Philippines in Focus (2): Energy and Climate Change

agus-hydropower-plantThe Mindanao Energy Problem and the Failure of Power Privatization

As Mindanao, the southernmost island of the Philippines, began to experience an average of 3-6 hour rotating blackouts beginning March of this year, the energy situation of the country became the focus once again as the government tries to build consensus among the affected peoples as to short- and long-term solutions to the problem.

As the stakeholders in Mindanao begin to come up with needed strategic decisions to respond to the situation, the Freedom from Debt Coalition (FDC) and its chapters in Mindanao, believe that there is more to the so-called "energy crisis" than what the government is saying. FDC-Western Mindanao Chapter Secretary GeneralLucita Gonzales calls the Mindanao power supply issue "as nothing but a drama, and it was the biggest box office flop of the year."

President Aquino's personal appearance When President Benigno S. Aquino III attended the Mindanao Power Summit that was called to discuss solutions to the power supply shortfall that caused rotating blackouts in some parts of the island, he declared: "The simple truth is: you will have to pay more... There are only two choices: pay a little more for energy, or live with the rotating blackouts."

For FDC and its chapters in Mindanao, the President's public pronouncement was a disappointment, at best. For them, his presence at the Mindanao Power Summit "wasn't a story of "he came, he saw, he conquered." Rather, it was a story of the President came, declared a debatable truth, and got the ire of the people."

Local government officials, business groups and other stakeholders had mixed reactions as well, with the majority saying that they were expecting the President to come and listen to them but were surprised that they were "lectured upon," and they felt that he had no intention of even having a genuine dialogue.

agus3Suspicious timing Majority of the people in Mindanao raised a suspecting eye on the continued blackouts, with many of them believing that it was meant to lay the ground for the entry of private business interest.

The storyline of the government is that because of the dry season, power shortages are bound to happen. Since 2009, the supply shortage has been repeatedly felt in Mindanao every summer, and yet, the Department of Energy (DOE) continuously ignores the need to develop additional capacity for baseload and peaking plants. A baseload plant is a generation power plant that ensures that there is a steady supply of energy all throughout the day, while a peaking plant is one that supplies power during peak time of the day.

Rotational blackouts did happen affecting mostly those in the western part of the island. Then, government presented a solution – additional but expensive electricity from privatized power barges. Electric cooperatives in the island which service almost 60-70% of the total Mindanao consumers refused to contract and purchase power from these private firms, stressing that electricity rates would surely shoot up at the expense of the consumers. More rotational blackouts happened. DOE officials, in turn, blamed the electric cooperatives for the massive daily power interruptions across Mindanao. But the electric cooperatives got the support of its member-consumers as the proposed solution was unacceptable to the people in Mindanao since it enjoys one of the cheapest electricity rates in the country.  FDC believes that the government's shortsightedness in addressing this issue could be indicated by the following: One, instead of rehabilitating the aging Agus and Pulangi hydro-electric power plants which are the main sources of cheap electricity in the island, they were allowed to deteriorate. These power plants were never harnessed to full capacity and developed further, and the main resource of these two great rivers, Lake Lanao, was never nurtured and protected. Agus 6, the first of the six Agus units, was constructed back in 1953, while the newest of the power plants, Agus 1, began operating in 1992. The Pulangi hydropower plant in Bukidnon, meanwhile, began operating commercially in 1985. According to the government, it may have to spend as much as P30 billion (€545.54 Million) to rehabilitate the Agus-Pulangi hydropower complexes in Mindanao and increase the output to a maximum of 982 megawatts from the current 646 megawatts.

Two, while DOE claims that they put up coal-fired power projects in anticipation of eventual shortages, such power plants take three years before they become fully operationalized. These projects cannot be an immediate solution for this period. More important, they are not climate-friendly alternative solutions. In addition, the government seems to be taking a long time to address investments in renewable energy sources such as wind and solar despite reports that investors are willing to put up investments for the same.

Third, the power barges that are owned by government through the National Power Corporation are continuously privatized, leaving the government without reserve capacity to deploy in times of need.

Power Privatization The Philippines has been one of the firm believers that private sector equals efficiency, and therefore, public utilities such as power and water should be left in the hands of private companies. But experience tells otherwise. Based on its studies and actual ground research, FDC believes that the highly flawed policy framework of the Electric Power Industry Reform Act (EPIRA) is the problem behind the Mindanao power supply issue as it was designed for big business interests, and not for public service.

Before EPIRA was passed, the former National Power Corporation (Napocor) was responsible for generating electricity as well as developing power transmission lines. But EPIRA, in effect, removed this fundamental role of the State. What EPIRA did was to pave the way for private investors to come in and chart the course of generating electric power in the country. The matter of developing electric power supply and management has been left at the mercy of the private sector, an oligopoly of a few big, long-entrenched family/corporate interests.

After more than ten years under EPIRA, the government provided few big corporate firms practically every incentive to shield them from major business risks and allowing them to practice market abuse. These big corporate interests hardly contributed to increasing the already existing power generation capacity in the country. And with electricity generation and distribution companies under private hands, they managed to impose high electricity rates – now the highest in Asia – and extract sustained profits.

PALAGAccording to some legislators and proponents of EPIRA, the comparatively low generation cost in Mindanao is not a competitive price and therefore there is a need to increase its generation costs so that investors would be enticed to come in and put up power generation plants with the assurance that they will be able to charge for a price that guarantees profits. But the people in Mindanao say otherwise. In September 2010 alone, the total average production cost (excluding depreciation) of Agus-Pulangi was only 21.34 centavos per kWh as compared to Iligan Diesel Power plant amounting to P7.7910 per kWh, and Power barge 104 with P7.3367 per kWh. In that same period, the total net operating revenue of the seven hydro-electric power plants of Agus and Pulangi reached P6.85 billion. In truth, the government-run hydro-electric power plants are generating income despite the limited budget it gets from the state.

Solutions To immediately address the so-called power crisis in Mindanao, the Freedom from Debt Coalition (FDC) together with the electric cooperatives and Mindanao consumers propose that the government must urgently upgrade the Agus and Pulangi hydro-complexes, repairing and rehabilitating equipments, dredging the silt, and implementing watershed reforestation and development projects to sustain water flow.It must also change its attitude towards privatization and maintain in its hands the ownership and maintenance of remaining generation assets. It must be transparent and provide the people of all declared generating capacity in Mindanao in order to guide them about the real status of the base-load requirements, mid-range and peaking capacity.

Job Bordamonte, FDC campaigner on Power believes that in order to spur local economic development in Mindanao, the government must continue to provide subsidized electricity to the poorest of the poor in the island, as well as sustained access to cheap and clean sources of energy such as that of the Agus and Pulangi power plants.

Lucita Gonzales adds that "in the medium- and long-term, the government must conduct a democratic and participatory planning and demand-side management to come up with a Mindanao Energy Plan that covers a 20- to 30-year period, that signals the transition to clean energy. It must develop renewable energy sources, instead of over-reliance on private investors. It must encourage embedded mini-hydro projects among distribution utilities And lastly, it must lead a multi-sectoral review and overhaul of EPIRA."

FDC believes that the crisis must be turned into an opportunity towards genuine development through reinvigorated sense of ownership and level of commitment from both the government and the citizens to pursue a just transition to sustainable energy development.

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