A research team from the faculty of the College of Engineering of the University of the Philippines took center stage yesterday in presenting, to an invited audience, the preliminary results of a 1+ year long study to analyze the structure of electric power rates. The work is being funded by an Open Grant for research from the Office of the Chancellor (whatever that might mean).
I didn’t count, but it seems like there were easily more then 150 people there, including media. I was able to attend thanks to colleagues at the UP School of Economics. It was a fairly high profile event, with opening remarks by the Chancellor, UP Diliman.
The presenters were:
- Prof. Rowaldo Del Mundo
- Dr. Allan Nerves
- Prof. Edna Espos
A panel or reactors, who had been provided earlier with certain interim report results, consisted of:
- Cyril del Callar, President NPC
- Jesus Francisco, President Meralco
- Lassi-Matti Holopainen, President WESM
- Helena Tolentino, VP, PSALM
- Generoso Senal, AVP, Transco
Notably, there were no reactors from either the ERC or the national government, both of which were subjects of the presenters opinions and conclusions.
The reactions from the panel were very interesting. The press has reported on them a little. The reactors have, or in some cases are preparing, written reactions and responses to the study. I hope those see the light of day publicly. They will be very useful and helpful. The study itself is not finalized (and to my knowledge has not been posted publicly, but I’ve seen copies of certain portions as provided to various parties). The final report is due in August.
One basic result of the study is that power rates can be reduced by about P2.00/kWh by a combination of implementing ten changes. The press has summarized those.
I was disappointed with the rigor with which the study has been undertaken. Since the study presented few, if any, issues that we all don’t already know about, the value in such an academic research project could have been the validating of the substantiality and quantification of the issues. But their access to data and information, and to some extent their approach, has hampered that.
P2/kWh applied to the Meralco sales volume is a huge number. Moving that amount money into the pockets of rate payers is a good objective. But it implicitly means it’s being moved out of the pockets of some one else. I’m not certain the UP study has evaluated either which rate payer groups see the bulk of the benefits from their recommended changes (i.e. will small users see much of a change? Does it benefit primarily the industrial sector?) or the resulting social impact of the negative changes on those that will cough up the money. Where is the transfer of wealth happening? What’s the impact outside metro-Manila? Outside Luzon?
My biggest disappointment, however, is that the study, at least with respect to generation and dispatch issues, was essentially backward looking. No work has been done to look out over the next few years to see what costs we might be expected to be incurring and how that cost outlook might be moderated by implementing specific changes.
For example, if there is indeed a sub-optimal dispatch issue with respect to the Meralco IPPs (and I have not yet been privy to any definitive analysis that substantiates that, maybe UP has that, I don’t know), then what is the quantification of that in today’s market and in the future and what specific actions should we take to insure that such optimality is achieved. Is there a regulatory action the ERC should take? Is there a market structural change that needs to be made? Is legislation required?
THAT’s the kind of stuff I’d like to see us doing in some of these forums. But that also is difficult to achieve.
But it’s way to easy to criticize. The UP research is helping to focus the discussion. And there was certainly lots of discussion from the reactors’ roundtable yesterday.