Bright spots in Phl energy

Last week, we were warned to brace for another round of electricity price hikes as the Malampaya natural gas field has fallen short to fill requirements of power suppliers of the Manila Electric Co. (Meralco). The first time Malampaya natural gas plant in Palawan underwent scheduled preventive maintenance shutdown from Nov. 11 to Dec. 10, we were being charged with record high rate hike by Meralco.

But Meralco officials reassured consumers this possible new increase due to the lack of cheaper natural gas may not be as high compared to the P4.15 per kilowatthour (kWh) power rate hike that the Supreme Court (SC) stopped late last year.

The High Court’s temporary restraining order (TRO) was issued in response to petitions to compel Meralco not to implement the rate increase. This was after the Energy Regulatory Commission (ERC) earlier approved it.

The bulk of the P4.15 per kwh rate hike is accounted for the generation charge that Meralco collects for the power producers. This was supposed to increase in three tranches: by P2 per kWh in December, P1 per kWh in February 2014 and P0.44 per kWh in March 2014.

Meralco repeatedly explains it had nothing to gain from this rate hike in generation charges. It merely collects the higher generation charges by the independent power producers ( IPPs) that supply them the electricity, which, in turn, the utility firm distributes to its more than five million consumers.

The Department of Energy (DOE) earlier revealed eight IPPs went into unscheduled maintenance shutdown while Malampaya was out of commission. The DOE reported this to the House energy committee that called a public hearing on the Meralco power rate hike.

The DOE noted this apparently further tightened the power supply situation and forced Meralco to seek ERC approval for rate hikes. This raised suspicions of “collusion” among the power industry players to force an artificial increase in their rates.

Taking note of the DOE report, the SC last week ordered the petitioners against the Meralco rate hike to implead, or include also these eight IPPs as parties involved in this case. Despite being only an afterthought, it’s logical for the SC to do this.

As stated in their counter-comment on the petitions against their three-stage rate hike, the TRO applies only on Meralco while the power generators and the transmission companies are not similarly enjoined, or stopped from imposing higher generation charges.

Being the country’s largest power distributor, Meralco explained the impact of TRO has far more serious consequence in the electricity supply chain and ultimately impact us consumers.

“With the TRO in place, it will not be far-fetched to imagine that some generation companies might altogether refuse to sell electricity to Meralco, or decide to sell to Meralco only such amount of electricity as is commensurate to the resulting rate of P5.6673 per kilowatthour (kwh),” Meralco cited. “Either way, the insufficient power supply will result in rotating blackout, particularly during the summer months, which historically drive up the demand for electricity,” Meralco stated in their counter-petition to the SC.

Methinks, this is not a warning. It’s like the usual publication of Meralco notice of power interruptions. Actually, we have been in this situation every year. The only difference this time, perhaps, is we are now being charged with the record high rate hike.

What should worry us more is the reported economic growth in the country. While this means more economic activities, it also brings about greater demand for electricity. But if there is no commensurate increase in the power supply situation, we shall definitely suffer not just rotating blackouts but also long hours of power outages.

Now here comes the latest information that the “emergency partial restriction” of the Malampaya gas plant last week might further push up power rates. This is precisely because the country has very thin power supply reserves.

Energy Secretary Jericho Petilla was quick to douse these fears. As the DOE chief sees it, “there should be no significant effect on prices to consumers,” especially with prices in the Wholesale Electricity Spot Market (WESM) currently stable. Petilla’s obvious optimism draws much from the latest upbeat news coming out from the country’s energy sector. As it turned out, there is a new oil discovery in Cebu. No less than the DOE confirmed the latest “oil discovery” made by the Australian firm Gas2Grid. Dubbed as the Malolos-1, the DOE approved the extension of Service Contract 44 of Gas2Grid to conduct oil production with the aim of establishing a commercial oil field. Although it will take a year to fully develop this newest oil discovery, Petilla cited this would definitely give a big boost to the country’s oil upstream industry.

Also last week, the Pilipinas Shell Petroleum Corp. unveiled its latest project to put up a multibillion- peso fuel import facility in Cagayan de Oro. Dubbed the North Mindanao Import Facility (NMIF), this project was formally launched as one of the highlghts of Shell’s centennial anniversary in the Philippines this year.

The latest Shell project is expected to cater to the power and energy needs of millions of residents, motorists and other end-users and consumers in Visayas and Mindanao. This is not to mention its multiplier effect to spur business and economic activities and create new jobs in these areas.

At the unveiling of the NMIF, top Shell executives led by its country chairman Edgar Chua underscored the importance of the project as a manifestation of Shell’s confidence in the investment prospects of the Philippine energy industry. Shell, as an expanding multinational in the country, is part of the joint venture that also operates Malampaya natural gas. To date, Malampaya supplies up to 45 percent of Luzon’s power requirements.

Our country’s energy requirements depend much on expensive imported crude oil from the Middle East. Hence, the Philippines is very vulnerable to the volatility of oil price fluctuations in the international market.

Fortunately, there have been quite a few bright spots in the country’s energy industry. Thankfully, these private sector-led initiatives pick up the government’s slack in the energy development that leave us at the mercy of these IPPs.

As it turned out, there is a new oil discovery in Cebu.