Right medicine for the wrong illnessBy Edwin Espejo Jun 09, 2010 11:13AM UTC
Davao-based power watch group Power Alternative Group in Mindanao (Palag-Mindanao) was correct when it called for a return to government intervention in power generation. But, for different reasons, I disagree with its analysis and preferred solution.
Bringing back power generation to the government will not level the playing field. It will create a government monopoly which is anathema to the laissez faire that is capitalism.
But I agree with Palag-Mindanao that the power crisis besetting the island is nothing but a result of government failed policy in the public utilities sector.
The Electric Power Industry Reform Act of 2001 failed to anticipate and address the shortage and imbalance of Mindanao grid’s peculiar generation mix.
For more than four decades, Mindanao enjoyed relatively cheap power supply owing to its reliance to hydroelectric dams which account for 53 percent of installed capacities in the island.
Decades of deforestation, land conversions and prolonged dry spells have affected Mindanao’s lake levels and river systems.
The current power outages in Mindanao today are caused by receding water levels at Lake Lanao, the principal source of the Agus River Hydroelectric plant complexes, and the underutilization of the Pulangi run-of-river hydroelectric plant due to heavy silt.
Mindanao’s other power supplies comes from thermal and geothermal plants.
The ideal mix would have been 30 percent each from hydro, geothermal and thermal plants with the remaining 10 percent for other renewable energy sources.
This means installing more geothermal and thermal generating capacities to prevent recurrence of power supply shortage being experienced by the island today.
Power rates should then be unbundled to reflect the real cost of generating electricity.
Generating capacity should also be spread out evenly throughout the island.
As it is, more than 60 percent of the island’s generating capacities are in northern Mindanao while more than 50 per cent of power consumption is in the southern regions of the island.
This situation is unduly taking a heavy toll on the transmission lines of the Mindanao grid, notwithstanding the shared cost of bringing power to every household.
There is no stopping power rate increases as long as the country cannot put in place a steady and balance source of power supply and for as long as market forces will dictate the direction of the power industry.
But this could be cushioned by government taking a principal role in the generation business. As the Philippines is not a centrally planned economy, the least it could do is ensure that at least 60 percent of power generation is in the hands of the state and and government should always guarantee that it has stakes in the private sector that will invest in power generation.
In so doing, the government recognizes that power generation is a social responsibility of the state.