The document discusses ensuring energy security, reliable power supply, and affordable power rates in the Philippines. It defines energy security based on definitions from the IEA and European Commission. The Philippines is currently not energy secure due to a cycle of power capacity deficiencies and high prices. It analyzes the adequacy and reliability of power supply in Luzon, Visayas, and Mindanao grids, finding future deficiencies without new power plants. It examines challenges to energy security under EPIRA, including lack of policy to ensure timely new capacity and high electricity prices compared to neighbors. It proposes options like aggregating electric cooperatives and large customers, embedded combined heat and power, and distribution utility bidding to contract new capacity. Finally, it

1. Ensuring
Energy Security, Reliable
Power Supply and Affordable
Power Rates
PCCI Energy Committee
1

2. Energy Security


International Energy Agency (IEA) Definition
1. Adequate
2. Affordable
3. Reliable
European Commission Definition
“Uninterrupted physical availability of energy products
on the market, at a price which is affordable for all
consumers (private and industrial)”
Considering the above definition, one can say that the Philippine
energy is NOT SECURED because we have been experiencing the
cycle of power capacity deficiencies and high prices
2

3. Adequate and Reliable Power Supply
LOLE –number of days
that there will be power
curtailment
1 day/yr LOLE = 28.7% Reserve
(Daily peak demand will
exceed available
generating capacity due to
simultaneous scheduled
and forced outages of
power plants)
1 day/year Loss-of-Load
Expectation to meet the
optimal level of reliability of
power supply in the
Philippines [Viray & del Mundo,
UPNEC, 1991]
Source: R. del Mundo, et. al., “Philippine Electric Power Industry Market and Policy Assessment”,
University of the Philippines – National Engineering Center, 2011
3

4. Adequate and Reliable Power Supply

Luzon Grid
New Power Plant
Capacity added courtesy
of PPAs signed in 1990s
US & European criteria
• Generation deficiency started
in 2010. WESM prices reflects
this first stage of power crisis.
• There will be generation
deficiency even with BacMan
rehabilitation (2012) and
GNPower new 600 MW Power
plant in (2013)
• Worst situation in 2014
Year
2011
2012
2013
2014
Capacity
(MW
9583
9624
9657
9657
Demand
(MW)
7581
7827
8085
8356
Reserve
(%)
26.41%
22.96%
19.44%
15.57%
• Malaya and Limay Oil Thermal
LOLE
Plant cannot be retired
(Days/Yr)
(uneconomic dispatch)
5.07
12.08
5.27
Assuming Malaya Oil Thermal Plant
82.27
will not be operated
4

5. Adequate and Reliable Power Supply
Minimum Requirement to maintain 1 day/year LOLE

Luzon Grid (in addition to 600MW Mariveles CTPP)
 200 MW Peaking Plant (2013)
 600 MW Baseload Plant (2015)
 600 MW Baseload Plant (2015 for Malaya Retirement)

Visayas Grid
 50 MW Intermediate Plant (2017)
 100 MW Intermediate Plant (2018)

Mindanao Grid

600 MW Baseload Plant (ASAP)

100 MW Baseload Plant (2015)

100 MW Baseload Plant (2016)

100 MW Baseload Plant (2017)
Source: R. del Mundo, et. al., “Philippine
Electric Power Industry Market and Policy
Assessment”, University of the Philippines
– National Engineering Center, 2011
5

6. Adequate and Reliable Power Supply

Visayas Grid had power crisis in 2009 after which
Distribution Utilities signed power supply contracts with
Gencos to build new power plant.

Mindanao Grid is currently in crisis. Modular Diesel plants
were recently procured by ECs for emergency power and
power supply contracts signed to build new capacity (2015
– 2017).

Luzon Grid will soon experience power crisis
 DUs signed contract only with existing plants
 DUs hesitated to sign power supply contract for new
capacity because of threat of Open Access and Retail
Competition [Concern on contracted capacity that will be
stranded]
6

7. Energy Security under EPIRA

Power Generation is liberalized and competitive
(deregulated) sector of the power industry
 DOE Power Development Plan only provides outlook.
 Private Generation Companies will decide what capacity, what type
of plant, when and where to build power plants
 NPC no longer allowed to build new power plants or sign new PPA
with IPPs
EPIRA in 11 Years:
Plan did not convert to Plant on time
Power Rates also went up instead of reduction
Lack of policy, regulation and implementation mechanism that
will ensure new power plant capacity will be available on time to
meet growing demand in the liberalized and competitive
electricity market .
7

8. Energy Security under EPIRA
Ownership of Installed Power Generating Capacity, 2011
Luzon Grid
SEM
Calaca
5%
AES
6%
NPC Others
2% 8%
San
Miguel
27%
First Gen
20%
PSALM
14%
Aboitiz
18%
• Also owners of
Distribution Utilities
Visayas Grid
Others
3%
PSALM
34%
NPC
2% Aboitiz
6%
Global
28%
First
Gen
12%
Salcon
15%
• Big 3 in Electric
Power Industry
control 65% of supply
in Luzon
Mindanao Grid
PSALM
28%
Others
2%
Aboitiz
18%
NPC
52%
Source: DOE
8

9. Energy Security under EPIRA
AVERAGE POWER RATE OF MERALCO
Source: MERALCO
9

10. Energy Security under EPIRA
Residential
US¢/kWh
Commercial
Industry
High
30
25
20
15
10
5
0
Brunei
Cambodia
Source: JICA (Sep. 2013)
Indonesia
Lao PDR
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
Electricity Prices of SEA countries
10

11. Energy Security under EPIRA
Report of
MERALCO
Consultant on
Subsidies:
Other countries
are using
subsidy for
strategic
competitive
advantage in the
short term
11

12. Energy Security under EPIRA
25
Comparison of Tariff with Indonesia’s subsidies
(2011)
20.8
US Cents/kWh
20
14.28
15
10
9.92
7.14
6.21
5
0
Thailand
Indonesia with
Subsidies
Indonesia
Without
Subsidies
Philippines
Vietnam
Source: JICA (Sep. 2013)
12

13. Long-Term Power Supply Security Framework
Demand
Forecast & PS
Contracts
Uncontracted
Demand
Qualified
GENCO
Bid
Long-term
PS
Contract
Lender
Financing
Investor
Capital
Power
Plant
Project
Financing
New Power Plant
Power Plant
Dev’t. &
Construction
Baseload: 3-5 Years Peaking: 1-2 Years
166 Permits & Licenses
• Long-Term Contract for New Capacity
• Short-Term Contract for Existing Capacity
Additional
Generating
Capacity
Competitive Electricity
Market will only work if
Supply deficiency is avoided
13

14. Options for Energy Security
1. Aggregation of Electric Cooperatives

20 ECs in Mindanao bidded 330 MW of baseload.
Signed long-term power supply contract at
Php4.09/kWh requiring Genco to supply from new
power generation capacity (405 MW in 2017)

12 ECs in Central Luzon bidded (October 18,
2013) 300 MW of uncontracted demand starting
2018. Genco is also required supply from new
capacity. Lowest bid less than Php4.00/kWh
Lessons: Economy-of-scale, Competitive Selection
Process, and Long-term contracting for new capacity!
14

15. Options for Energy Security
2. Aggregation of Large Customers in Retail
Competition and Open Access (RCOA)

Industry associations and Economic Zones to
organize power supply aggregation similar to
Electric Cooperatives
•
•

Minimum of 100 MW (preferably at least 300 MW)
Long-term contract (at least 10 years). The longer the
term, the lower the price.
Unbundled transmission and distribution wheeling
fees are already in place. Hence, will require only
metering, billing & settlement protocol to
implement
15

16. Options for Energy Security
3. Embedded Combined Heat and Power
System in Economic Zones for Selfsufficiency and affordability

Economics of CHP based on waste heat utilization
(for heating/cooling) after gas turbines (for power).
Efficiency at least 60% compared to 30% of
conventional thermal plant

Avoids transmission wheeling charges
(~Php1.00/kWh)

Needs Liquified Natural Gas Terminals in
Batangas and Bataan and Transmission pipelines
to Metro Manila through the economic zones
16

17. Options for Energy Security
4. Distribution Utilities Mandatory Bidding of
Uncontracted demand of Captive Customers
•
Lesson from Latin America (Brazil and Chile) where
spot market did not produce new capacity.
Government designed auction of Long-Term Power
Supply Contracts as mechanism. Mandatory for all DUs
to submit forecast and auction uncontracted demand.
Winning Gencos in auction will build power plants
•
Limit Open Access for Large customers only (at least 1
MW demand) for 10 years. Possible Declaration of ERC
of lower threshold and eventually full retail competition
will continue to threaten DUs.
This will also solve cross-ownership between
generation and distribution under EPIRA!
17

18. Policy and Regulatory Measures
1.
DOE to mandate and oversee a regular international
power generation supply bidding for DUs and large
customers.
2.
ERC to use market-based rules as default in
approving power supply contracts of DUs (for captive
customers) with reserved price such as the prices
Best New Entrant (BNE). Cost-based rules to be used
only if price from competitive selection process did
not achieve competitive results (i.e., higher than
BNE).
3.
Declare Power Projects and Fuel Exploration as
National Major Strategy Programs (“Shovel Ready”).
Streamline & shorten Permitting and Licensing
18

19. Policy and Regulatory Measures
4.
Certify as urgent the following pending bills in
Congress:

Uniform Franchise Tax on DUs in lieu of any and all taxes

Reduction of electricity rates through utilization of government
share in the discovery, exploration, development, and/or
production of indigenous resources
5.
Fastrack the establishment of ancillary reserve
market and provide mechanism for transparent
procurement and rules on determining optimal level
required and dispatching.
6.
Fastrack Natural Gas program (e.g., accelerated PPP)
and establish regulation (technical and price) to
make LNG for power and industries available ASAP.
7.
.
19

20. Policy and Regulatory Measures
7.
DOE to tighten the power program in Mindanao that
would assure adequate, reliable and reasonably
priced power supply and total electrification for small
and large utilities and consumers.
8.
ERC to simplify and make more transparent and
understandable the Rate Setting Methodology for
transmission and distribution utilities.
20

21. Ensuring
Energy Security, Reliable Power Supply and
Affordable Power Rates
PROF. ROWALDO “Wali” DEL MUNDO
National Engineering Center
University of the Philippines
Diliman, Quezon City 1101
Tel/Fax (02) 981-8500 Loc. 3014 / Fax (02) 926-1516
Email: rddelmundo@gmail.com
Cellphone: (0929) 564-2772
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