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The Philippine Energy Sector
PHILIPPINE ELECTRICITY PRICES ARE THE HIGHEST IN ASIA!
This administration's TRAIN law has imposed an additional excise tax on coal, our country's main energy source and removes the value-added tax (VAT) exemption of the National Grid Corp. of the Philippines (NGCP), which means that instead of electricity prices going down, it will inevitably go up even further.
“Coal is a major fuel source for power generation in the country. Increasing the existing excise tax on coal will only result in higher electricity prices, which will reduce the country’s competitiveness vis-à-vis Asean neighbors,” said Meralco First Vice President and head of Regulatory Management Office, Ivanna de la Peña.
How Did We Get in This Situation
The real story on how we got in this situation is one of the many examples of how our country's elites have taken advantage of the Filipino people for their personal gain.
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Everything started with the Bataan Nuclear Power Plant. It was even dubbed as the "original sin", which is the reason why our power industry is in the situation that it is today.
The Bataan Nuclear Power Plant
Philippine government officials have been interested in nuclear energy when the U.S. has given it a nuclear fission reactor. The government then went ahead and established the country's first nuclear program in 1958, which was handled by a new commission, the Philippine Atomic Energy Commission (PAEC). The commission then designed and proposed the Bataan Nuclear Power Plant (BNPP) in the 1960s, which was approved by the Marcos regime (1965 - 1986) in July of 1973. The project was won by Westinghouse Electric and was eventually completed in 1984.
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The construction of the power plant was filled with controversy from start to finish. Firstly, President Marcos was connected to Westinghouse Electric, which may had a big hand in the company bagging the project. This then caused a large dispute between General Electric and Westinghouse. Lastly, Westinghouse had issues when it comes to following the proper construction protocols during and after construction. These issues that surrounded the BNPP has even led to several criminal lawsuits being filed against Westinghouse. Only two years after the plant's completion, where these issues were known to the public.
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President Marcos used his power to urge the National Power Co. (the government-owned electric utility) to buy two nuclear reactors from Westinghouse. Westinghouse then used their connections with Marcos to bag the deal. Even though Westinghouse's proposal was already more expensive than all others, their contract still jumped from $650 million for just one reactor to a whopping $2.2 billion. During investigations, pieces of evidence were found that show large amounts of money going to President Marcos. Westinghouse and Marcos dismissed these claims.
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Another major controversy is why Westinghouse Electric's proposal was chosen over General Electric's even though it has already been known that the National Power Co. was already in talks with General Electric regarding the project before Westinghouse came into the picture. Because of the president's connection with Westinghouse through his friend, Hermino Disini, Westinghouse Electric has easily been able to join the negotiation process as if it were at the same footing with General Electric. In fact, General Electric was even already in the negotiation stage with the government before Westinghouse was able to present its proposal.
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Also, as mentioned, there were also issues regarding proper construction protocols during and after the construction of the project. Ebasco Services' compliance with safety testing protocols was greatly questioned by Librado Ibe, which is Marcos' top nuclear expert. Instances were bribery were documented by Ibe, as top officials have tried to bribe him to approve the site and give the green light for the construction. After the construction and during the Aquino administration, a consultant from the International Atomic Energy Agency (IAEA) named William Albert was hired by the new top officials to inspect the project. Many issues regarding welding, working hours, base plates, pipe hangers, water values, and transmission cables were found, which was all attributed to quality control. These issues were then raised to National Power Co., which was tasked to decide if the plant was operable or not.
Cory Aquino Refuses to Use the Power Plant
In April 1986, the Chernobyl disaster happened. This was then used as a horror story by anti-nuclear activists in the Philippines at that time to prevent the operation of the BNPP. Since most of these activists were allies of the anti-dictatorship movement, president Aquino followed and ordered to stop the plant's operation. However, there were no plans to replace its 620-megawatt capacity and aid our electricity supply
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President Aquino followed the advice of her cabinet officials that are pushing for the interests of big businesses and did not seek condonation of the loans from the US that were used to finance the BNPP. Also, US officials have advised her that if she repudiates these loans, the Philippines will be an outcast in the global financial community and that the US would not help in stopping attempts to topple her administration.
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“Hindi tayo balasusbas sa mga utang natin” Cory said. But it was only 21 years later when our country has fully paid these loans In the end, a total of 120 billion pesos were spent for a power plant that was not even used, even just once. These loans were shouldered through these years by the National Power Corp., which essentially made it bankrupt. Because of this, it was not able to borrow and finance new power plants to meet the growing demand. As the demand for electricity grew to more than the available supply in Cory's administration, the people experienced long hours of power interruptions, which discouraged foreign investments from coming in.
Private Companies Enter Our Country's Energy Sector
At that time, the NPC had the sole responsibility of building and operating power plants. But since the NPC was still bankrupt from paying the loans for the BNPP and was unable to finance and build new power plants, the next administration had to come up with a solution. President Fidel Ramos then had an idea, and this was to have private companies go into power generation and help increase our supply.
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It sounds like a good idea, but since the government is desperate to gather investors, our country's corporate elite was able to blackmail Ramos into agreements that would very much favor the investors. This led to the creation of what are called "take-or-pay" arrangements with these big private companies. In these arrangements, the NPC was contractually obligated to pay these new private generators, even if it does not need electricity and does not need to buy from them.
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These arrangements went smoothly for a while. That is, until the 1997 financial crisis. Our country's economy slowed down, along with the demand for electricity. With the take-or-pay arrangement, however, the NPC was still obligated to pay the private generators for electricity even if it has no use for it. This then gave rise to what is called "stranded costs" for the NPC. By 2010, these stranded costs ballooned to 80 billion pesos. Just after paying off the BNPP debt, the NPC was then again bankrupt.
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Our neighboring countries, Indonesia, Malaysia, Thailand, and China all have very successful power industries that are controlled by the government. This is also why they have electricity prices that are much lower than ours. Meanwhile, in the Philippines, we have a power industry that serves as a cash cow for many large private businesses. These businesses were supposed to introduce competition and bring down costs. But instead, they connived to raise the prices even more. Indeed, our power industry has been such a profitable business venture that one of the largest business tycoons in South Asia, Anthony Salim, has bought into Meralco, which is our largest electric distribution company.
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Today, Filipinos have the highest electricity bills in Asia and the fifth most expensive in the world.
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Source: The Manila Times Article: "High electricity costs root of our backwardness" by Roberto Tiglao, January 9, 2014
WHAT CAN WE DO?
The "katipuneros" from the Spanish times famously asked themselves the questions: “Kung hinde tayo kikilos, sinong kikilos? Kung hinde ngayon, kalian pa?”. Now is the perfect time for us to ask ourselves those questions again. Instead of being against the oppressive Spaniards like before, we are now against the corporate elite that are also effectively oppressing us by controlling the power industry, making us suffer from high electricity prices.
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Before, our enemies have the advantage of being equipped with better weapons. Now, it is the other way around. They have the dirty, 20th century energy source in coal while we have the technology and energy of the future in solar.
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BE PART OF THE SOLAR ENERGY REVOLUTION TODAY!
