2 key issues still unresolved In Mindanao power industry

WHEN President Benigno Simeon C. Aquino III took his oath as the 15th President of the Philippine in 2010, one of the key issues in Mindanao was power. When he leaves Malacañang in June next year, two key issues in relation to power will be left unresolved.

The first issue delves on what to do with the two government-run power complexes which has been the most reliant power sources for the island since the time they were built.

The Electric Power Industry Reform Act (Epira) mandates the government to leave the industry to the private sector, but the Agus and Pulangi hydroelectric complexes, which supplies about 60% of Mindanao power requirements, have remained with the government.

Several Mindanao leaders, including Secretary Luwalhati R. Antonino, MinDA chair, have pushed that government retain the complexes by creating the Mindanao Power Corp., but the proposal has remained with Congress. Also supporting the proposal is the Association of Mindanao Rural Electric Cooperatives.

But the business sector has raised its hand in relation to the creation of the power company that would manage the two huge assets.  “We do not expect the proposal to be approved (within the term of Aquino),” said Ferdinand Maranon of the Philippine Exporters Confederation, adding that it would be better if the government retain the ownership of the two complexes to temper the tendency of the private power companies in increasing their rates.

Another key issue that this administration will leave behind is the interconnection between the Mindanao grid to the rest of the country.

Among those who earlier proposed the project was Allan T. Ortiz, then the president of the National Transmission Corp., a government agency which was tasked to manage the transmission system whose operations were eventually privatized and run by the National Grid Corp. of the Philippines (NGCP).

Ortiz, now the president of the SMC Global Power Holdings inc. of the San Miguel Corp. conglomerate, saw at that time that it was the only feasible solution to the Mindanao power problem as the island’s grid has been isolated with the rest of the country.

However, the NGC P, the Henry Sy-led State China Grid Corp.-backed company that manages the transmission system of the country for 25 years, has yet to come up with a feasible study for the interconnection project.

CONCERN

But the biggest concern among environmentalists is the power mix, which has slowly been tilted in favor of the fossil-fueled plants after years of being dominated by the two power complexes.

To address the issue, the Mindanao Development Authority (MinDA) set up a web-based facilitation portal that will help applicants process and monitor their applications for renewable energy projects.

MinDA’s Romeo M. Montenegro said that based on the projections of his agency, the power mix will be balanced by 2030 when all the new applications are completed by then. “The setting up of the one-stop shop facilitation center is our way of helping investors hasten the implementation of their projects,” he said.

As  of July, the facilitation center recorded about 290 renewable energy projects that would have a combined output of 2,400 MW. “We hope that with that bulk of renewable power, we will be able to balance the mix,” he said.

The problem, however, is that investors are still calling on government to provide more incentives to companies that set up renewable energy project.

A power company executive who did not want to be identified for lack of authority to speak to the media said that for these projects to take off, the government should come up with better feed-in-tariff rates, rates that companies are assured to get when their projects are completed which are usually higher than the prevailing rates.

“Companies need better details because renewable power projects are not only capital intensive but are also smaller which in turn provide smaller revenues,” he told the TIMES.

At that time, however, several investors already decided to start their investment in the industry spawned by the move of the national government about a decade earlier to establish a better industry atmosphere by passing the Epira of 2001.

PROBLEM SOLVED

But when the President steps down from office on June 30 next year, Mindanao will by then have ample power supply with the coming in of several projects because based on projection, it will have about 1,920 megawatts (MW) in additional power by 2019  on top of the about 1,340 MW at present.

The operations of new power plants started in September this year when the first unit, or half of the 300 MW coal-firedpower project of Aboitiz Power Corp., operated by its subsidiary Therma South Inc. (TSI), started its commercial operations.

Before the end of the first quarter next year, the second unit of the TSI project and the first unit at 100 MW of the Sarangani Energy Corp. project will also be online. All in all, about 720 MW of power that will be added to the grid even before the end of the first half next year.

The better prospect – at least if the reckoning is based on has been happening in Mindanao since 2010 – is that Mindanao will have ample power supply to propel its economic growth.

“We need additional power to help us catch up with the rest of the country economically,” said Maranon.

Maranon, whose company Sagrex Corp. is into agricultural ventures including processing of indigenous banana for exports to the Middle East, Europe and the US market, said that the entry of the new investments in the industry will provide a better business climate and will enhance confidence of the business sector in Mindanao.

Based on the MinDA study, for Mindanao to add a percent of growth in its gross domestic product, it needs a corresponding percentage in growth of its power supply.

But Bryan H. Diosma, Mindanao Power Monitoring Council (MPMC) technical head, said that Mindanao’s power supply growth will be irregular until the next three years and will only stabilize after the period because it would be the first time for it to have a better supply flow next year.

Based on the data from the Philippine Statistics Authority, the fastest growing region in the country in terms of gross regional domestic product was the Davao Region which registered a growth of 9.4%.

Data from MinDA also showed that Mindanao contributes about 14% to the country’s economy. With power supply stabilizing, said Undersecretary Janet M. Lopoz, MinDA executive director, “Mindanao will be able to sustain its growth and make this growth inclusive.”

Lopoz said the expectations have also been driven by the recognition that Mindanao has courted as several ratings agencies have come to look at its potentials. “Before, ratings agencies were not interested on how we performed; now, they have slowly taken notice of the impact of Mindanao’s economic performance to the rest of the country,” she told the TIMES earlier.

The Mindanao power problem has been in existence since the early 1990s when only a few independent powerproducers decided to build smaller power projects on the behest of the national government, then under former President Fidel V. Ramos.

POLITICAL COMMODITY

Between 2001 and 2007, except for small hydroelectric power projects, only the 210 MW coal-fired power project of the Steag State Power Inc. was added to the grid because at that time, power investors looked at Mindanao’s power industry as being dictated by politics.

Since 2009, however, several huge power projects have started to be implemented with big power players in Luzon decided to see the growth potentials of the island for their respective investments.

Both the problem and the potentials prompted Mindanao leaders both in the private and government sectors to form the MPMC, a multisectoral body tasked to help oversee the industry to harness its huge potentials for growth.

Vicente T. Lao, who sits as co-chair of the MPMC, believes that the creation of the body will help Mindanao “find solutions to key issues that need to be addressed.” “We must not rely on the national government; we must be able to at least come up with programs that will help us make our lives better,” he said.

But even with the expected better power supply, however, does not necessarily mean that all of the island will have enough supply, said Montenegro, head of MinDA’s public affairs division and the MPMC technical working group.

Montenegro pointed out that some areas, unless they are able solve their problems like mismanagement, they will still not be able to take advantage of the situation.

For example, he said, because the competition in the power industry has become cutthroat as power companies have established their marketing arms, several electric cooperatives succumbed to sweetened deals even when the projects they signed up for have yet to start.

In other instances, electric cooperatives, the dominant power distributors in the island, have also heavily indebted.

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