Aquino’s power cartel

First of two parts

IMAGINE a blueprint. In the minds of the gullible and undiscerning, it might not be apparent. But to the complicit, it exists. And to insiders, it is imminent.

In last week’s pathetic attempt to debunk the notion that Benigno Aquino III was “Noynoying” the Mindanao power crisis, rather than listen to solutions proffered by affected constituencies, in cacique fashion, Aquino rammed through what had been whispered to him earlier. The hyped summit was a moro-moro. Rather than solutions, it echoed the disembodied yet slowly forming designs of a power cartel.

The spawning starts with a 372-megawatt surplus in Mindanao where transmission should have been the energy grid’s weakest link. At evening peak hours this fell to 131 megawatts. As most power sources are in its northern hemisphere and miles from centers where demand was growing, the government’s task was to either ensure transmission security, or to establish viable generating sources where the demand was.

The government achieved the first but failed the latter miserably.

Transmission lines stretched over 5,658 kilometers. That required substations. Mindanao’s substation capacity was 1,697 megavolt amperes.  Communities hosting power plants, such as Misamis Oriental and Cagayan de Oro, enjoyed greater reliability and lower tariffs than did such areas as Davao, Sarangani or General Santos outlaying the end of the transmission circuits.

The privatization of the National Power Corp.’s (Napocor) transmission facilities through its spin-off National Transmission Corp. transferred the expansion burden to a privatized entity. That entity turned out to be the National Grid Corp. of the Philippines.

In 2007 the last additions to the Mindanao grid were operational and ready. These included power barges 101 through 104, imported from Luzon and contracted to serve only as ancillary power sources. These increased Mindanao’s supply by a mere 4 percent in 2005. For base-load power a 220-megawatt coal-fired power plant in Cagayan de Oro came online. This increased Mindanao’s supply by as much as 12 percent.

Unfortunately, supply growth ended in 2007 with total supply pegged at 1,953 megawatts. Demand growth, however, was not as static. In 2007 it was 5 percent. But since that was when 220 megawatts came online, Mindanao had a 7-percent economic surplus. As demand was projected to increase by 5 percent yearly up to 2012, save for 2011 and 2012 where it was projected at 6 percent, deficits were expected.

Fortunately, given grid code protocols, reserves were required. When factored in, from 2007 to 2010, the grid had adequate although declining reserves from 20 percent to 14 percent to 9 percent to 3 percent in 2007, 2008, 2009 and 2010, respectively. In 2011 and 2012 when demand rose from 5 percent to 6 percent, reserves fell to -2 percent and -8 percent, respectively. This created the 40-megawatt shortfall in 2011 and the 158-megawatt shortfall in 2012.

Ferengis investing in costly and dirty technologies know only too well the challenges Mindanao poses. Mindanao’s gross generating capacity comprises 62 percent hydroelectric plants, 25 percent oil and 13 percent geothermal. Respective dependable capacities were 57 percent, 36 percent and 7 percent. By and large, that seemed like an ideal mix for as long as the government carried its end and channeled tariffs and taxes to maintain its 75 percent indigenous and inexpensive sources. That meant periodic de-silting, dredging and equipment upkeep.

Though neglected, expanding the indigenous sources was also part of the charge. In Region 10 alone, Malindang, Misamis Occidental, offers geothermal prospects. So does Camiguin island. In the Davao region there are over 150 megawatts of potential geothermal resources along Ugos Dome, Amacan and Gopod North Solfataras. Others are in Compostela Valley, Davao Oriental and Davao del Sur.

As for wind energy, Davao del Sur’s sharp peak and saddle terrain offers excellent sources.

But criminal neglect, laziness and a persistent propensity for quick fixes would have calamitous effects.

Through a build-operate-and-transfer (BOT) agreement under the Corazon Aquino administration, two diesel-fired plants with a combined plate capacity of 103 megawatts were set up in Iligan. Diesel-fired BOTs are quick fixes. The first had a dependable capacity of only 20 megawatts or 31.34 percent. The other had a dependable capacity of 40 megawatts. What kept the plants viable were its take-or-pay contracts.

Both operated below even their combined rated capacity of 98 megawatts for three good reasons. One, under transmission protocols, they were dispatched only when hydroelectric power did not suffice. Other than those periods, the plants simply served as peaking plants. The third reason was that their fuel was expensive, imported and depleted dollar reserves. Following energy conversion agreements with Napocor, the plants were eventually turned over to the latter in 2003 and in 2006.

It is the nature of the beast that monopolies are created in the industry’s wire businesses. Next week we will track how a power cartel is similarly created from the government’s criminal neglect in the more critical generation sector.

Dean dela Paz