Author Topic: The ugly face of interconnection  (Read 447 times)

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The ugly face of interconnection
« on: December 08, 2016, 03:43:08 PM »
The ugly face of interconnection
By Carmelito Francisco

If there is one thing glaring about the indifference of the national government to Mindanao, one example that comes to mind is the power industry.

The Mindanao power grid is isolated from the rest of the country so that during the times its power needs were in dire straits, the bureaucracy turned a blind eye on it. Even during those times there were officials who were boldly pushing for the interconnection between Mindanao and the rest of the country, particularly then president Allan Ortiz of the National Transmission Corp. (which would eventually became the privately-run National Grid Corp. of the Philippines), the national government never lifted its finger.

In fact, when the President Benigno Aquino III assumed office in 2010, the thrust of his administration was instead to privatize the two main power sources of Mindanao, the Agus and Pulangi hydroelectric complexes.

It was fortunate that the move never materialized owing to the counter-moves both of some lawmakers and the Mindanao Development Authority as they pushed for the setting up of an entity to run these power assets. The congressional proposal has been revived of late.

The danger in the privatization of these assets is that the once-touted low power rates in Mindanao would become the thing of the past because, and this is to be expected, the companies that would operate them would definitely not only push for profitability and by doing so invest huge amounts that need to be recouped.

The interconnection of Mindanao to the rest of the country’s grid has been revived with Energy Secretary Alfonso Cusi as among the proponents. Of course, there is nothing wrong with Cusi’s move because it is within the mandates of his office, but he must be told about the long-term implications of this action.

Those pushing for interconnection would claim that this is fair enough because this will result in a single grid. But when interconnection was needed by Mindanao so it could have more power sources, the national government never attempted to do it for whatever reason.

The big problem about interconnecting Mindanao with the rest of the country is its two main assets would also benefit the rest of the country. However, during the times when Mindanao was needing sources, the rest of the country had but it did not have and it was ignored.

The argument of those who are bucking the interconnection is that the power rates of Mindanao from using these assets, which stand at about P3 a kilowatt-hour, would result in higher rates because it would be blended with power sources with higher rates. This is an advantage in terms of being an investment area.

The interconnection will also become a huge burden on consumers that even the funding for feasibility study has be passed on to consumers. Even finding the best places for the interconnection has been so hard for the NGCP, if it were to be believed.

The one sad thing is that Mindanao consumers are paying for the government loans of projects in Luzon and the Visayas and even for renewable energy in the Luzon-Visayas grid when do not even benefit from it.

This corner believes that the interconnection concept must be abandoned and just allow Mindanao to chart its growth even in power.

Mindanao’s power surplus, by early next year, would stand at about 1,000 megawatts. The volume even excludes the incoming new renewable energy projects are necessary to balance the power mix which at present is slowly getting tilted in favor of fossil-fueled power plants.

The big surplus a is welcome development for Mindanao because power is essential to economic growth. This was among the reasons that many investors shunned Mindanao in the past.

If the Energy department wants to help Mindanao grow, it must find ways to ensure that rates here are competitive so that investors both in the industry as well as outside will take notice of its potentials.

Mindanao can realize its full potentials even without the interconnection. Government should only ensure that it has the needed push to become a primary investment area that will continue to support the economy of the country. (Carmelito Q. Francisco has been in community journalism for two-and-a-half decades with half of it spent on writing business stories. At present, he is the managing editor of the Davao City-based Mindanao Times and a correspondent of business broadsheet BusinessWorld)

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