Deflecting from the DOE 1

Deflecting from the DOE

Dean Dela Paz

Posted at Sep 22 2021 12:28 AM

To deflect means to draw away. Faced with the prospect of being held accountable for historic, current, and prospective power outages either due to the failure to establish sufficient generating capacity or brazen ignorance of the complex technicalities required to competently oversee the energy sector, it makes sense for the unqualified at the Department of Energy (DOE) to draw attention away from its shortcomings.

As we entered the second half of this year, two battles raged in media. One was political, the other, highly technical. Both deflected attention from the DOE.

The more titillating and vitriolic involved a very visible and public washing of filthy underwear by a political party. It was covered by most media, achieved a fair amount of notoriety, and sparked righteous indignation among the public that it invariably led concerned groups to charge an official they felt was derelict of his duties.

Inordinate attention to party politics deflected attention from matters that affected the economy. In their judgement, gross neglect contributed not simply to the power undersupply threatening a struggling economy already victimized by bungling governance, but the appellants also sought to refocus misplaced priorities on the public welfare rather than on political power plays.

It was all about dirty politics. And it involved the backstabbing and betrayals by the political operators of the ruling party to which Rodrigo Duterte and an incredibly popular prospective presidential candidate belonged. The PDP-Laban was the political party of Emmanuel "Manny’’ Pacquiao who expressed his desire to run as its standard bearer. Unfortunately, Duterte, whose convoluted combinations for 2022 include controlling the presidency through a surrogate, needed a marionette with shorter strings.

The second controversy was related but bore vastly distinct characteristics. Also a distraction, it involved contrived non-issues. It was closely reported on by a print and online troll tabloid that served as a peculiarly hospitable haven for demolition jobs. That legitimate media did not follow its lead belies its inherent lack of credibility.

There were common denominators. Two political operators were concurrently in the electricity sector.

The sector’s generating undersupply controversies involved economic viabilities, supply, and demand, established rules, regulations and quantifiable costs debated between the DOE and a private corporation. These can be settled by the Energy Regulatory Commission(ERC), the proper forum for such. One protagonist however decided a tabloid would be the better courtroom. That made sense for bias and falsehoods. Troll tabloids care little for energy economics, statutes, mathematics, or even the truth.

Despite having the software rotting in some warehouse, absent a requisite least-cost Resource Adequacy Assessment (RAA) all competent energy policy-making agencies worldwide use as a critical determinant, the DOE is compelling the nation’s transmission grid operator to purchase higher-cost ancillary reserves (properly labeled “balancing” capacity) on a firm basis thinking these suffice to mitigate DOE’s total undersupply volatility. 

Balancing capacity is not the problem. DOE’s failure to establish all of reliable baseload, mid-merit, peaking, and balancing capacity is. Balancing capacity primarily establishes grid integrity as randomly needed. But if these enter the wholesale electricity market pricing protocols on a firm basis, they invariably jack up tariffs. Note now the resultant cost-push inflation and the bloating of generating electricity rates despite the fall in industrial demand by 30% in Luzon, 17% and 25% in the Visayas and Mindanao, respectively.

The DOE is sidetracking from being held accountable. As expected, like others in this bureaucracy, exemplified from the very top of the heap, deflection and disparagement are their default defenses.

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(Dean dela Paz is a former investment banker and a managing director of a New Jersey-based power company operating in the Philippines. He is the chairman of the board of a renewable energy company and is a retired Business Policy, Finance and Mathematics professor.)

Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.