.

But it cannot do it alone. It needs the support of the communities and the government, including our regulators.

It’s not only NGCP though that’s been encountering challenges from the ERC.

Recent ERC decisions concerning Meralco have confused not only the power distributor but the industry sector as well.

That’s another story for another time but for now, it might be good to remind the ERC that investors – foreign and local – don’t want a confusing and slow regulatory environment. Without investors, there won’t be power generators, distributors and grid operators.

Against this backdrop, we should remember that the most expensive form of electricity is no electricity at all.

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Follow her on X, formerly Twitter @eyesgonzales. Column archives at EyesWideOpen (Iris Gonzales) on Facebook.