Press Release
January 17, 2014

TRANSCRIPT OF INTERVIEW OF SEN. SERGE OSMEÑA

ON POWER RATES

Serge: I am finding out that it is not as bad as we think it is. Napaka-complicated lang. For example, 'yung average ng WESM is about P6.50/kwh in 2013. The average rate of Meralco was P5.50/kwh. That's P1 higher. Hindi naman masama 'yun. Talagang nagkaroon ng temporary shortage during Nov 11 to Dec 10.

Nagpapa-run ako ngayon ng simulation, paano kung naka-add kami ng 300MW. You know the rates would have gone down from P33 to P12. Pinapa-confirm ko lang ito sa PEMC. This was done by a friend.

Very sensitive 'yung price sa demand eh. 'Yung demand umabot sa 5,400MW. If we had even 300MW lang, 'yung presyo na P62/kwh, bababa sa P10/kwh. Very sensitive talaga kung kukulangin lang tayo ng konti. After a certain level, it will really jump up. Because these were the prices that were bid in the market. But this is unofficial and I am asking the PEMC to confirm this. But I have no doubt that the PEMC will come out with the same result.

Q: Tuloy po ang hearing sa January 23?

Serge: Yes, tuloy ang hearing. I have too much homework to do. Basahin niyo din 'yung USAID report, napakaganda. Prices of electricity compared to other countries. Kung tatanggalin ninyo 'yung admitted subsidy, kasi marami pang hidden subsidy sa ibang bansa, for the industrial, the Philippines will be P7.42, Singapore is P7.43, Malaysia is P7.30, Indonesia is P6.16, and Thailand is P6.33.

Q: Malapit lang pala (ang prices) ...

Serge: That's why. Malaki kasi ang subsidy sa ibang bansa... now, you take our 3 closest neighbors -- Indonesia, Thailand and Malaysia. Ginagaya nila ngayon, gusto nilang gayahin ngayon 'yung EPIRA. Kasi hindi nila kaya na i-subsidize. They're spending about $5 billion a year. $5B a year, with the exchange at P4-P4.5, that will be about P240 billion. Biro niyo, if we were subsidizing like them, we would be spending P240 billion. Mawawala 'yung Conditional Cash Transfer. Mawawala 'yung program for infrastructure, for school-building, for our health programs, etc. At sila rin, they want to remove it already kasi hindi rin sustainable sa kanila, at mas malaki pa ang budget nila sa atin. In Indonesia, there are political problems because nagagalit, umaangal din ang mga tao kasi nasanay na, na-spoiled na. So, they will have demonstrations there, I am almost sure. Because that's what happened when Suharto was overthrown.

Q: Sino ang mga guests? Same people lang?

Serge: Yes, hindi ko maubos eh. I only question them for 1 hour, pagkatapos I yielded the floor to my fellow senators.

Q: Anong focus nitong parating na hearing?

Serge: The focus is really on explaining the process of the WESM, and it's very complicated. No matter if I try to explain it for 1 hour, hindi niyo pa rin maiintindihan 'yan.

First, let me get their answers on record. Then we will explain it in the committee report. And we will have live seminars for you, if you want.

Pero 'yung WESM po, ito po 'yung electricity market that we have copied from other countries, the USA, the UK, Australia, especially New South Wales because they have the best model. It is an efficient way na maka-capture po natin 'yung extra at mga sobra.

Anong ibig sabihin ng extra at sobra? Alam po ninyo, kung ako po ang may-ari ng Mall of Asia, kelangan ko pong sabihin sa Meralco, sa supplier ko, na 'Uy, kelangan ko ng 6MW everyday ha. Pumirma na tayo ng kontrata, hindi na ako puwede sa brownout-brownout diyan ha.' Ngayon, it became a cool day today, tapos ang mako-consume ko lang ay 5MW kasi very comfortable ang temperature. So, anong gagawin ko sa 1MW? 'Yun ay wasted na. So, icha-charge ko iyan sa mga customers ko diyan, 'yung mga bumibili sa mga retail shops dun. Or, pwede kong ibenta sa WESM, sa market, 'Uy may sobra ako na 1MW. Who wants to buy?' On the other hand, merong pabrika, merong manufacturer who contracted for 3MW at makita niya, 'Uy, kukulangin yata ako ngayon, I need half-a-megawatt.' Normally hindi ka makakabili niya. Because it usually takes you 3 months to sign a contract and get approval from the ERC, ang tagal niyan. Now, you go to WESM, buy, magkano, buy.

Q: Anyone can buy from WESM?

Serge: Yes, anyone who is registered. All you have to do is to register with WESM, then you can buy. So, that's a very efficient way to use electricity. So, if you have surplus, you have kulang, you can go to WESM. We need the WESM. But of course, ang problema diyan, kung talagang malaki ang kulang, ayun, puputok ang presyo, and they'd bid it high.

Now, we're going to ask that they amend the P62 cap. Kasi 'yung rule sa WESM is 'must offer.' Now this is something that will be hard to make you understand... there is a 'must offer' rule. So, kung ako ay may 200MW and I only want to offer 50MW, the only thing that I can resort to is to bid high..cost ko siguro P8 lang. Pero ang bid ko, P62. Para walang bibili.

Q: Bakit?

Serge: Para walang bibili ng elektrisidad ko. Because I have to offer everything, 200MW. I am offering 200MW but I am offering it at P62. Alam ko walang bibili. But it just so happened that we had a shortage. So people bought it, because they need the power. Because the most expensive power is no power.

We want to change that, we want to modify that. Yes, tama po 'yan, mag-bi-bid sila. For example, may isang hydro-power, may long term contract iyan, at iyan po ginagamit mostly for peaking. And they have to conserve the water because during this time of the year, magkakaroon ng shortage ng water, wala ng rainy season eh. And I have to deliver power in January, February, March and April. My operational cost is very cheap, it's something like 20 centavos/kwh. All I have to do is to turn on the faucet, and the water starts flowing, and the electricity will work. But I don't want to do that because I am conserving my water for the summer months because I have a contract with you to give you so much. If I don't fulfill my contract with you, for example I am selling to you at P4/kwh, if I don't fill 200MW that I contracted with you, then I have to buy in WESM to make it ka-palit. But if I buy from WESM during the summer, that will be P30/kwh. Eh 'di luging-lugi na ako. Kaya nga ayoko, I don't want to deliver. But because I must offer, eh 'di sige, P62 ... so it becomes very complicated. These guys don't really want to bring up the price, they don't want to be dispatched. But under the rules of WESM, they are forced to offer everything, all or nothing. Unless you are really down for repairs.

So it just so happened that... Luzon was getting an additional 150MW from Leyte. Eh nagkaroon ng Yolanda on November 8, nasira ang 650MW dun ng EDC. So, Luzon lost that 150MW. Nakita niyo naman dito, anong sensitivity niyan. If they had only given us that additional 150MW, then it should have been something only like P15, not P33, not P62.

This is what I am finding out. Then we have to explain. We really have to adjust some of the rules. Having learned our lessons that this is what will happen. So, let us not be dumb enough to allow it to continue because it will happened again.

But this much I will say, we will be running shorter and shorter of reserves until 2016.

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