Energy Columns in BusinessWorld

* My article in  BusinessWorld  last Dec. 19. ------------- Here is my list of big energy stories and some of my ideas of 2022, five of which are global and five national. 1. Big jump in energy prices due to economic sanctions vs. Russia’s invasion of Ukraine. Germany, the UK, France, Italy, etc. are not parties to the Russia-Ukraine war, they have no territorial dispute with Russia unlike Ukraine whose Crimea and Donbas regions are being claimed by both countries. But these European countries opted to cut their importation of cheap gas, oil, and coal from Russia and bought them elsewhere where prices are high, and transportation takes longer and is more costly. The European Union/Title Transfer Facility (EU/TTF) gas jumped from below €20/megawatt-hour (MWh) in 2019-2020 to nearly €340/MWh as the peak price this year. France, which had an average price of about €50/MWh in 2019-2020, experienced a spike to €1,130/MWh this year (See Table 1). The economic sanctions have penalized the Eur

This column continues to monitor many economic issues and developments. There are 10 topics tackled here.... 6. A projected power rate hike Consider these recent reports in  BusinessWorld  related to the Energy Regulatory Commission (ERC) ruling against the two San Miguel Corp. (SMC) power companies’ petition for a generation rate hike: “SMC Global Power appeals rate hike denial — ERC” (Nov. 25); “SMC Global Power points to ERC for looming rate hike” (Nov. 29); “SMC Global Power offers Ilijan capacity to Meralco” (Dec. 4); “Meralco gets CSP exemption for power supply deal” (Dec. 7); “Higher power rates seen on ceased 670-MW supply” (Dec. 8); “Malampaya consortium denies SMC Global Power’s claim on banked gas delivery” (Dec. 12); and, “Meralco hopes to secure power deal within the week” (Dec. 12). SMC Global Power and its allies in media continue to demonize the ERC and the agency’s chairperson, Monalisa Dimalanta. There seems to be no acknowledgment by SMC that they made a big mistake

* BusinessWorld  Nov. 28, 2022. -------------- .... PROJECTIONS MEDIUM- TO LONG-TERM There is a trend that high and rising consumption of fossil fuels (FF) — oil, natural gas, and coal — leads to high and sustained growth. And declining consumption of FF leads to low and declining growth. In two tables accompanying this piece, I chose the biggest economies and arranged them in group A for North and South America, group B for Europe, group C for Northeast and South Asia, and group D for the ASEAN-6. Energy consumption is expressed in Petajoules (PJ). One PJ is equivalent to 23,885 tons of oil equivalent, or equivalent to 277.78 megawatt-hours (MWH) of electricity. The G7 countries — the US, Canada, Germany, the UK, France, Italy, and Japan — have had high FF consumption historically, which partly explains their high GDP per capita. Russia and Asian countries like South Korea, Taiwan, and Singapore, also have high FF consumption both in total and PJ per million population (Tables 2 and 3

* BusinessWorld  Nov. 21, 2022. ---------- .... ATTACKS AGAINST DOE AND ERC LEADERSHIP Last week, the Independent Electricity Market Operator of the Philippines (IEMOP) reported a piece of good news — high power margin (supply less demand) of 3,500+ megawatts (MW) and lower prices at the Wholesale Electricity Spot Market (WESM) for the November 2022 billing period. I summarize in Table 2 the prices from January to November billing, and added the percent contribution of coal and intermittent sources. Coal is frequently demonized but is largely responsible for why those who want it phased out still have electricity 24/7. The beloved wind-solar have combined generation of near-insignificant levels. Recently, there have been attacks against Energy Secretary Raphael Lotilla and Energy Regulatory Commission (ERC) Chair Monalisa Dimalanta which say that they are not objective and neutral because they have worked with one of the major gencos in the country. While this might be a factor, Lotill

* BusinessWorld  November 14, 2022. -------------------- There are three topics this week and we go straight to them.... POWER SUBSIDIES, TRANSMISSION AND GENERATION I want to comment on these four recent reports in  BusinessWorld . 1. “ERC determining extent of subsidies for marginalized power consumers” (Nov. 7) 2. “NGCP fined P5.1 million over failure to maintain adequate reserve power” (Nov. 8) 3. “Grid operator to appeal P5.1-million ERC fine” (Nov. 10) 4. “Meralco raises electricity rates for November” (Nov. 10) Report number one is about Republic Act (RA) 11552 extending the lifeline rate, or subsidies for low usage consumers, from 20 to 50 years. There are two problems with endless subsidies like this law. One, not all low-usage consumers are poor — they may be rich people who have vacation houses somewhere and just occasionally use these and hence, consumption is low. And, two, other consumers will be forced to pay for that subsidy and this will distort household savings and s

* BusinessWorld  October 31, 2022. --------- .... COMMODITIES INFLATION This column has discussed comparative inflation rates in many countries before — see for instance “The ERC, NGCP, inflation and public debt” (Oct. 10). Today we will discuss important commodities and their price hikes over the past two years. I use the latest data, that of Oct. 28, and compare the prices on the same date in 2021 and 2020. The irrational “war on fossil fuels” has produced irrational and unwanted results: high energy prices, from gasoline and diesel to electricity; high fertilizer prices, like that of ammonium nitrate because the main raw materials to produce ammonia and urea are natgas and oil; high industrial prices for items like bitumen, asphalt, and paints because their main raw material is crude oil; high agricultural prices because of high fertilizer prices, and high livestock prices because feeds — from corn, soybeans, etc. — have high prices. The big jump in energy prices started in 2021, ev

*  BusinessWorld  October 10, 2022. ---------------- Four important events that occurred last week: the Energy Regulatory Commission (ERC) dismissed the rate hike petition of the power companies of San Miguel Corp. (SMC); the continuing threat of blackouts was highlighted; the jump in the inflation rate; and, the government’s cash operations and debt payment information were released. ERC’S DISMISSAL OF SMC POWER COMPANIES PETITION Last Monday, the ERC published its decision denying the petition of SMC for a rate hike for its two power plants. See these reports in BusinessWorld: “Meralco vows to prevent termination of SMC deals” Oct. 5), “SMC studies legal options after rate hike denial” (Oct. 6), and, “SMC plans to sell power to WESM after rate-hike denial” (Oct. 7). For me the main issue that the ERC has to grapple with is not the projected higher electricity rate hike if the SMC petition was not granted. The main issue is rule of law and sanctity of contract. If the ERC granted the

*  BusinessWorld  October 3, 2022. ----------------- .... POWER RESERVES AND TRANSMISSION ISSUES Consider these columns and reports in  BusinessWorld : 1. “The way forward for the power industry” by Romeo Bernardo (Jan. 26, 2014): “… ensuring that the systems operator National Grid Corporation of the Philippines (NGCP) fully contracts what the system requires. The establishment of a reserve market has been long delayed.” 2. “Red Alert and EPIRA” also by Romeo Bernardo (June 13, 2021): “… the transmission line operator has not fully contracted firm power reserves. Where the system operator’s role is to procure reserves, much like procuring a genset for your home, to call on in a time of power crisis… NGCP over the past 10 years has been non-compliant with the rules… in the form of a lack of transmission lines, a lack of redundancies in our network, a lack of power reserves, and not meeting the IPO requirements under the law.” 3. “NGCP power reserve compliance inadequate, key legislator

* BusinessWorld  September 19, 2022. ---------------- Last week, on Sept. 12, the National Grid Corp. of the Philippines (NGCP) made a big announcement of red and yellow alerts in the Luzon grid. It was a bad situation for three reasons. One, it came just five days after a successful business roadshow by the Marcos Jr. administration in Jakarta and Singapore where some $14.4 billion of pledged investments to the Philippines were announced. When those big foreign investments come, they will need a huge power supply and yet the Philippines still experiences yellow-red alerts of thin power reserves and potential blackouts until now. Two, the main reason was not power generation deficiency but the tripping of transmission lines of the NGCP — two 500 kilovolt (kv) lines connecting Kaampat (Bolo) to San Manuel (Nagsaag) tripped on the morning of Sept. 11, but the NGCP and some sectors blamed the affected power plants. Two big coal plants, Sual (1,294 megawatts or MW) and Masinloc units 2 and

* BusinessWorld  Sept. 12, 2022. ----------------- Four important economic and business developments occurred last week that I want to comment on. 1. Philippine Economic Briefing, Singapore Last Wednesday, Sept. 7, President Ferdinand Marcos, Jr. and his economic and infrastructure teams held the Philippine Economic Briefing (PEB) in Singapore, which was attended by many investors. In Panel 1, the speakers were Finance Secretary Benjamin Diokno, Socio-Economic Secretary Arsenio Balisacan, Budget Secretary Amenah Pangandaman, Central Bank Governor Felipe Medalla, and SM Investment Corp. (SMIC) Vice-Chair Teresita Sy-Coson. The four officials spoke clearly about the macroeconomic and fiscal stability of the country. And it was a brilliant idea to have another speaker from Philippine business. Singapore businessmen know the Sy and SM conglomerate, and Ms. Coson spoke positively about the economic team and economic outlook of the Philippines. When the panel ended, there was loud applause i

* BusinessWorld  August 29, 2022. --------------- .... SMC PETITION FOR POWER INCREASE These two recent reports in  BusinessWorld  might send another chill down the spines of consumers in the Meralco franchise area: “SMC power unit says losses hit P15B, seeks rate hike” (Aug. 2) “SMC unit warns of power price surge starting Oct.” (Aug. 24). San Miguel Corp. (SMC) has two power generation companies (gencos) — San Miguel Energy Corp. (SMEC), a coal plant in Sual, Pangasinan, and South Premiere Power Corp. (SPPC), a natural gas plant in Ilijan, Batangas — which it declared had incurred combined losses of P15 billion: P10 billion in 2021, and P5 billion in January-May 2022. SMEC committed 330 MW and SPPC committed 670 MW, for a total of 1,000 MW, to Meralco from December 2019 to December 2029. SPPC has asked the Energy Regulatory Commission (ERC) for a rate increase from January to May 2022 of P0.80/kWh (from P4.30 to P5.10/kWh), and SMEC asked for a big increase of P4/kwh (from P4.30 to P

*  BusinessWorld  August 22, 2022. ------------------- This week will mark the sixth month of Russia’s invasion of Ukraine, so we review commodity prices as a result of invasion and US-led economic sanctions against Russia. We will also discuss the Philippine government budget for 2023 which is to be submitted to Congress today. Here are 10 things to watch out. 1. Continued high power prices that trigger high inflation. Last week, the Dutch Title Transfer Facility (TTF), the leading Europe benchmark for wholesale gas prices, reached an all-time high of €245 per megawatt hour (MWH) — 505% higher than it was a year ago. And last week, the UK reported a double-digit inflation rate of 10.1% in July, another 40-year high record. Germany’s overall electricity prices (all in for generation, transmission, distribution, etc.) have been rising from €0.14/kwh in 2000 to €0.24 in 2010, €0.32 in 2020, and €0.41 in 2022. 2. High fertilizer prices, high food prices. Fertilizers — urea/carbamide, urea

*  BusinessWorld  August 15, 2022. -------------- This piece will cover six topics and events that occurred last week so we go straight to them. 1. GROWTH RECOVERY AND RISING INFLATION Last week, the Philippine Statistics Authority (PSA) released the 2nd quarter (Q2) 2022 GDP growth and it was 7.4%, a bit lower than the Q1 growth of 8.2%. The PSA also released the July 2022 inflation rate last week and it was 6.4%, a bit higher than June’s inflation of 6.1%. So, for Table 1, I averaged the GDP growth for Q1 and Q2 of selected countries and compared them with the Philippines’. Then I also averaged the inflation rate from January to July. The big East Asian economies with no Q2 GDP report yet, like Japan and Thailand, are not included in the table. The Philippines so far has the fastest growth recovery in first half 2022 with 7.8%, followed by Malaysia and Vietnam. The main explanation is low base effect — the Philippines had the deepest GDP contraction in Asia in 2020, followed by low g

* My article in  BusinessWorld  last August 8. -------------- There were four economic developments last week that I want to comment on... TOBACCO TAXES AND ILLICIT TRADE Last week, Budget Secretary Amenah F. Pangandaman reiterated that they will submit Budget 2023 to Congress on Aug. 22. The thick documents include projected tax revenues and other measures to fund the government’s huge expenditures, including sin taxes. Eight years ago, now Finance Secretary Benjamin Diokno wrote a column, “Illicit trading of cigarettes rising” (Manila Speak, Oct. 9, 2014; reprinted in one of his four books, Through the Looking Glass, published 2020). He cited Oxford Economics’ estimates of tax losses from illicit cigarettes: P2.62 billion in 2012, and P15.60 billion in 2013. The estimated number of illicit cigarettes was 6.4 billion sticks in 2012 and 19.1 billion sticks in 2013, an almost 200% increase in just one year. Last April, I attended a webinar organized by the National Tobacco Administratio

* My column in  BusinessWorld  last July 18.  ------------- There were five events last week that I want to comment on.... BUREAUCRACY RIGHTSIZING On July 13 and 14, I saw two television/radio interviews of Department of Budget and Management (DBM) Secretary Amenah F. Pangandaman where she reiterated the DBM’s plan to “rightsize” the bureaucracy. According to Secretary Pangandaman, rightsizing is to “determine which among the 187 government agencies and government-owned and -controlled corporations (GOCCs) with more or less 2-million personnel, may be streamlined through merging, restructuring, or abolition.” This is a good move by the Marcos Jr. economic team and I support it. There should be some spending cuts to reduce the need for more debt to pay old debts. I computed the averages in government spending and GDP level every four years, computed the expenditures/GDP ratio, and compared it with average GDP growth for the same four-year period. The result seems convincing — we have fa

* My column in  BusinessWorld  last July 11. -------------- A number of interesting developments happened last week. I will discuss three of them. THE SC RULING ON MERALCO RATE HIKE On July 4, the Supreme Court (SC) upheld the Meralco rate hike of December 2013 and allowed it to collect a staggered amount of P22.64 billion, and junked the petition by Bayan Muna and the National Association of Electricity Consumers for Reforms (Nasecore) which argued there was lack of due process in the Energy Regulatory Commission’s (ERC) approval of the power rates increase. In 2013, the ERC approved a staggered increase of P7.67 per kilowatt hour (kWh) for the December 2013 billing of Meralco consumers and ordered an additional P1/kWh increase in the February 2014 billing. These were not implemented after the SC issued an indefinite temporary restraining order (TRO) on April 22, 2014. The SC was wrong in issuing such a TRO, wrong in doing price control and intervention. Recall that many power plants

* BusinessWorld  June 20, 2022. ----------------- Last week, there were a number of developments in these four subjects or sectors: taxes, cement, electricity and land transportation. DINNER TALK Last Monday, June 13, I organized a dinner with incoming Finance Secretary Benjamin Diokno and Budget Secretary Amenah Pangandaman, and I gathered a few fellow columnists in BusinessWorld plus the newspaper’s editor-in-chief, Willy Reyes. I could have brought more columnists from the paper but Sir Ben wanted a small group. Ben Diokno was my teacher twice at the UP School of Economics (UPSE): when I was an undergrad in 1984 and again when I took my graduate studies Program in Development Economics (PDE) in 1997. Mina was my classmate in PDE batch 33 so maybe they found it difficult to decline my request. Among the topics we talked about that evening were the tax reforms done by the Duterte administration, infrastructure spending, agriculture modernization, reducing the debt stock, and the defic

* My column in  BusinessWorld  last June 13. ----------------- Three different topics here, we go straight to them.... ELECTRICITY CONCERNS These recent reports in  BusinessWorld  are interesting. 1. “NGCP starts new transmission line for Bataan capacity expansion” (May 26), 2. “Meralco seeks ‘sound’ policies to cut power costs” (June 1), 3. “Razon firm ‘poised’ to control Malampaya project” (June 3), 4. “Prime Infra unit plans world’s largest solar farm” (June 9), 5. “Gov’t imposes sanctions on two electric cooperatives” (June 9), 6. “Meralco power rates to rise in June” (June 10). Report No. 1 is somehow good because the National Grid Corp. of the Philippines (NGCP) has a record of frequent delayed delivery of the needed transmission lines between new power plants and distribution utilities. The report refers to the Mariveles to Hermosa, Bataan line, which should have been finished much earlier. And NGCP should have finished the Hermosa, Bataan to San Jose, Zambales line by June 30 a