Mindanaoans are not brats

This was the message Mindanaoans wanted to convey to the government’s energy cluster and to President Aquino himself in the Mindanao Power Summit in Davao City on 13 April 2012. That the power shortage in Mindanao was the making of the Mindanaoans themselves seemed to have been the central government’s theme—as covered by the press— in washing its hands of responsibility for the current crisis. Mindanaoans, the propaganda line went, were just too accustomed to low and unsustainable rates from a generation mix dominated by hydroelectric power and had resisted moves that could have increased capacity but at a higher cost.

Not so, six prominent leaders of Mindanao asserted. They were willing to bear additional but “reasonable” costs. These leaders are Menchie Ambalong, M.D. (Mindanao Commission on Women), Ricardo Juliano(Philippine Chamber of Commerce and Industry Mindanao), Vic Lao (Mindanao Electric Power Alliance), Sergio Dagooc (Association of Mindanao Rural Electric Cooperatives), Deputy House Speaker for Mindanao Maria Isabelle Climaco, and Governor Rodolfo del Rosario (Confederation of Governors, City Mayors, and Municipal Mayors League).

Yet, Energy Secretary Jose Rene Almendras opened the summit with an admission of guilt, tentative at first, but absolving the president of any blame. Candor and humility—Almendras later adverted to his lack of legal and engineering education as necessary backgrounds to solve the crisis—are always welcome. But what, exactly, did he hold himself accountable for?

For one, there was the delayed implementation of the rehabilitation plans for Agus and Pulanguithat, which were allegedly impeded by bureaucratic requirements. Almendras did not give any detailed timeline on this. I understand that the delay was caused in part by the procedures of the Investment Coordinating Council (ICC) under the National Economic and Development Authority. It is understandable that the ICC would have stricter and more rigorous vetting processes after the scandals under the previous administration.

However, I think that the project analysis could have been swifter if the staff at the Department of Energy had a better grasp of power economics. The Secretary was not getting adequate staff support. Mr. Dagooc, who had a better grasp of the numbers and the historical facts, frontally contradicted the data and other claims presented by the Secretary.

Second, there was no move to crack the whip on electric cooperatives that did not contract peaking power from oil-based generation capacity. This problem should have been addressed as early as 2010.

While it is clear administration opponents have exaggerated the severity of the power crisis for political purposes, it still is unwise to downplay the problem. The Department of Energy can and should publish solid information on the outages by franchise area continuously.

For now there is already broad agreement on the immediate steps to mitigate the shortage: the mobilization of more power barges and the institutional (contractual) framework to tap embedded capacity. Embedded capacity is generally higher cost generation capacity connected to the distribution lines within a franchise and not tapped when low-cost power from the transmission grid is available.

When the President arrived earlier than scheduled after lunch, it was somewhat anticlimactic because his prepared speech that addressed the points raised by the Mindanao leaders’ presentations in the morning session gave me the impression that the summit was a bit too scripted. But the exercise was saved by his spontaneous engagement and dialogue during the open forum, especially on the points the Mindanao leaders were unanimous on:

· No to the privatization of the Agus and Pulangui hydropower plants; the Electric Power Industry Reform Act (Epira) of 2001 had exempted these facilities from the general privatization program for ten years, a deadline which lapsed last year. Up to now no definite directive has been issued by the Joint Congressional Power Commission or JCPC. (JCPC co-chair Representative Herminia Abad was at the forum but Senator Sergio Osmena III was absent.)
· No to the proposed interconnection of the Visayas and Mindanao grids that could interconnect the transmission systems of the country’s three major island groups. This is a myopic and ill-informed position because any modeling of interconnections would show that this would benefit all consumers and producers; I am skeptical of an alleged University of the Philippines study showing that the interconnection would be a “white elephant.”
· Yes to a review of the Epira. This is a real challenge because the Department of Energy is not ready to compare the what-could-have-been scenario without Epira with what has happened under it.

The President engaged the leaders on all these issues, but he hedged on the Agus-Pulangui privatization, answering the concern with another conjecture. Would deferment of the privatization really be a long-term solution? But this was simply rhetorical because the way he asked this implied his answer was NO. But standing his ground on the fundamental economic principles behind the industry reforms is commendable. The President told Mr. Dagooc he was willing to sit down for four hours to “crunch the numbers” on alternatives to privatization. He should keep his promise.

One really disturbing thing was the President’s simplistic view of renewable energy (RE). He claimed that renewable energy was good but that a premium had to be paid. He likened the feed-in-tariff (FiT) system to the take-or-pay provisions of the independent power producer contracts begun under his mother and that were laden with suspicious deals under the presidency of Fidel V. Ramos.The President is mistaken in this regard. The recent contracts between IPPs (especially coal) and off-takers actually still contain an equivalent provision under a different guise.

Though many of the broad agreements presented at the forum had already been reached before the summit, it was still a worthwhile exercise ably presided over by the Mindanao Development Authority under Secretary Lualhati Antonino.

 

The Mindanao leaders’ presentations leaders can be downloaded here: http://minda.gov.ph/site/Mindanao/downloads/Presentations

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