TUCP: Yes to emergency powers, No to generator sets, No to ILP

By TUCP
July 22, 2014

QUEZON CITY – The Trade Union Congress of the Philippines (TUCP) welcomes the move of DOE Secretary Jericho Petilla in advising President Aquino to declare a state of emergency in the power sector.

“We fully support the invocation of Section 71 of EPIRA which will allow the President to step in with programs to provide additional generation capacity. We, however, strongly disagree with the proposal from the DOE and from the generation sector that the way out of the current crisis will be through the purchase of generation sets, to be financed through the National Budget,“ said TUCP Executive Director Luis Corral.

“Gen Sets are a quick fix but they will be very expensive and the power generated from gen sets will be in the vicinity of P12 to 15 pesos per kWh,” he added. TUCP stated that the crisis is not just the lack of power security but the need to bring down power rates as well.

TUCP warned against the DOE knee-jerk /quick fix as the situation in Luzon, Visayas and Mindanao are vastly different from each other. “We also deeply disagree with the DOE recourse to the Interruptible Load Program (ILP). On the ILP, when was it ever a social good to allow SM’s and Robinsons’ to run their own generators for their own use air-conditioning and lighting in their malls and allow pass through of their power costs to the consumers of MERALCO,” explained Corral.

Instead, TUCP proposes that the President using Section 71, convene a multi-agency and a multi-sector group to assist him develop and craft the necessary policies and strategies to address the power crisis. “We request the President to include the entire economic cluster of his cabinet, the business sector, organized labor and the consumers in fast tracking policies and strategies for the next 24 months to ensure that the crisis is addressed.” A comprehensive set of policies and a strategy to temporarily allow government to build additional capacity should be put in place and this should be complemented by policies and strategies to bring power costs down.

To this end, TUCP suggests and recommends to the President for his consideration the following:

a. The return of the government to the generation sector temporarily until we establish a reserve for each island grid in the range of 20% to 30% reserve of the peak demand (The reserve requirement can be technically determined factoring in population growth, projected GDP, power demand, expected downtime for plants, and allowance for force majeure, etc.)

b. The suspension of the Wholesale Electricity Spot Market (WESM) until such time that there is sufficient capacity to provide a reliable reserve of 20 to 30 % reserve for each grid. Unless there is sufficient capacity and a reliable reserve, TUCP warns that WESM will remain a “seller’s market” and there will be no competition, as prices will remain vulnerable to “gaming” as what happened in November to December 2013. Also, in a “seller’s market”, sweetheart deals will be rampant and prices will go up due to speculation or economic and physical withholding of supply in the market;

c. Ensure 100 percent Bilateral contracts between the distribution sector and the generation sector through public auctioning of both available capacity and committed capacity for plants that are respectively already built by the private sector and those that will be built if they have sure customers to purchase their power. This will ensure that we will approximate true cost and do away with the “gaming” and price gouging that has characterized market behavior of the generation sector in the WESM in recent years;

d. The replacement of the Performance-Based Rate Making (PBR) formula with a 12 percent cap on a simplified Return on rate Base formula for determining distribution tariff. This will dramatically bring down power rates and make our economy competitive in attracting investors and locators.

TUCP urged the President to call upon all sectors to join in crafting a national response in the face of this crisis. “We will be one with the President in this key concern because as we have repeatedly told the economic cluster and His Excellency in our meetings in 2012 and 2013: “If there is no power, there are no investors, and there will be no new jobs”. Corral said, “We hope to solve the power crisis which is the key in bringing about new jobs and saving current jobs.”