From the News! – Your Daily News

Martin LaMonica
cNet News

General Motors at its centennial celebration in Detroit on Tuesday is expected to showcase the Chevy Volt, a plug-in hybrid electric car that carries the heavy expectations of reversing GM’s slide and slashing consumers’ fuel use.

Buzz around the Volt picked up last week when photos of the production car were captured, showing a less sporty look than the original concept car. But what are the environmental and cost benefits of the Volt?

The Volt will be able to run 40 miles on lithium-ion batteries and get a range of 400 miles from an internal combustion engine that charges the battery. The four-door sedan with a hatchback is set for release at the end of 2010.

GM has not offered many details on the Volt’s fuel economy and didn’t respond on Monday to a request for more specifics. But early estimates indicate that the Volt will deliver a significant boost in mileage and be cheaper to operate than a gasoline car.

Plug-in electric cars also stand to reduce, although not eliminate, air pollution.

“The Volt story has gotten much more interest than other (GM) product introductions because it represents such a dramatic departure. Historically, things were more incremental,” said David Cole, the chairman of the Center for Automotive Research in Ann Arbor, Mich.

GM says the Volt will get the equivalent of 50 miles per gallon on longer trips where an expected four-cylinder engine will be engaged.

But mileage will improve substantially if a person stays within the batteries’ 40-mile range. GM designers targeted a 40-mile battery range because most people drive less than that in a day.

In all-electric mode, drivers can expect the equivalent of about 100 miles per gallon, said David Goldstein, the president of the Electric Vehicle Association of Washington D.C.

In a mixed mode, where the gasoline engine kicks in, Golstein thinks that overall mileage for a 100-mile trip would be about 50 miles per gallon, but would go down to 35 miles per gallon for a 200-mile trip because the gasoline motor is working more.

Compared with a gasoline car, plug-in hybrids like the Volt stand to be cheaper to operate. Goldstein estimates that people will pay between 2 and 6 cents per mile with the Volt, depending on electricity rates.

That price per mile estimate for the Volt is less than the 15 cents per mile that a typical gasoline car costs, calculated Scott Sklar, an alternative energy consultant at the Stella Group.

Comparing the cost per mile of a gasoline car with a battery-powered vehicle is complicated by the fact that many regions in the U.S. have different electricity tariffs that depend on usage and time of day.

Martin Eberhard, the founder and former CEO of Tesla Motors, is one of the first customers of the all-electric Tesla Roadster. After a few months of driving, he reported in his blog that the cost per mile of the Roadster is between 2 and 6 cents per mile.

From an environmental perspective, plug-in hybrids have the lowest greenhouse gas emissions over their product lifecycle compared with other transportation technologies except all-electric vehicles, according to a recent analysis done on the future of transportation published in August by the Massachusetts Institute of Technology.

That’s because electric motors are more efficient than gasoline engines, said Goldstein. Also, electricity generation is several times more efficient than the energy conversion that happens in a car, said Cole.

Similarly, the the Electric Power Research Institute and the National Resources Defense Council (NRDC) last year concluded that adoption of plug-in hybrid electric vehicles would lower global warming emissions, improve air quality, and reduce petroleum consumption by 3 million to 4 million barrels per day in 2050.

Road blocks?

But for all the promise of the Volt, there are some real engineering and business challenges.

The biggest technical issue is the reliability of lithium-ion batteries, in which nearly all auto makers are investing.

The useful life of these batteries is still not totally clear, as they haven’t already been tested in vehicles for decades.

One business model that automakers are looking at is a leasing option, where consumers would lease a plug-in hybrid electric car’s batteries for 10 years, said Cole. After that, the battery would be replaced and potentially used in less-demanding applications such as power grid storage.

A drop in the price of petroleum, which has fallen dramatically since earlier this year, could also put the brakes on the investment in engineering to make plug-in hybrid vehicles less expensive.

Recent reports said that GM is planning to charge about $40,000 for the Volt, more than what was originally anticipated. For the price to go down, there needs to be a multi-year ramp-up in battery production.

“Anyway you look at it, out of the box, this is going to be expensive. These are going to be expensive batteries,” Cole said.

In its report, MIT estimated that plug-in hybrids will be commercially competitive with gasoline cars in eight to ten years.

The battery will weigh 400 pounds, be 5 feet long, and be placed under the car, Bob Boniface, GM’s Chevy Volt design director said in an interview. Boniface said GM had to make a break from the initial concept car design to improve the aerodynamics and fuel efficiency.

The Volt is a series hybrid, which means that the car’s internal combustion engine only charges the battery, rather than drives the car directly. That means an automaker can design engines that run on different fuels.

Cole said that the biggest environmental pay-off from this design will come once ethanol from nonfood sources, called cellulosic ethanol, becomes commercially viable.

A car that uses E85 fuel, a mix of ethanol and gas, could get 400 miles per gallon of gasoline, he said. There are a handful of pilot cellulosic ethanol plants in the U.S., but none are producing at large scale.

For GM, the Volt is meant to help change its image as a vendor or SUVs and other trucks, while giving it important technical know-how in fuel-efficient cars.

“All GM brands are candidates to receive this technology,” said Cole.

Donnabelle L. Gatdula
Philippine Star

Energy efficiency has improved with the continuing decrease in the utilization of diesel and oil-based generating plants to only 2.4 percent during the first half of this year from 11.5 percent of the total demand in 2005,  the Philippine Electricity Market Corp. (PEMC) said.

PEMC president Lasse Holopainen, in a speech during the 2nd anniversary of the country’s wholesale electricity spot market (WESM), said the decrease in dependency on oil-based plants had helped shield the consumers from the increasing prices of oil in the international market.

Conversely, indigenous natural gas contribution to the energy mix has increased to 47.1 percent for the first half of 2008 from 36.1 percent in 2005.

Already two years in operation, Holopainen said the WESM reflects a turnaround in the prices of electricity starting at the end of 2007 to the first half of 2008.

“This was brought about by the shift in annual peak demand for the first half of 2008, the early start of the rainy season resulting in higher hydroelectric plant contribution,” said PEMC executive vice president Mario R. Pangilinan.

Pangilinan said there has also been a notable increase in investor interest in generation investment since the start of commercial operations of WESM.

The Power Sector Assets and Liabilities Management Corp. (PSALM) has successfully privatized the Pantabangan-Masiway Hydroelectric Plant (112MW) in 2006. This was followed closely by the sale of the Magat Hydro (360MW), Masinloc Coal (600MW), Calaca Coal (600MW) and Ambuklao-Binga Hydro (175MW) for a total cumulative value of over P119 billion.

According to Pangilinan, to sustain the development of the market and its participants, PEMC intends to launch the WESM traders’ accreditation program to institutionalize the electricity trading as a profession.

The Traders’ Accreditation Program, he said, will improve the skills and competencies of existing and new electricity traders. The curriculum will also upgrade the competencies of power traders and monitor the integrity of their actions as well as enhance compliance to market rules.

“The continued operation of the WESM only bodes well for the participants and the consumers. As it marks its second year of operation, the market also marks the broader achievements it has earned: an atmosphere of equity, fair competition and transparency, accomplished through the spirit of cooperation and professionalism,” Holopainen said.

Manila Times

The Department of Energy is reviewing a study conducted by the International Atomic Energy Agency about the safety and viability of reopening the mothballed Bataan Nuclear Power Plant, government sources said.

The Philippine government had requested the study, according to a statement released recently by the Department of Foreign Affairs.

The International Atomic Energy Agency (IAEA) is a United Nations agency that was established in 1957 to promote safe, secure and peaceful nuclear technologies.

The agency was asked to organize a multi-disciplinary and independent fact-finding mission to the Bataan plant, which was mothballed in 1986 after the collapse of the Marcos government.

The mission took place between January 28 and February 1, 2008 and was officially received by Energy Secretary Angelo Reyes and officials of the Philippine Nuclear Research Institute.

According to a report posted on the agency’s website on June 12, “A team of experts was deployed by the IAEA in February 2008 to counsel the Philippines government on the practicalities of revitalizing the plant.”

But the Director of the Division of Nuclear Power Akira Omoto, the mission’s team leader, was quoted in the same report as saying, “It is not the IAEA’s role to state whether the plant is usable or not, or how much it will cost to rehabilitate.”

The Department of Energy has received the final mission report and is now reviewing it. The stated purpose of the mission was to help determine whether the Bataan plant could still be rehabilitated to generate power, and to find out the corresponding technical, budgetary and safety requirements needed.

Agency Deputy Director General for Nuclear Safety and Security Dr. Tomihiro Taniguchi warned the Philippines, though, saying “Commercial interests should not take precedence over safety issues in the current expansion of nuclear power worldwide.”

In Southeast Asia, those planning to establish nuclear power plants in the next few decades include Thailand, Malaysia, Indonesia and Vietnam.

– Katrice R. Jalbuena

Maricel V. Cruz
Manila Times

Electricity consumers in the franchise area of the Manila Electric Co. (Meralco) are paying for value-added tax, which the utility firm is exempt from paying.

The Lopez-controlled Meralco apparently has not been declaring that a large portion of the power supply that it buys from the state-run National Power Corp. (Napocor) and independent power producers, or IPPs, is spared from VAT.

The 14-page Napocor’s “Power Bill” for Meralco, a copy of which was obtained by The Manila Times, showed that the VAT being passed on to consumers by Meralco is bloated, from 23 percent up to 39 percent that represents billions of pesos collected from consumers every month to cover its supposed VAT charges.

The document showed that an average of 24 percent to 39 percent of the electricity supplied by Napocor to Meralco is sourced from zero-VAT power plants that utilize renewable energy sources.

The country’s biggest power distributor, Meralco charges 12 percent across-the-board VAT without making any distinction between a VAT-free and VAT-chargeable power supply in the electric bills of its consumers, despite the cut in VAT payments for its power supply from Napocor.

The 25-percent, zero-VAT rate representing the total volume of electricity supplied by Napocor to Meralco is outside of the other VAT-free electricity supplied by other independent power producers to Meralco.

Napocor supplies 35.96 percent out of the total amount of power requirement of Meralco, while 19.1 percent or roughly 2,154.8 megawatts are sourced from Lopez-owned power plants, including the First General Hydro, a VAT-free rated power plant.

Napocor billings to Meralco showed that since December 2005, the government-owned power corporation has started collecting 10-percent VAT from the utility company. This charge became the basis of the VAT charges passed on by the power distribution firm to its customers.

At the same time, however, the 10-percent VAT being charged by Napocor to Meralco does not cover “FBHC, GRAM, ICERA and renewable energy portion of all other charges.” Napocor’s December 6, 2005 “power bill” to Meralco showed that of the total of 1,000 megawatts supplied by Napocor, 26 percent were “renewable” and, therefore, was free of VAT charges.

On January 3, 2006, out of the total of 1,050 megawatts also supplied by Napocor to Meralco, 26.69 percent were again renewable and VAT-free.

The document also showed that from February 1, 2006 to July 10, 2006, during which Napocor started charging 12-percent VAT, 24.03 percent up to as high as 39.09 percent of the monthly total of 1,050 megawatts supplied by Napocor to Meralco came from renewable energy sources and were also not covered by VAT.

The monthly inclusion of “renewable” energy in the total volume of electricity supplied by Napocor, however, did not have any impact on lowering the cost of electricity that the utility company had been charging its customers.

Efren L. Danao
Manila Times

The government, not the Lopezes, is the rightful owner of the Manila Electric Co. (Meralco), Sen. Juan Ponce Enrile said Tuesday.

Enrile said former President Corazon Aquino gave Meralco to the Lopezes for free, even if the government had expanded its franchise and upgraded its facilities. He maintained that since the Lopez family did not pay the government anything for getting Meralco, the government could still claim ownership of the utility firm.

“It is up to the government whether it wants to get back Meralco,” Enrile said when asked what should be the next step if the government really still owns the utility.

He added that Eugenio Lopez and his brother, former Vice President Fernando Lopez, went to then-President Ferdinand Marcos in 1973 because Meralco Securities Co. that they had owned was in precarious condition with about P101 million in principal and interest that was past due.

“That’s why the Lopezes were hard put in looking for somebody who could bail them out,” Enrile explained.

He added that the Lopez brothers had written a letter to Marcos offering to sell Meralco to a cooperative composed of its employees, end-users and the government. Enrile, however, could not say how much the Lopezes were paid for their share, but he cited a P200-million loan secured by the new owners, Meralco Foundation, from the Development Bank of the Philippines for payment.

“At the start, the customers had participation certificates that entitled them to Meralco dividends. When Cory [ex-President Aquino’s nickname] gave Meralco to the Lopezes, these certificates were forgotten,” he said.

Sen. Joker Arroyo, the Executive Secretary during the Aquino administration, said there was no documentation on the return of Meralco to the Lopezes.

“It was done verbally,” Senator Arroyo added. He argued that the Lopez family yielded its ownership of Meralco under duress during the martial-law regime of Marcos.

Enrile, who held various Cabinet positions under Marcos, denied that the Lopezes were forced to give up Meralco. The Lopez family has been claiming that it was forced to give up the power firm as well as its other companies because the martial-law regime was holding Eugenio Lopez Jr. hostage.

“That is not true. Geny [Eugenio’s nickname] Lopez was arrested because he was involved in a plot to assassinate Marcos after the 1969 elections,” Enrile also claimed.

He said that everything that he was saying could be found also in a notarized statement of former Meralco officials Emilio Abello and Senen Gabaldon. Abello and Gabaldon gave the statement on February 27, 1975 in answer to a claim of the Lopezes’ lawyer Gerard Hill of San Francisco, California, that Marcos grabbed Meralco.

He and the other senators apparently recognized Meralco as still Lopez-owned during the start of the hearings on Monday on charges against the Lopezes’ alleged mismanagement of the utility, as shown by its alleged price-gouging.

Sen. Edgardo Angara also on Tuesday said Meralco should return to consumers through billing credits what they had been wrongfully charged with.

“For instance, I don’t think consumers should pay for the power consumption of Meralco offices. Meralco not only got its power for free [but] it also charged its consumers for power that they did not use. Meralco should refund them this,” he added.

Meralco had admitted at the hearing of the Joint Congressional Power Commission (PowerCom) that it had been passing on to end-users about 72 million kilowatt-hours costing about P427.5 million that its offices had been consuming every year.

Angara said Meralco also should not pass on to its consumers its franchise tax.

“System loss [stolen electricity] should be limited to only 4.5 percent. Anything beyond that, Meralco should assume and not pass on to consumers,” he added.

Angara, however, refused to blame Meralco alone for the high power rates in the country.

“The Energy Regulatory Commission is also to blame. It is supposed to be a regulatory body but it seems those supposed to be regulated are dictating what it should do,” he said. “We are also to blame for passing the Electric Power Industry Reform Act that has caused many of these problems.”

Domini M. Torrevillas
Philippine Star

I clearly remember the sweet smell of success when Biofuels Act No. 9367, otherwise known as the “Biofuels Act of 2006,” was passed by Congress on Jan. 12, 2007. The chief author of the bill, Sen. Juan Miguel Zubiri, was walking on Cloud 9 over his accomplishment. He had fallen in step with the world’s grabbing of alternatives to fossil fuel whose supply is dependent on Middle East sheiks, and whose price is alarmingly increasing seemingly day by day.

The Biofuels Act of 2006 declared that “it is the policy of the State to reduce dependence on imported fuels with due regard to the protection of public health, the environment, and natural ecosystems consistent with the country’s sustainable economic growth that would expand opportunities for livelihood by mandating the use of biofuels as a measure to:

“a. utilize indigenous, renewable and sustainably-sourced clean energy sources to reduce dependence on imported oil;

“b. mitigate toxic and greenhouse gas (GHG) emissions;

“c. (create) rural employment and income, and

“d. (secure) the availability of alternative and renewable clean energy without any detriment to the natural ecosystem, biodiversity and food reserves of the country.”

Section 4 of the Biofuels Act mandated the phaseout of the use of harmful gasoline additives and/or oxygenates within six months from the effectivity of the said law, and Section 5 of said law instead mandated the mandatory use of biofuels with a specified timeframe.

Section 5 mandated that within two years from the effectivity of the Act, at least 5 percent bioethanol shall comprise the annual total volume of gasoline fuel actually sold and distributed by each and every oil company in the country; that within four years, it would recommend a 10 percent blend of bioethanol by volume into all gasoline fuel distributed and sold by every oil company, and that within three months, a minimum of 1 percent biodiesel by volume shall be blended into all diesel engine fuels sold in the country.

Well and good. But those mandates seem to be meeting a slow death, what with a food crisis enveloping the globe. Food security vs. biofuel production and the environmental degradation caused by biofuels in all likelihood will necessitate putting Zubiri’s baby on hold — unfortunately,  I don’t know for how long.

The first big blow hitting Zubiri is Sen. Miriam Defensor-Santiago’s seeking more government oversight powers over biofuel development, which she fears could adversely affect the country’s ability to produce its own food. Speaking in the senator’s favor is Renato Velasco, chair of the Philippine National Oil Co.-Alternative Fuels Corp. (PNOC-AFC) who said that the program to develop the biofuels sector would not adversely affect the country’s food production.

From academe comes the contrary view — coming from UP Prof. Teodoro Mendoza who, like Senator Santiago, see the real threat of massive cultivation of crops for biofuel production, thereby reducing the hectarage devoted to food production.

*      *      *

At a chance meeting with Rep. Roilo Golez, he told me he had raised questions about the implications of the Biofuels Act as early as Dec. 10, 2007. At this time he filed a resolution directing the committees on ecology, energy, and agriculture and food “to conduct an inquiry, in aid of legislation, on the current biofuels program and review its impact on energy security, carbon emissions, global warming, and food security.”

In a press statement he had urged the Government “to suspend the multi-billion dollar biofuels program of the country and redirect the huge financial and land resources from biofuels to food production.”

At best, he said, the biofuels program “can provide only around 5 percent of the country’s transport fuel needs in the coming five years, but in exchange, the biofuels program has wrought havoc to the food production sector, contributing to the emerging global disaster of food scarcity and high food prices.”

“The people can survive without the 5- to 10-percent contribution to energy security that the biofuels program can potentially provide, but the people cannot survive the dislocation of the food sector that is now fast unraveling.

“There is also the very serious global ethical issue that some sector pushing for biofuels are doing so because they are going to benefit primarily from the increased demand for biofuels crops like sugar and corn. This must be reviewed and clarified by the government before any further resources are committed to the biofuels sector.”

*      *      *

The adverse negative effects of biofuels’ carbon emissions concerns the representative from Parañaque. Biofuels, he said, aim to be “carbon neutral, meaning that the carbon released during the use of the fuel, e.g. through burning to power transport or generate electricity, is reabsorbed and balanced by the carbon absorbed by new plant growth . . . (Also) carbon neutral fuels lead to no net increases in atmospheric carbon dioxide levels, so that global warming need not get any worse.”

In practice, he said in his resolution, “biofuels are not carbon neutral because energy is required to grow crops and process them into fuel; examples of energy use during the production of biofuels include fertilizer manufacture, fuel used to power machinery, and fuel used to transport crops and fuels to and from biofuel processing plants.”

He said that the amount of fuel used during biofuel production has a large impact on the overall greenhouse gas emissions savings achieved by biofuels.”

In his declarations, Golez mentioned a slew of experts (from the United Nations and World Bank and Organization for Economic Cooperation and Development) who decry the greenhouse gas emissions of biofuels. Among these is global warming expert Nobel Laureate Paul Crutzen who says that “the advantages of reduced carbon dioxide emissions are more offset by increased nitrous oxide emissions since nitrous oxide is deemed to be both a potent greenhouse gas and a destroyer of atmospheric ozone.”

*      *      *

My e-mail:dominimt2000@yahoo.com

Donnabelle Gatdula
Philippine Star

The Energy Regulatory Commission (ERC) has directed the Department of Trade and Industry (DTI) to clarify the government’s petition on various power rate reduction schemes.

ERC executive director Francis Saturnino Juan said at a pre-hearing on the petitions last Tuesday that the government, represented by the DTI, has yet to explain in detail how it intends to help bring down electricity rates.

As this developed, the Philippine Electricity Market Corp. (PEMC) predicted that prices at the wholesale electricity spot market (WESM) would stabilize beginning this month. PEMC is the operator of WESM.

ERC has set the hearing on the petition for June 3. “The pre-hearing enabled us to clarify with DTI what exactly the government intends to do to bring down the price of electricity,” Juan said.

He said the petition filed by the DTI does not specify how the power rate reduction schemes would be carried out. “We want to see justifications,” he said.

Representatives from Manila Electric Co. (Meralco), National Association of Electricity Consumers for Reform (Nasecore), Private Electric Power Operators Association (PEPOA), Federation of Philippine Industries, and other consumer groups attended Tuesday’s hearing.

President Arroyo recently ordered the DTI to file a petition with the ERC on rate-slashing schemes.

The proposed rate reduction schemes include expanding the so-called lifeline rate, prohibiting Meralco from buying from WESM at peak hours; implementing the preferential treatment for poor households and power-intensive industries in the distribution of the National Transmission Corp. (TransCo) charges by Meralco, and pegging Meralco’s rates on the same level as those of Visayas Electric Cooperative, Cebu Electric Cooperative, and Davao Light rates, and justifying a deviation from the “cost of service” principle in the rate-setting provision of the Electric Power Industry Reform Act (EPIRA).

Earlier, the ERC asked the DTI to publish its petition in compliance with EPIRA and with Supreme Court decisions on the matter.

“Much as the ERC would want to expedite its action on this petition, there are procedural requirements that the DTI has to comply with. Otherwise, it may not be able to discharge its burden of proof during the hearings. Also, it is important for DTI to comply with the procedure in the EPIRA IRR, which, as interpreted by the Supreme Court, is mandatory,” ERC chairman Rodolfo Albano Jr. said.

WESM prices seen to stabilize

Prices at WESM are seen to stabilize as the onset of the rainy season is expected to dampen demand as well as boost hydropower operation.

“All things being equal, and if our anticipation is correct, then it should come down,” Lasse Holopainen, PEMC president said.

“It’s been raining so that increases our hydro availability and also decreases or suppresses demand by keeping things a bit cooler – and again this is just because of the rain,” he said.

“And if it continues all throughout the month then it will be good. The other things we are watching are of course fuel supply and the availability of plants. Having said that, then it should stay stable,” he said.

According to Holopainen, the electricity rate for the past months was relatively lower than in the same period in 2007.

“If you look at it year-on-year the price at the WESM has actually dropped. But the reaction of the public seems to have been much keener now as regards to prices. I think that’s partially because there’s a lot of inflation going on in other things outside electricity – so people are more concerned about electricity prices,” he said.

The PEMC chief also noted that WESM only affects three to five percent of consumers’ electricity bills and that generation charge under the generation rate adjustment mechanism or GRAM has the biggest impact on the billing.

Effective settlement price (ESP) at WESM for the period March 26 to April 25 was P5.72 per kilowatt-hour or lower than the P6.72 per kWh from Feb. 25 to March 25, 2008. For the March 26-April 25, 2007 period, the price was P8.62 per kWh.

The ESP for Meralco’s spot market transaction from Feb. 26 to March 25 amounted to P8.93 per kWh as against the P5.78 per kWh in the same period last year.

Asked about the impact of President Arroyo’s order for the National Power Corp. (Napocor) to lower its generation charge to P4.11 per kWh, Holopainen said it would have “very little effect on the market.”

One way to bring down electricity rates, Holopainen said, is to give incentives to power distributors.

Monday hearing

The Joint Congressional Power Commission (Powercom) hopes to have Meralco president Jesus Francisco explain on Monday allegations that the firm is overcharging consumers.

“We will listen to Meralco and other government officials on Monday on why we are paying very high electric rates. We will not dwell on whether Meralco should be owned by the Lopez Group or the government because that is a private enterprise,” Sen. Miriam Defensor-Santiago said.

Santiago chairs the commission with Pampanga Rep. Juan Miguel Arroyo, chairman of the House committee on energy, as co-chair.

“We will talk about why the rates remain high when the government is saying that it has been lowering the price of power (that) it has been selling to Meralco,” Santiago said.

“It might be a violation of the penal provision against anti-trust. The anti-trust provisions are found in the prohibition against restraints in trade or monopoly,” Santiago said.

Also invited to the hearing are Energy Secretary Angelo Reyes, Napocor president Cyril del Callar and ERC chairman Albano, among others. Representatives of militant and consumer groups have also been invited to attend the hearing.

Rep. Arroyo said it does not really matter what Meralco and its supporters think about the hearing because the main issue is the high electricity rates.

“They can harp on whatever spin they want. The bottom line is malaki ang singil nila sa kuryente (they charge high electricity rates) and they are looking for so many issues na takpan iyan (to conceal it). People are crying and we need to do something,” he said.

An administration lawmaker echoed Rep. Arroyo’s contention and said even the Supreme Court found Meralco to be overcharging its customers by P30 billion in 2003.

Quezon Rep. Danilo Suarez said an SC ruling found Meralco to have “illegally passed on to its customers its income tax charges.” The SC ruling included an order for Meralco to refund consumers. Meralco contested the ruling but lost.

“The burden of proof that it is not overcharging us rests with Meralco, and it only has itself to blame,” he said. “Meralco should be reminded that it can only milk the cow to a point, after which it will get nothing more. Worse, it may kill the cow,” he said.

He also lambasted some opposition lawmakers for allegedly defending Meralco.

“To defend Meralco, whose high rates are making life doubly hard for our people, runs against the grain of many of my colleagues’ avowed stance in the past,” Suarez said.

Garcia acting on his own

Malacañang maintained that GSIS president Winston Garcia is acting on his own in his row with Meralco.

“All that I gathered is that he is going to initiate a meeting with the other stakeholders in Meralco and that is specifically Development Bank of the Philippines, Land Bank and for that matter other shareholders of Meralco,” Executive Secretary Eduardo Ermita said.

Garcia’s earlier demand for a management change in Meralco and for the power distributor to present its financial records fueled speculation of a government takeover.

“They are specifically talking about the management of the entire company. Other than that, I guess the GSIS general manager has his own position on the matter,” Ermita said.

The GSIS owns 23 percent of the shares of stock of Meralco and, combined with the holdings of the other government entities such as PhilHealth, Social Security System, Land Bank and Pag-Ibig Fund, the total share of the government would be around 33 percent. The Lopezes own 33.4 percent. The Lopezes also control giant network ABS-CBN, which is perceived to be critical of the administration.

“Let us wait for the action of the ERC on the petitions submitted by the DTI as well as on the one that was submitted to the ERC on the settlement agreement between Napocor and Meralco,” Ermita said in Filipino.

Unimpressed

A consumer group that calls itself People Opposed to Warrantless Electricity Rates (POWER) assailed the “tax on tax” on electricity rates, saying that aside from the 12 percent value-added tax (VAT) consumers also pay local franchise tax, which is a component of the “distribution revenue and subsidies” item in the electricity bill.

“It’s like having a tax on a tax. The 12 percent VAT is levied on the franchise tax when the latter is computed as part of the distribution revenues and subsidies. In effect, the franchise tax is also taxed,” POWER convener Ramon Ramirez explained.

“This really doesn’t make much sense for consumers, to be taxed twice. This adds justification to our earlier calls to scrap the VAT on power rates. This will certainly save consumers a significant amount,” Ramirez said.

POWER also questioned Meralco’s charging of systems losses to consumers.

“There is again an injustice here,” Ramirez said. “We are being charged for a company’s inefficiency, then that same charge is taxed by the government. It’s a double whammy.”

The Freedom from Debt Coalition (FDC), for its part, said the administration’s effort to bring down power rates is “piecemeal and selective” and is unlikely to have significant impact.

“Filipinos, rich and poor alike, pay the second highest electricity rates in Asia. So, any move by the government to reduce exorbitant power rates in the midst of a devastating food crisis and the rising costs of other goods and services is welcome news to our people,” the FDC said in a statement.

“We believe, however, that piecemeal and selective action such as the bid by the Arroyo government to cut down Meralco’s distribution rates will not bring significant reduction in power rates,” it added.

– With Delon Porcalla, Christina Mendez, Katherine Adraneda, Marvin Sy, and Christina Paguinto

Jarius Bondoc
Philippine Star

The mafia at the state-owned Napocor has done it again. It succeeded diverting attention from its billion-peso thievery as the real cause of soaring electricity rates. Congress was made busy reviewing the power sector law. Malacañang was sicced on private retailer Meralco. Meanwhile the Mafiosi are laughing their way to the bank.

They had pulled a fast one in April 2007. Claiming acute shortage of coal in four Napocor plants across Luzon, they contrived emergency imports to avert blackouts. On cue power tripped island-wide supposedly because the coal generators couldn’t run full capacity, straining two oil-fired ones. “Bidding” was held on too short a notice so no supplier could meet the deadline to submit quotations. This paved the way for a “failure of bid” and the opportunity for negotiated purchase. A deal was signed with Hunter Valley Coal Corp. of Australia, thru Glencore Far East Philippines AG, for an initial shipload of 65,000 metric tons. The contract price was $84 per ton (at P50:$1 exchange rate). Yet, the going rate in Australia then was only $30. It was overpriced by $54 per ton, or $3.51 million (P175.5 million) for the first shipment in April 2007. Napocor ordered four more similar shipments in July and August. Total overprice thus hit $17.55 million (P877.5 million).

Irate consumerists sued Napocor president Cyril del Callar before the Ombudsman for graft. Not only was machination obvious, the state firm’s managers also disobeyed the energy department’s long-standing order to stockpile on cheap coal. Also charged were Napocor VP-Logistics Eduardo Eroy, VP-Bidding Juan Carlos Guadarrama, and Mancom secretariat head Urbano Mendiola Jr.

The Joint Congressional Power Commission promised to investigate. Somewhere along the way it got distracted, though. Napocor management talked legislators into scrutinizing instead the rising cost of electricity for burdened homes and industries. Blame was put on lack of “open access” for factories and subdivisions to buy electricity from retailers of their choice. To date Napocor has privatized only a third of its plants, instead of all as obliged by the Electric Power Industry Reform Act. The act programs open access to commence when Napocor sells off 70 percent. But Napocor now wants Congress to amend it to begin open access even at only 50 percent. Napocor Mafiosi scored double. Forestalled was the probe that could have exposed how much they’ve filched so far and who the patron is. Impending approval of a 50-percent threshold for open access also means they won’t have to speed up the sale of coal plants from which they make a killing.

Malacañang too was fooled to ignore the coal kickbacks. No less than Gloria Arroyo led the deceived. Pointing to Meralco as culprit, she asked businessmen to help her force Luzon’s biggest power distributor to match the lower charges in Visayas-Mindanao. Forgotten was that mostly cheap waterfalls run Visayas-Mindanao turbines. By contrast, coal makes up a third of Luzon’s electricity costs, so overpricing drives up Napocor’s pass-on rate to Meralco and other retailers. Overlooked too was that state-run mutual funds and a bank — GSIS, SSS, PhilHealth, Pag-IBIG, Land Bank — own 33 percent of Meralco. A President-led attack on Meralco would hurt the agencies. (GSIS boss Winston Garcia, leading that bloc in the Meralco board, is sharper in urging open books from the controlling Lopez clan.)

While nobody was looking, the Napocor mafia struck again early this year. Under the old modus operandi, it declared need for rush purchase of coal — a shipload of 65,000 metric tons for Pagbilao plant. One of the firms Guadarrama invited on February 12 to bid was PT Marsitero Marloan of Indonesia, represented in Manila by TransPacific Consolidated Resources Inc. Notably, TCRI was incorporated only in October 2007 with paltry P1-million authorized capital — P250,000 subscribed, P62,500 paid up. Listed address was Danarra Business Center, which the Quezon City hotel staff says has been closed since December.

Three days later PT Marsitero Marloan-TCRI won the “bidding” and was awarded the contract on February 19. Price: $109.50 per ton. Though bogus, TCRI was in for more good luck. On March 5 del Callar awarded it triple the original volume. The contract rose to $23,487,750 (P956,374,204.50) for three shiploads in March, April and June. Indonesian coal was selling then at $77 per ton. There was clear overpricing of $32.50 per ton, or a total of $6,337,500 (P258,050,325). Consumers are now paying for that sleaze, among many others.

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As co-chair of congressional oversight, Rep. Mikey Arroyo should lead in investigating Napocor. But he’s been in America for the past two months. There, Ramon Tulfo wrote, he has four bodyguards and three housemaids each on $300 government per diem. That’s P88,200 a day, P5,292,000 in 60 days, for all seven.

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E-mail: jariusbondoc@workmail.com

Marvin Sy
Philippine Star

In an effort to bring down electricity rates, President Arroyo has ordered the state-run National Power Corp. (Napocor) to cut by half its charges to the country’s biggest power distributor, the Manila Electric Co. (Meralco).

Speaking at a joint event of the Federation of Philippine Industries and the Federation of Filipino Chinese Chambers of Commerce and Industry, the President said that she and a number of her Cabinet members spent the entire night discussing ways to bring down Meralco’s rates.

“I have been wondering aloud why power cost in the Luzon Urban Beltway where many of you operate, should be so high when Luzon is reliant on imported oil for only one percent of its power,” the President said.

During the late night meeting, Mrs. Arroyo said that she ordered the Napocor to charge Meralco the same rate it charges the Luzon electric cooperatives which is at P4.11 per kilowatt-hour.

Energy Secretary Angelo Reyes said any rate-related matters should be decided by the Energy Regulatory Commission.

“ERC will have to go through that process,” Reyes said when asked about Malacañang’s newest directive.

A Napocor official, meantime, said they are not yet ready to comment on the order. “We cannot say anything until we see the order from Malacañang,” the official said.

Mrs. Arroyo pointed out previous statements by the Wholesale Electricity Spot Market (WESM) that Meralco has been purchasing electricity during peak hours when rates are higher.

This was one of the main reasons given by members of the power industry for the high rates charged by Meralco.

“We know there is room for improvement in the rates,” the President said.

According to Mrs. Arroyo, Napocor immediately agreed to her request and even gave more than what she asked for.

Instead of using the P4.11/kWh rate, the President said that Napocor would now charge Meralco the same preferential rate of P3.52/kWh it charges the high-load factor industrial customers that are accredited by the Philippine Economic Zone Authority.

For the month of January, Meralco sourced about 35 percent of its requirements from Napocor, nine percent from the WESM and the rest from independent power producers.

In its April billing period, Meralco’s rates went up by P0.6717/kWh or an increase of 8.95 percent, which it blamed on the higher prices at the WESM and the higher cost of procurement from its IPPs.

Meralco has sought for another rate increase from the ERC, this time equivalent to P19.38/kWh under the performance based rate mechanism.

Meralco said the adjustment, which will peg the rate at P1.3607/kWh from P1.1669 per kWh, took into consideration under-recoveries of the rates set on the regulatory period from July 1, 2007 to June 30, 2008 which remains pending for implementation until now.

“The maximum average price of P1.3607 per kWh carries a correction factor of 15.8 centavos per kWh as a result of delays in the implementation of the MAP of the first regulatory year, which resulted in under-recoveries,” Meralco said.

The President also followed up her instructions last February for the Department of Trade and Industry to file four petitions before the ERC in relation to the rates of Meralco.

The four petitions are as follows: to enjoin Meralco from buying electricity from the WESM during peak hours; to ensure preferential treatment for households and power-intensive industries in the distribution of TransCo (National Transmission Corp.) charges; to prohibit Meralco from charging its system loss as a separate item; and to require Meralco to charge the same rates as the Visayan Electric Co. (VECO), Cebu Electric Co. (CEBECO) or Davao Light.

Mrs. Arroyo noted that the distribution charges of VECO, CEBECO and Davao Light, “along with all 140 utilities and cooperatives are all lower than Meralco.”

“We spent last night or maybe this dawn, (Executive Secretary) Ed Ermita and I and a couple of officials who are involved in the petition, talking about where the petitions are, what are the missing links, how can they fast-track. To make a long story short, the ERC will hear these petitions on Tuesday, May 6,” the President said.

The President urged the FPI to participate in the hearing of the ERC as one of the sectors heavily affected by the high electricity rates.

“Please be there with all your legal luminaries because this is going to be a tough legal fight and you will be the beneficiaries; your workers will be the beneficiaries, your consumers will be the beneficiaries, the Filipino people will be the beneficiaries. But you are the ones with the means and the articulateness to be able to make a good case before the ERC,” the President said.

Apart from the petitions, Mrs. Arroyo said that Congress is now in the process of amending the Electric Power Industry Act to remove the requirement of 70 percent power privatization for open access.

“Because open access will allow industrial consumers like you to enjoy the power of choice which will also mitigate the cost of electricity,” she said.

Apart from social responsibility, the government has an actual stake in Meralco equivalent to 33 percent, almost the same as the Lopez Group.

Heavy losses

Industry sources, on the other hand, said that President Arroyo’s order will result in heavy losses for Napocor.

“This will be similar to what Malacañang did during the passage of the EPIRA (Electric Power Industry Reform Act) when it mandated a 40-centavo rate cut which resulted to P100 billion losses for Napocor,” a source said.

“So what will happen next, the government will burden the public by another EVAT (expanded value-added tax),” the source said.

According to sources, at present, “the lowest cost for the consumers will be for Meralco to honor its contracts with its IPPs (independent power producers) and run at contracted levels of 83 percent.”

“Otherwise, it would be very expensive for Meralco to buy power from Napocor and its own IPPs,” the source said.

“Right now, Napocor’s finances are okay.  So what’s the use of Meralco getting its power from Napocor at off-peak hours at consumers’ expense?”

Expanding audit

Aside from electricity rates, the government is also bent on addressing the problem on the rising prices of petroleum products.

The Department of Energy (DOE) has taken the initial step by expanding its audit on oil companies’ profitability to see if they are charging reasonable prices to consumers.

In a press briefing in Bangui Bay, Ilocos Norte, Energy Secretary Reyes said they have asked the audit team, conducting a thorough review of oil firms’ books, to examine carefully the petroleum players’ return on equity.

“I asked SGV and the University of Asia and the Pacific to look deeper and get more details and data on the oil companies’ ROE,” Reyes said. “As you can see, you can adjust profitability by creative accounting.

“By looking at their ROEs, you can determine the reasonableness of their under-recoveries. The base (ROE) should be examined carefully to see the accurate value of the equity which includes devaluation and depreciation.  This way, we will be able to measure their profitability,” he said.

Oil firms have claimed that they need to recoup about P6 to P7 per liter under-recoveries due to the continuing rise of global crude prices.

The petroleum players said they would likely increase their prices by P1 per liter in the next weeks.

According to Reyes, SGV has increased the number of its examiners that are reviewing the books of oil firms.

The energy chief said if the review will be completely this week, they will be able to release the results of the audit anytime soon.

Reyes, meantime, said the DOE could not do anything about the weekly adjustment of oil prices.

“We are on a deregulated environment. We are prevented by the Oil Deregulation Law from doing such thing (announce price trends). It is the market that dictates the prices. This is why I’m telling consumers to conserve. It’s a global phenomenon, we have to learn to adjust to it,” he said.

Consumer and Oil Price Watch chairman Raul Concepcion had urged the government to convince the oil firms to be more transparent on their pricing.

“I told Mr. Concepcion that his request will be very difficult for us. The DOE is not allowed under the deregulated environment to announce oil price trends,” he said.

Besides, Reyes said it would create a chaotic impact on consumers if DOE will announce oil price movements.

“The reason the DOE doesn’t want to announce oil price trends is because we do not want it to result to undue panic for consumers. It may result to long queues in retail stations and hoarding of inventories,” he said. – With Donnabelle Gatdula

Mike Wootton
Manila Times

I see from some recent reports that research is continuing on the potential for development of nuclear power for the Philippines. This is of course not the first time that this has been considered, back in the early 1970s a plan was conceived in the energy crisis of the time, to develop a 620MW nuclear plant in Bataan. This started the Westing-house debacle. Construction started in 1976 and was completed in 1984 at a cost of about $ 2.3 billion. The plant was never brought into operation due to reports of its being unsafe, being built near a major fault line and close to Pinatubo volcano. Despite this, the Philippines has been paying for the plant at the rate of about $160,000/day for over 30 years.

A few years ago I was approached to take a (very) senior position in an organization called the Nuclear Decommissioning Authority in the UK. It was the aim of this organization to oversee the decommis-sioning, putting out of service of most of the nuclear reactors in the UK, many of which were getting quite old. Nuclear power accounts for about 23 percent of electricity production in the UK and has been in use since the 1960s. It is operated in an extremely safe manner and to very high standards with continual oversight on operational safety from various national and international agencies; there has never been a major incident. Although the Nuclear Decommissioning Agency still exists, there is now a growing mood within the UK government to re-establish nuclear power as a main power source—with oil at over $100/barrel and rising and coal at about $170/ton, there appears to be a case to re-examine ‘the case for nuclear power’. It’s cheap and it can be operated safely. China is embarked on a major nuclear power development program (40,000 MW in 12 years to 2020). France and other European countries as well as the USA and Japan (45,000 MW operating since 1966) have been big nuclear users for many years and continue to be.

It will be several generations before renewables (hydro, biomass, solar, wave and other as yet well undeveloped new sources) can make much of a dent in fossil fuels (oil, coal, and natural gas). The price of fossil fuels continues to rise to levels, which in fairness are what they should be anyway taking account of aside from normal decreases in the value of money, or inflation (oil now at $100/bbl is the equivalent of oil 25 years ago at $20 /bbl [barrel]—is what it in fact was, depending of course on which way you do the calculation !). It is interesting to note that oil hovered around or below $20/bbl for a hundred years up to 1973. So things are not going to get better. We have been living with unrealistically low oil prices for many years, only now are they catching up to what they really should be.

So reopening the discussion on nuclear power for the Philippines should be seen as a constructive move, albeit it is highly unlikely that the Bataan Nuclear Power Plant would come back into the reckoning; Pintaubo did in fact erupt, and the plant is sited near a major fault line. Nuclear power is clean energy, as said it is relatively cheap and not subject to major market driven fluctuations in price. Even though there have been some major nuclear power disasters; Three Mile Island, Chernobyl, the safety issues are very well understood and the processes and mechanisms surrounding nuclear safety are tried and tested and rigorously internationally supervised. Most of all though, it would allow the Philippines to reduce its unacceptable dependence on imported fossil fuel, and facilitate real challenge to the (very high) indigenous gas price, as well as provide a substitute for, or even negate, the need for future LNG imports.

To find a good safe site however will prove a major challenge to the geoscientists, but I think it would really help the Philippines if a suitably stable site could be found …

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Mike can be contacted at mawootton@gmail.com