Tight energy squeeze

High power rates are an issue that affects everyone, and it’s understandable that consumers eagerly await the outcome of the ongoing probes of the Joint Congressional Power Commission and the House Committee on Energy. If the grilling of officials of the National Power Corp. (Napocor), Manila Electric Co. (Meralco) and the Energy Regulatory Commission (ERC) by lawmakers leads to a significant decrease in electricity rates, well and good. But my guess is that this could take time, as this will entail amendments to the Electric Power Industry Reform Act of 2001, or Epira.

Meantime, it is worthwhile to take a look at the country’s energy situation, as it holds the key to understanding why power rates have risen the way they did over the years.

The country’s installed generation capacity now stands at 15,763 megawatts (MW), with dependable capacity at 14,008 MW. Electricity supply is enough to meet the peak demand at 9,069 MW. However, since the Philippines is an archipelago, the major islands must be interconnected to augment the power deficit in particular areas. Thus, Luzon is connected to Visayas with a transfer capacity of 440 MW. Within the island of Visayas, the major interconnections, we’re informed, are Leyte-Cebu with 200 MW and Cebu-Negros, Negros-Panay and Leyte-Bohol each with 100 MW.

Data on capacity mix indicate that Luzon is dependent on fossil fuel, while Visayas and Mindanao rely mainly on indigenous fuel. Coal accounts for 32 percent of Luzon’s capacity mix, with natural gas at 23 percent. The Visayas grid uses 56-percent geothermal energy, while Mindanao uses 60-percent hydro. At the national level, coal is dominant at 26 percent, with hydro at 19 percent and natural gas at 18 percent.

In so far as market share is concerned, Napocor is the dominant player in power generation, despite the passage of Epira, which mandates the privatization of its assets to promote true market competition and prevent harmful monopoly and market-power abuse. Epira restricts ownership, operation or control by a single entity to 30 percent of the installed generating capacity within the grid or 25 percent at the national level. State-run Napocor’s continuing control of power generation in this country, despite the noble intention of Epira, is part of the reason for the high power rates that everyone reluctantly pays for every month.

Manufacturers hurting from rising prices

Local manufacturers are hurting from high prices of critical raw materials from China as the Beijing Summer Olympics draw near.

The sectors most affected are those engaged in steel, cement and ferro-alloy manufacturing that rely on refractory materials sourced mainly from China.

Among the raw materials from China whose prices have gone through the roof are magnesium oxide and bauxite, critical in the manufacture of refractory products. Reports indicate that prices of bauxite from China have risen by 35 percent since last year. Prices of refractory-grade magnesite have also skyrocketed by as much as 80 percent for fused grade and 66 percent for sintered grade. And there’s every indication that these prices will still go up in the coming months due to increased domestic demand.

Local manufacturers’ woes are likely to get worse in the light of the recent announcement that the Chinese government will double the export tax on bauxite and magnesium products to 20 percent.

But that’s not all. China, host of the Summer Olympics in August, wants to temporarily shut down some of its high-polluting industries located near Games sites to contain air pollution. Among those being eyed for closure are bauxite, and fused and sintered grade magnesite-production facilities.

This is a triple whammy for local manufacturers that can spell disaster for those with tight operating budgets.

Golf in Shenzhen

It ain’t over till the fat lady sings, and that’s what it looks like in the case of the controversial NBN-ZTE deal.

We had thought the controversy had been snowed under by the rice crisis and the more recent power-rates tiff in media and in Congress. But the ghost of NBN-ZTE simply refuses to wither away, and this time there’s even photographic evidence of the President and the First Gentleman in a golf course in Shenzhen, China, where the telecoms firm ZTE has its main headquarters.

The testimony of a new witness in the NBN-ZTE deal will certainly be interesting to watch as it puts in yet another tight spot the Arroyo administration, which has long been beleaguered by allegations of high-level corruption. We’re stocking up on popcorn to watch the TV coverage of the resumption of the Senate blue-ribbon committee hearing on the issue.

E-mail: ernhil@yahoo.com.

BERT Hofman, the World Bank’s country director in the Philippines, has characterized the National Roads Improvement and Management Project Phase 2 (NRIMP 2), the roads project just approved by the World Bank board, as significant beyond the progress it embodies in terms of physical infrastructure; more important, it is a major test in the efforts of both the bank and the Philippines in fighting corruption.

The latest agricultural number of 4-percent growth in the first quarter is clearly an indication of what the rest of the year will hold. Just when you are ready to count the Philippines down and out, something positive happens.

High power rates are an issue that affects everyone, and it’s understandable that consumers eagerly await the outcome of the ongoing probes of the Joint Congressional Power Commission and the House Committee on Energy.

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It was the former US president who famously requested a one-handed economist who wouldn’t offer “on the one hand, on the other hand” solutions. Truman might have been disheartened by Bank of Japan (BOJ) Governor Shirakawa’s latest musings.

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