Consider these three instances of good news and bad news in the Philippine economy.
Last Monday morning, May 8, the good news came when employment data for March 2023 was released by the Philippine Statistics Authority (PSA): the labor force participation rate remained high at 66% vs. 65.4% in March 2022, 63.3% in 2021 full year; unemployment and underemployment rates remained low at 4.7% and 11.2% respectively, vs. 5.8% and 15.8% in March 2022, and 7.8% and 15.9% in 2021. See this report in BusinessWorld, “Underemployment rate at 18-year low” (May 9). These numbers are good news for investors, they will come, stay and possibly expand here because people have jobs, have money to buy.
Then, on the afternoon of that day, the bad news came when there were wide-ranging red and yellow alerts — the National Grid Corp. of the Philippines (NGCP) transmission line in Zambales tripped, leading to the Masinloc power plants tripping, leading in turn to rotating blackouts in some cities and provinces in Luzon. This sort of event will scare investors because their machines, appliances etc. can be damaged by power outages and fluctuation. Running their gensets for hours will mean higher operational costs.
Yesterday morning, May 9, there was another piece of good news, also from BusinessWorld: “PHL ‘on track’ to become an upper middle-income country, says WB” (May 10). The target of the economic team is for the Philippines to attain this level, per capita income of $4,256-$13,205 a year, by 2025. Good target.
Then yesterday afternoon, another piece of bad news: NGCP’s Duhat-Hermosa 230-kV transmission line in Bataan tripped. This affected three power plants — GNPower, Mariveles, and Limay. There were a few hours of yellow alert and Meralco had to use automatic load dropping (ALD) to avoid blackouts.
And on the morning of April 27, the PSA released the gross regional domestic product with this headline, “All Economies of 17 Regions Continue to Record Positive Growths in 2022; Western Visayas was the Fastest Growing Region at 9.3 Percent.” I am from Negros Occidental, my wife is from Iloilo, our folks in both provinces and the region have micro businesses there so this is good news.
Then, on the afternoon of the same day this news from Sunstar: “NGCP reports Visayas grid disturbance; red alert raised for potential power outages.” There was a related story from BusinessWorld, “Unstable power on Panay could persist indefinitely” (April 30).
Blackouts, potential or actual, are anti-business, anti-consumer, anti-economic growth. Philippine businesses and the government economic team are working hard to have sustained fast growth for the country. And the NGCP, the only remaining private monopoly nationwide, earning tens of billions of pesos in profit yearly, has become the growth-dampener, and in some instances, business-spoiler.
Yesterday I attended the press conference of the Department of Energy (DoE) about the large-scale red alert last Monday. DoE Secretary Raphael P.M. Lotilla said in his opening statement: “In the Luzon, Cebu-Negros-Panay, and Mindanao-Visayas transmission projects, we extended assistance together with other agencies to NGCP, the private concessionaire, to fast-track the completion of long-delayed transmission projects and free up stranded power supply. Notwithstanding these efforts, these projects still have not been completed. The recent prolonged power outages in Panay and Negros, and the power interruption experienced yesterday have been traced principally to inadequacies in the transmission system.”
Amen to that, Secretary Lotilla.
From the succeeding DoE presentation by Undersecretary Rowena Guevarra, this is the sequence of events last Monday, May 8:
1. NGCP’s Bolo-Masinloc 230-kV transmission line 2 tripped at 1 p.m.
2. Masinloc power plant units 1 and 2 immediately tripped, also at 1 p.m.; 659 MW of power supply was available but there was no “highway” or line to deliver it to distribution utilities (DUs) like Meralco and electric cooperatives (ECs).
3. The NGCP issued red alerts (2-4 p.m., 7-8 p.m.) and a yellow alert (5-6 p.m.) for the Luzon grid, a yellow alert for the Visayas grid. The NGCP restored transmission line 2 within 19 minutes but the damage had been done to the Masinloc plants — unit 1 was restored by 4:30 p.m., unit 2 was restored by 3:26 a.m. of May 9.
Other power plants also had outages, but these were not related to NGCP line 2 tripping: a forced outage of 310 MW (Calaca unit 1, 1590 bunker station 1) plus derated capacity of 255 MW (Sual unit 1, Calaca unit 2, and SNAP Binga hydro). Sub-total: 565 MW.
4. Affected by the red alert with rotating blackouts that afternoon were: Meralco, Zambales (Zameco), La Union (Lueco), Pangasinan (Cenpelco), Dagupan (Decorp), Nueva Ecija (Neeco), Isabela (Iselco), Quezon (Quezelco), Batangas (Batelec), Laguna (Fleco), and Camarines Sur (Casureco).
So the root or main cause of the red alert and rotating blackouts in many cities and provinces in Luzon that afternoon was NGCP’s Bolo-Masinloc line 2. It was mainly a transmission problem, not a power generation problem.
But in most news headlines that followed, there was a distortion of the story: the power plants were blamed. See these reports for instance: “Power outages hit Luzon grid as five power plants conk out,” “5 power plants conk out,” “Luzon grid on red alert over plant shutdowns, low power production — NGCP,” “NGCP places Luzon grid on red alert amid lack of supply.”
I would like to think that NGCP has a shrewd team of PR guys, turning the table, shifting the blame away from the monopolist, by constantly and repeatedly arguing that whenever red alerts happen, the power plants and lack of power supply are to blame.
Somehow this is true. The Philippines has the lowest power generation in both total terawatt-hours (TWH) and kwh per capita in major economies of East Asia. I saw data from the World Bank — the Philippines has high transmission and distribution losses, 9.4% of total electricity output in 2014, the latest data available by the WB (see table).
But it is possible also that some power generation companies are discouraged from expanding capacity because an expanded supply killed or restricted by transmission line tripping would mean immediate power plant tripping, business losses, and they will be blamed after even if the fault does not lie in them.
What needs to be done?
Let me start with these direct no-nonsense proposals from an industry insider (he gave me permission to use this): 1.) Have enough reliable reserves, 2.) Strengthen the transmission backbone, ensure solid ancillary services (AS), 3.) DoE to compel all sectors to cooperate — this is not just NGCP, this is symptomatic of an industry wide problem —, and, 4.) Include inefficient ECs in the inventory and help off-grid areas.
Amen to that.
Plus, there are these two as reported in BusinessWorld: “NGCP warned red alerts may ultimately go before Congress” (May 9), “Palawan, Mindoro called ideal sites for nuclear reactor facilities” (May 8).
Yes, the NGCP franchise monopoly came from Congress, not from the DoE or the Energy Regulatory Commission or Malacañang. With this serious problem of frequent yellow-red alerts in the country, 33 years after the big blackouts of 1990-1991, Congress should now assert its oversight function on private corporations which got franchise monopolies from them.
And for the off-grid islands that run practically on 100% fossil fuels via big gensets from the National Power Corp. and private power companies, the subsidy given to them via the universal charge for missionary electrification (UC-ME) — now at P0.178/kwh and soon to become P0.33/kwh — should end. Small modular reactors (SMRs) will greatly help the off-grid islands and provinces to end frequent blackouts and dependence on subsidies from on-grid consumers, from Cagayan to Zamboanga.
Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers