Experts to next admin: Abolish ‘pasa-load subsidy’ of power companies

Electoral bets challenged to prioritize affordable, reliable, secure power

QUEZON CITY, 30 March 2022 – Entering the final month before the May 9 elections, energy policy experts called on candidates running for national posts to make the energy transition central to their infrastructure agenda. The experts called for the immediate removal of the “pasa-load subsidy” applied for decades, which has allowed power generation companies to automatically pass on volatile fossil fuel price fluctuations to consumers.

“Without a truly level playing field, Filipino households and businesses can’t enjoy what they have always deserved in the form of affordable, reliable, and secure power,” said Atty. Pedro Maniego Jr., senior policy advisor of the Institute for Climate and Sustainable Cities (ICSC), in a virtual press briefing today.

“The COVID-19 pandemic and Ukraine invasion only worsened what was already a fragile and inflexible energy system. Indigenous renewable energy is vital to the economy, as is genuine competition in the power sector,” Maniego added. “Fossil fuel-dependent baseload systems are obsolete and have been replaced by residual load systems anchored on near zero marginal cost energy sources in many countries. Real modernization through flexible and distributed generation – powered by renewable energy – is what we need to spare us from the perennial outages and to establish long term energy security and affordable, reliable power.”

In February, ICSC launched a report entitled “Luzon Power Outlook: Determining the Adequacy of Power Supply for April-June 2022” that predicted an electricity shortfall in the Luzon grid during the national elections and throughout the second quarter of 2022. ICSC’s findings anticipating a red alert status, possible blackouts, and increase in power rates were affirmed by the Independent Electricity Market Operator of the Philippines (IEMOP).

ICSC chief data scientist Jephraim Manansala cited outages of large coal power plants in the first quarter of this year up to today, despite the Grid Operating and Maintenance Program (GOMP) approved by the Department of Energy (DOE) allowing planned and scheduled outages only until March 25, 2022:

1. Aboitiz Power Corporation’s GN Power Dinginin Units 1 and 2 in Bataan (1,336 megawatts [MW] total generating capacity) may not be fully operational. Unit 1 has had 34 days of outages in 2022, contributing to the yellow alert status in January 11 and March 26, while Unit 2 still has not started commissioning;
2. Semirara Mining and Power Corporation’s Calaca Unit 2 in Batangas and AboitizPower’s GN Power Mariveles Unit 1 in Bataan (616 MW) availability is questionable given their unreliable operations since 2021. Calaca Unit 2 has not been operational this Q1, while GN Power Mariveles Unit 1 has experienced multiple shutdowns in the same period;
3. South Luzon Thermal Energy Corporation’s (SLTEC) Unit 1 and 2 in Batangas (270 MW), where Unit 1 has had 18 days of unplanned outages in 2022 so far and Unit 2 has had 81 days of outages in the same period and remains shut down till today;
4. Southwest Luzon Power Generation Corporation’s (SLPGC) Unit 1 and 2 in Batangas (300 MW), where Unit 1 has had 8 days of outages in Q1 while Unit 2 has had 54 days of unplanned shutdowns in the same period, contributing to the yellow alert status in March 26; and
5. Pangasinan Electric Corporation’s Sual Unit 1 and 2 (1,294 MW), where Unit 1 had 4 days of outages in 2022 even after its planned and scheduled outage a few months ago, and was derated by 390 MW last weekend while Unit 2 had 30 days of unplanned shutdowns in Q1 2022.

With gasoline and diesel prices skyrocketing in the past few weeks, Manansala said that coal price increases are much greater. Today, crude oil costs around USD 100 (around PHP 5,200) per barrel, while coal prices reached approximately USD 450 (around PHP 23,400) per metric ton.

“We’ve always had this problem, even before the pandemic. In fact, we experienced the same problem in the 1970s during the oil embargo. Because of the oil crisis, we developed geothermal and hydropower plants. Yet now renewable energy’s share is down to 21 percent while coal now is at 54 percent of our energy mix,” said ICSC energy transition advisor Alberto Dalusung III. “The lack of energy security has a massive economic impact. Bringing in more renewable energy also makes power more affordable.”

Sara Jane Ahmed, founder of the Financial Futures Center and finance advisor to the Vulnerable Twenty (V20) Group of Finance Ministers, discussed how the continued reliance on imported fossil fuels exposes the country to multiple financial risks. “The Philippine energy mix is skewed towards imported fossil fuels, whose prices have always been volatile. The exposure includes price instability, high prices and an unreliable power system,” said Ahmed.

“It’s best not to try to build the recovery of the Philippine economy on unpredictable fossil fuel prices, especially because renewables and storage are better placed to fuel the economy, providing long-term economic and financial stability. The spot market operator of the Philippines has called for more RE to minimize power outages. Developers and investors now need to be confident in stable and robust policies to guide the accelerated transition,” Ahmed added.

“Renewables can lower electricity prices by 30 percent, according to studies. The RE industry has also continued to provide more jobs here in the country and abroad,” said Nazrin Castro, branch manager of The Climate Reality Project Philippines, in her reaction.

“Our government must enable the environment to advance RE in the country, starting with ending policies that only favor the fossil fuel companies. This includes abolishing automatic pass through and to make carve out clauses mandatory. The moratorium on new coal should also be permanent,” added Castro.

Reacting to ICSC’s power outlook updates, Oxfam Pilipinas country director Lot Felizco said: “If our next set of leaders continue to make the country rely heavily on coal, oil, and fossil gas for our energy needs, then we will be further locked into expensive, imported, and unreliable power sources that will never be able keep up with our needs and will only hamper our pandemic recovery and long-term development. On the other hand, renewable energy has been proven to be more affordable, more resilient to extreme weather events, and more viable for island and other off-grid communities,” she said.

“As we approach the final weeks before the elections, we challenge candidates to commit to delivering more affordable, reliable, and secure energy for all Filipinos,” Felizco added.

ABOUT
The Institute for Climate and Sustainable Cities is a Manila-based climate and energy policy group advancing climate resilience and low carbon development.

CONTACT
Ira Guerrero: media@icsc.ngo, +63 917 149 5649, +63 998 546 9788

Related Stories