PNoy speech during the Mindanao Power Summit

Speech
of
His Excellency Benigno S. Aquino III
President of the Philippines
During the Mindanao Power Summit
[Delivered at the Waterfront Insular Hotel, Davao City, on April 13, 2012]
Maayong hapon. Maupo ho tayong lahat.
Before I start, can I just pay special mention to Secretary Almendras. Secretary Almendras has become the favorite whipping boy of so many people. For instance, tatawagan siya ng alas-singko, “Anong ginagawa mo sa pagtaas ng presyo ng krudo?” I don’t remember Secretary Almendras egging Iran for instance to embark on their alleged nuclear weapons program. I don’t remember him going to America to egg Barack Obama to issue all of the pronouncements against Iran or Netanyahu also for that matter. Pero parang lahat ng nangyayari, pati ‘yung beyond his control, kasalanan niya. And to be honest with you, this is not fair. Can we get really good people to accept being the whipping boy for things that are beyond their control?  And if you agree with me that he has been unjustly pilloried for quite some time, can we give him a round of applause?
I’d like to greet also our very feisty MinDA chair, Secretary Lou Antonino; the other members of the Cabinet present: Linda Baldoz, Secretary Roxas, Secretary Coloma; our friends and allies in the Senate present: Senator TG Guingona, Senator Coco Pimentel; our representatives: Mylene Garcia-Albano, of course—Congressman Ungab, Congressman Karlo Nograles, the very feisty Henedina Abad; other members of the House of Representatives present; Governor Umali of the League of Governors of the Philippines; Vice Governor Rodolfo del Rosario; other local government officials present; various sectors and power stakeholders of Mindanao; fellow workers in government; honored guests; mga minamahal ko pong kababayan:
Maayong hapon po uli.
In 2003, NAPOCOR’s debt had already reached a staggering 1.24 trillion pesos—let me emphasize that—1.24 trillion pesos: 24.3 percent of total consolidated public sector debt. The economics of the problem told us we had to draw a line in the sand.
Think of it this way, this debt was bigger than the entire General Appropriations Act for that year. The country faced a continuing, hopeless dilemma: pay for NAPOCOR, or pay for everything else—like roads, schools, and health care.
This explains why Congress passed the Electric Power Industry Reform Act of 2001. The idea behind it is: NAPOCOR would sell its power plants to private investors, and use the proceeds to pay and pair down its debt. This was supposed to put an end to the never-ending, increasing debt. It also freed money that could go to essential government services.
The idea behind this is: electricity generation would be more assured because sound economic and business policies will dictate decisions, instead of political expediency. Businesses will improve our energy sector’s capacities, as opposed to the old government-run system, in which these companies’ leaders had no qualms about mortgaging the country’s future to temporarily satisfy the people, and to please the appointing body.
Gusto ko lang hong idiin, ano? Siyempre, pinatayo ng gobyerno. Kung sasabihin na nalulugi tayo dito, mas madali sa politikong, “umutang na lang tayo kaysa sa taasan natin ang presyo.” At siyempre magpapatong-patong ho iyan; at talagang nagpatong na nga ho, hanggang trillion na ang pinaguusapan.
Mindanao, however, had an exception from EPIRA. There was an oversupply for your power, more than adequate then for your needs, and cheaper than the power that anyone else had. So, the status quo could be maintained, if—and I have to emphasize—if things didn’t change. But things have indeed changed: increasing population means increasing demand; increasing opportunities means increasing need for more power.
Plus, the old assumptions that allowed all of us to rely on hydroelectric power simply aren’t there anymore. You assumed abundant water, but the watersheds are vanishing, which results in the sedimentation of waterways, not to mention the effects of global climate change, which has drastically changed the amounts and frequency of rainfall.
The warning signs were there. In the aftermath of Typhoon Sendong, we saw 60 hectares of logs on the seashore of Iligan—which means the watersheds are indeed gone if not going. You can see the state of the Pulangi River, which badly needs to be dredged.
Hydropower needs water. And the availability and timeliness of the supply of water cannot be considered a constant. So the situation is: the demand is constant, but the supply isn’t.
Basically, Mindanao relying on hydropower for more than half of its consistent consumption—what is called the base load—is not sustainable anymore, considering the many variables that affect water supply—from rainfall, to natural calamities, even to seasonal variations like El NiƱo, and, of course, the depredations of man.
If you can no longer rely this much on hydropower to provide for your base load, you need a more diverse mix of energy sources. So this is what we are addressing.
Right now, Mindanao’s energy production capacity is at 1,280 megawatts, and this is including the 200 megawatts already from the barges, which I must thank the cooperatives for contracting. The peak demand is pegged at 1,300 megawatts, so there is a shortage of 20 megawatts more just to meet peak demand. But we also have to meet the reserve margin of 150 megawatts. So what this really means is we need 170 megawatts more, immediately.
Repairing Pulangi 4 will give us an additional 100 megawatts. There is a further 74 megawatts that can be run by embedded generation units. Therefore, the 170 need can now be met with your resources, because you have 174 that potentially can be tapped. I ask those with these embedded generating units to run those units. And what the cooperatives here have to do is contract these embedded generation units and apportion the 74 megawatts equitably among themselves.
So, we can reach our target of 1,450 megawatts and end up with an excess of at least 4 megawatts. In other words, we are fixing the problem now by maximizing delivery of existing available capacity. But this is not the end of the solution.
In fact, this 4-megawatt surplus is a very, very, very thin surplus. If any one of your existing power plants decides to malfunction, then the problem returns. Mindanao needs more generating capacity, and without putting all the eggs, in one basket.
We have to get more plants here. We just can’t walk, obviously, into a department store and order a few megawatts of energy. It costs two million dollars per megawatt on average, to construct a coal or natural gas power plant. It costs double that for hydro. So for hydro, for example, that’s almost 170 million pesos per megawatt; and obviously we will not build anything that will be less than a hundred. But how can you entice anyone to invest—and this is the question—if their generating cost is more than their selling cost? The simple truth is: we can have a lot more energy, but we have to provide the incentives for businesses to come here to put up those plants. Therefore, there will be a change in what we have to pay. We will have to pay, perhaps, a bit more.
Of our 1.8 trillion budget, remember, only 400 billion of this is programmable. So, can government pay for new plants, plus old loans, and still provide the services and facilities you need?
You have to pay more because this is the reality of economics, not the rhetoric of politics. Everything has its price. We have to pay a real price for a real service. There are actually just only two choices: pay a little more for energy, or live with the lack of energy and the continuation of the rotating brownouts.
What we need to realize is that the old days of cheap power are no longer sustainable, but we can maintain reasonable power rates. And you must also put in your fair share in solving this problem. You have to pay a little more for the current and future health of the energy sector in Mindanao. I understand some cooperatives are paying an additional fifty to sixty centavos per kilowatt hour—this is in contrast to certain quarters who prefer to sow intrigue rather than to face the facts; and who chose to alarm the public by extravagant claims of Mindanaoans having to pay up to 14 pesos more per kilowatt hour. This is simply not true. But, still, prices will increase; and we all need to play our respective parts. Sa Tagalog po, “Ambag ambag tayo dito.”
These are costs all of us must share. And your administration is doing its part. We are putting our money where our mouth is. We are setting aside almost P2.6 billion for the large-scale rehabilitation of Units 1 and 2 of Agus 6, which have been neglected for the past 59 years. This is a plant that was designed, as I told you earlier, to operate for or have a life span of only 30 years, and yet we have used it for almost twice as long. This rehabilitation is long overdue. We are also spending for the rehabilitation of Agus 2. We will not only restore these plants to installed capacity, but improve their output due to advancements in technology. The result: these plants will be able to produce an additional 79 megawatts.
NEDA has also approved the Integrated Natural Resources and Environmental Management Program, which allocates 7.24 billion pesos for four river basins, two of which are here in Mindanao: literally getting the water flowing again.  We are indeed doing our part. But we are also making sure that these projected price increases will be fair. This is why we are studying the formation of a Mindanao Power Monitoring Committee, to be chaired by MinDA, with representatives from Department of Energy, NAPOCOR, the National Grid Corporation of the Philippines, and others from civil society, electric cooperatives, and the business sector.
Paying a little more for energy will enable us to ensure a stable supply of power for the future of the region. It will make the lives of everyone in Mindanao better—not just by allowing them to switch on light bulbs—but also because having a more consistent energy source will give Mindanao a more convincing business proposition to potential investors—not just in the energy sector. This isn’t just about energy; this is about attracting investments and creating jobs, and this is about securing the future of this region.
The dream is that, by the time I step down in 2016, this energy situation will be one less worry in the minds of Mindanaoans and investors in Mindanao alike—that by then, I can truthfully say that I left you in very good hands and in a very better state than what I have found.
I have said so many times, and I say it again today—Mindanao must become not just a land of promise, but the land of fulfilled promises. And that is why I’m here: not just to show all of you that we are focused on the problems you’re facing, but more importantly, that we don’t want your region to just get by these next one or two years, we want you to be a pillar of our economy in the coming decades. Consistency is the foundation of progress: consistent supply, to consistently entice investments that will stay and create continuing jobs.
At the end of the day, it is about empowering a region to take hold of your own future.
And before I end, can I just emphasize the need for energy? In the ARMM—in the provinces of Basilan, Sulu and Tawi-Tawi—we are undertaking a “lighting of sitios” program. We are allocating close to P3 billion for the entire country to energize these sitios. What was left to me was a statement that said 98 percent of all barangays in the country are electrified. What was not said was that 98 percent referred to a definition of an electrified barangay—any barangay that has at least one sitio electrified is considered an electrified barangay. So what was left was 36,000 sitios to be electrified at about a million pesos per. Now, we are happy to note that last year, they asked for 1.3 billion for 1,300 of the first phase of this electrification program. They actually electrified 1,520 sitios, and the cost was not P1.3 billion; the cost was a mere P814 million. So again, that’s an achievement of both DOE, NEA, and even DBM. Now, we are connecting them to the grid. The grid doesn’t have power to supply, then we’re back to square one. That’s why it is so essential we address the needs of those who have the least, but more importantly, in providing you all of the opportunities, we do need the power that is constant and reasonable to entice the businesses that will provide us the jobs and enable our countrymen to really improve their lot in life. And that is where we are focused on, and not just a palliative now, but something that you could count on for decades upon decades.
And now, before I end: I understand that in the Balawi flood plains, the governor—Governor Dimaporo is present—may we ask personally for the efforts, your efforts, to ensure that the flood control project, which adds also to … Agus is expedited. Thank you, governor.
Thank you. Good day.