Department of Energy's Response to Duterte's SONA

Wazzup Pilipinas!

Here is the response of the Department of Energy (DOE) to the recent State of the Nation Address (SONA) of President Rodrigo Roa Duterte last Monday (July 25, 2016) at the Batansang Pambansa Complex.


a) Stand on Coal

The Department of Energy supports President Rodrigo R. Duterte on accelerating economic growth by implementing energy policies that will meet the country’s specific requirements, especially baseload capacities.

The DOE is mandated to ensure energy supply as the country is still in the process of industrialization. It should be emphasized that the Philippines, as a developing country, has low carbon emissions. The country must therefore use whatever energy resources are available and affordable for power generation.

b) Direct access to electricity by the marginalized sectors and informal settlers as well as settlers in relocation sites:

(Please refer to attached PR on DOE Strengthens Partnership with MERALCO)

Oil Industry

a) Oil Price Adjustments:

STATEMENT: Prices of petroleum product will decrease by 10 cents (gasoline), 35 cents (diesel) and 30 cents (kerosene) due to weak demand in Asian market caused by heavy rains in large oil-consuming countries like China and India, and the stronger peso. Chevron, Eastern Petroleum, Flying V, Petron and Seaoil implemented price rollback today (26 July) at 12:01 a.m., while City Oil, Jetti, Phoenix Petroleum, PTT and Shell effected rollback at 6:00 a.m.

Power Industry

a) Ilijan Underpayments of San Miguel:

STATEMENT: The termination will have no effect on the operations of the Ilijan plant, as the plant is being operated by the Korea Electric Power Corporation (KEPCO) through KEPCO Ilijan Corporation.

The contract termination promotes consumers’ interest as the collection of outstanding amount will translate to a reduction of NPC stranded debts that will be recovered through the universal charge. The unpaid amount of SPPC forms part of the privatization proceeds to be utilized to liquidate the financial obligations of National Power Corporation (NPC) pursuant to the EPIRA. This was noted by the Commission on Audit in its qualified opinion for PSALM’s 2014 Annual Report wherein it cited that collections from SPPC are not sufficient to pay for the capacity fees and energy fees due to IPP, fuel expenses and other related expenses necessary for the operation of the said Power Plant, and for the amortization of the outstanding loans of PSALM.

DETAILS: The management and control of the contracted energy output of the Ilijan Plant was transferred to San Miguel Corporation (SMC) on 26 June 2010 as it posted the highest bid of USD870 million (USD870,000,473) and complied with all the Administrator Conditions Precedent. SMC later assigned the IPPA Administration Agreement (AA) to its wholly-owned subsidiary South Premiere Power Corporation (SPPC).

Under the terms of the Ilijan AA, SPPC has the obligation to pay PSALM generation payments and fixed monthly payments.

b) Universal Charge Application of Power Sector Assets and Liabilities Management (PSALM):

STATEMENT: The Department of Energy is studying all options how to lower the universal charge being passed on to consumers. This is one of the mechanisms that the DOE is considering to lower the price of electricity. We hope to come up with a win-win solution for all affected stakeholders.


DETAILS:

a. Universal Charge Remittances, Interests & Disbursements Charge Remittances, Interests & Disbursements

As of 31 May 2016, remittances of collecting entities (CEs) to PSALM amounted to PhP94.817 billion with interest earnings from deposits and placements of UC funds amounted to PhP0.147 billion. On the other hand, UC fund disbursement amounted to PhP94.496 billion. Below are the details of UC remittances, interests and disbursements:

UC Collections as of 31 May 2016 (in Billion PhP)

Particulars	Remittances	Interests	Disbursements	Balance
Special Trust Fund –  Missionary Electrification (ME)   NPC-SPUG	55.260	0.044	55.289	0.015
Special Trust Fund – ME Renewable Energy Developer Cash Incentive (REDCI)	0.246	0.000	0.141	0.105
Special Trust Fund – Environmental Charge (EC)	1.721	0.095	1.491	0.325
Special Trust Fund – Stranded Contract Cost (SCC)	37.590	0.008	37.575	0.023
TOTAL	94.817	0.147	94.496	0.468

      Source: PSALM

Accounting for the inflows and outflows of the UC fund leaves it with a balance of about PhP0.468 billion as of 31 May 2016.

b. Remittances for CY 2016

For the period November, 2015 to May, 2016, PSALM received Php13.945 billion in UC remittances broken down as follows:

UC Remittances to PSALM for the period November 2015 to May 2016 (In Php Billion)

 

Month	UC-ME (NPC-SPUG)	UC-ME (REDCI)	UC – EWR	UC - SCC	Total/Month
November	0.906*	0.010*	0.015	1.142	2.073
December	0.844	0.010	0.013*	1.048	1.915
January	0.917	0.010	0.015	1.145	2.087
February	0.858	0.009*	0.014	1.075	1.956
March	0.826	0.009	0.013	1.031	1.879
April	0.904	0.010	0.015	1.126	2.055
May	0.870	0.010	0.014	1.086	1.980
Total	6.125	0.068	0.099	7.653	13.945

Source: PSALM * Difference of .001 with previous reports was due to rounding off

c. Disbursements for CY 2016

For the period November, 2015 to May, 2016, PSALM disbursed a total amount of Php13.810 billion to UC beneficiaries as follows:

UC Disbursements of PSALM for the Period November 2015 – May  2016 (in Php Billion)Month	ME (NPC-SPUG)	ME (REDCI)	UC-SCC1/	Total/Month
November 2015	0.906*	0.003	1.143	2.052
December 2015	0.834	-	1.036	1.870
January	0.925	-	1.151	2.076
February	0.857	0.002	1.075	1.934
March	0.823	0.006	1.026	1.855
April	0.915	0.004	1.149	2.068
May	0.872	0.007	1.076	1.955
Total	6.132	0.022	7.656	13.810

For the period January to May 2016, PSALM disbursed PhP4.392 billion to NPC-SPUG to fund missionary electrification functions, chargeable against the UC-ME fund. This is pursuant to the following ERC Decisions/Orders:

Date	Particulars	ERC Case No.
12 August 2013	ERC Decision on CY 2011 True-up Adjustments (PhP4.651 billion)	2012-085 RC
10 October 2013	ERC Decision on CY 2010 True-up Adjustments (PhP2.566 billion)	2012-046 RC
03 November 2013 & 17 August 2015	ERC Order on CY 2015 UC-ME Subsidy	2014-135 RC
20 April 2015	ERC Order on CY 2014 UC-ME Subsidy (PhP2.763 billion)	2012-85

In accordance with the ERC decision dated 28 January 2013 under Case No. 2011-091 RC, the amount of PhP5.477 billion was transferred from the UC-SCC STF to the UC-SCC SFA for the period January to May 2016.


d. ERC Approved UC Rates

The table below shows the ERC-approved UC rates being implemented as of 31 May 2016:

Type of UC	PhP/kWh
UC-ME	0.1561
UC-EC	0.0025
UC-SCC	0.1938
Total	0.3524

c) SPEX/Malampaya Arbitration:

STATEMENT: The Department of Energy’s thrust is to take a nationalistic approach, which requires a unified stand by the various agencies of government involved to protect the rights and interests of Filipinos.

DETAILS:

Updates on COA (Commission Proper, Local Proceedings):

·        Pending resolution of the Motion for Reconsideration filed by SPEX & Chevron.

·    COA held hearings on June 7 and 27, 2016, in which SPEX and Chevron presented additional documents and witnesses, including former PM Cesar Virata, former DOE Sec. Raphael Lotilla, and former DOE Undersecretary Rufino Bomasang.

·        SPEX and Chevron filed their Memorandum on 04 July 2016.

Updates on International Chamber of Commerce Arbitration (Venue: Singapore)

·        The GRP challenged the jurisdiction of the ICC tribunal.

·       May 2016 - ICC Tribunal decided to first hear the jurisdictional issues and will hold hearings thereon in November 2016.

  

Updates on International Centre for the Settlement of Investment Disputes Arbitration (Venue: Washington, USA)

·        June 27,2016 – SPEX filed the Request for Arbitration (RFA)

·      June 28, 2016 – ICSID acknowledged receipt of the RFA and notified the Office of the Solicitor General and the PH Embassy in Washington DC about said filing of the RFA.

·        July 20, 2016 – ICSID registered the RFA.

d) Agus-Pulangui Privatization Stand per Conversation with Electric Coops:

e) DOE Discussion with PSALM/Department of Finance on Continuing Privatization of Power Assets:

STATEMENT (d/e): The Department of Energy anchors its directions on the merits of the EPIRA. For Malaya Thermal, it is targeted to be bid out by 2018. The DOE will consult the legislative body on privatizing the Agus & Pulangi Hydro Complexes.

Meanwhile, the sale of Bataan Thermal and Bataan Gas Turbines is still pending subject to the resolution of the court involving their assets.

DETAILS:

Indicative Privatization Schedule

Schedule of Privatization for Generating Assets as of 30 June 2016

Asset Type/ Plant Name	Rated Capacity (MW)	Bid Date		Turnover Date
Owned Generating Plants
Malaya Thermal	650.00		1st Semester 2018	2nd Semester 2018
Agus 1 & 2 Hydro	260.00		2017 Subject to consultation with Congress as provided under the EPIRA
Agus 4 & 5 Hydro	213.10
Agus 6 & 7 Hydro	254.00
Pulangui Hydro	255.00
Decommissioned Plants
Sucat Thermal	850.00		2nd Semester 2016	2nd Semester 2016
Bataan Thermal	175.00		Sale/disposal is subject to resolution of court cases involving the asset
Bataan Gas Turbines	120.00

Source: PSALM

PSALM requested DOE for “no objection” on the transfer of ownership and physical possession of PB 104 to SPC Island Corporation (SIPC) relative to its privatization. The DOE in its memorandum dated 27 June 2016 advised PSALM that it does not object to the said transfer of PB 104 to SIPC in line with the agreements reached during the 22 December 2015 PSALM Board Meeting.

f) DOE Direction for NEA on Continuing Mess at Albay Electric Cooperative:

STATEMENT: The Department of Energy (DOE) will continue to closely monitor the concerns of ailing distribution utilities/electric cooperatives to finally resolve their financial obligations and help them improve their operations. Coordination with PEMC is continuing.

DETAILS:

1. Financial and Operational Parameters

NEA classified ALECO in 2015 as one of the ailing ECs based on the following financial & operational parameters which are not complied with under RA 10531 guidelines, as per its latest submission of data on April 30, 2016:

·      Insufficient Cash General Fund to cover the one month working capital for power and non-power cost;

·        The EC’s collection efficiency is only 84.43% which is below the 95% standard of NEA;

·        The EC posted a net margin of Php 8.529 million;

·    The EC’s networth is negative Php76.254 million, its liabilities is almost Php2.731 billion;

·       The EC posted a systems loss of 20.46% which is higher than the 13% systems loss cap.

2) Financial Status (Payables)

·       ALECO has a total of Php1,161.884 million power payables:

Agency	Amount (Php’000)
APRI	Php 29.400 Million	As of  June 30, 2016
PEMC - Current             - Arrears TOTAL	Php 124.907 Million Php 982.844 Million PhP 1,107.751 Million	As of July, 2016
PSALM	Php 2.320 Million	As of April 30, 2016
NGCP	Php 22.413M	As of  June 30, 2016

As of March 11, 2016, ALECO’s Operations Manager, Mr. Balgemino informed DOE that the Concession Agreement is sufficient for PEMC to defer the payment arrears amounting to PhP 1.240 billion. Mr. Balgemino also informed DOE that the Concession Agreement is sufficient for PEMC to know that APEC is now taking care of the business of ALECO. On APEC’s current arrears in the amount of PhP78.678 million, APEC sent a request for restructuring of their current power payables with payment terms of twelve months starting March 15, 2016 on top of their current bills.

Renewable Energy

a) Additional Approval on 2nd wave of Feed-in Tariff for Solar:

STATEMENT: The Technical Audit teams will assist us in deciding on the area and the rate to be considered in hosting renewable energy (RE) projects.

The area, meaning Luzon, Visayas, and Mindanao, can even include specific islands that can accommodate more RE projects and consider an energy mix of baseload, mid-merit and peaking plants. The rates will be evaluated so that these will result in minimal cost to consumers.