Growth and electric cooperatives

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Bienvenido S. Oplas, Jr.

My Cup Of Liberty

On the Philippines’ GDP growth rates, the good news is that from 2010 to 2018, the Philippines has been growing above 6% yearly except in 2011. High growth was experienced in 2010 with 7.6% (recovery from 2008-2009 global financial turmoil) and 2013 (election year) with 7.1%.

The bad news is that these growth rates are not enough. The Philippines, with 106 million people, has a GDP size in 2017 of only $314 billion while neighbors with their smaller populations had similar or larger GDP sizes: Malaysia (32M) has $312B, Singapore (5.8M) has $324B, Thailand (69M) has $490B. We need to grow 7-10% per year for many years before we can even catch up with Thailand or Malaysia (Source: IMF, World Economic Outlook [WEO] October 2018).

Among the important factors to have high and sustained growth is to have high and rising supply of cheaper and stable electricity. There are numbers that show a correlation between GDP growth and electricity consumption growth especially for developing countries like the Philippines (see Figure 1).

Philippines GDP and Electricity Growth Rates, 2000-2017




Among the ASEAN 6, a similar pattern can be observed, also with China and Japan. The Philippines’ low GDP size is reflected in its low electricity consumption in tera-watt hours (TWH) (see figure 2).

Electricity Generation (in TWH) and Growth Rates, TWH and GDP, %

There are many factors why our electricity supply and consumption is low compared to our neighbors, like the thick, expansive bureaucracies and permits required before one can explore and develop new power plants.

We focus on the role and “mis-role” of electric cooperatives (ECs). Since they are geographical monopolies granted with congressional franchise to distribute electricity, they can help expand or restrict power demand. If an EC for instance is mismanaged and does not pay the power generation company (genco), even if the genco has big plans to expand power capacity, it cannot do so.

The Department of Energy (DoE) has issued two media releases related to problematic ECs dated February 01 and February 06. It noted that many ECs are failures in expanding rural electrification because of “inefficient management, corruption, unnecessary political interference, institutional conflicts.”

So DoE will conduct a performance review of ECs, especially those that burden their communities with persistent and unresolved brownouts, because they have heavy debts and do not pay their power supply. Underperforming ones will be assisted while non-performing ones will be recommended for cancellation of their franchises.

DOE has identified 17 ECs that are chronic failures to provide satisfactory services to their customers as stipulated in their congressional franchise. Seven are from Regions IV-B and V — ALECO (Albay), CASURECO III (Camarines Sur), FICELCO (Catanduanes), MASELCO (Masbate), OMECO (Occidental Mindoro), ORMECO (Oriental Mindoro), and PALECO (Palawan). Other problematic ECs are PELCO (Pampanga), BASELCO (Basilan), LASURECO (Lanao), SULECO (Sulu), ZAMCELCO (Zamboanga), and DANECO (Davao del Norte).

Then certain islands have rising missionary subsidies — which are then passed on to all electricity consumers nationwide via high universal charges.

In three previous articles in this column, “Unstable power supply due to problematic electric cooperatives” (February 08, 2017), “How the bureaucracy works against cheap and stable electricity (March 08, 2017), and “Corporatization of electric cooperatives can reduce system loss” (September 29, 2017), it is argued that ultimately all ECs should be corporatized and depoliticized, be registered as corporations with SEC, and not with NEA.

 

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.

minimalgovernment@gmail.com