Electricity sector in the Philippines

The electricity sector in the Philippines provides electricity through power generation, transmission, and
distribution to many parts of the Philippines. The Philippines is divided into three electrical grids , one
each for Luzon , the Visayas and Mindanao . [1] As of June 2016, the total installed capacity in the
Philippines was 20,055 megawatts (MW), of which 14,348 MW was on the Luzon grid. As of June, 2016,
the all-time peak demand on Luzon was 9,726 MW at 2:00 P.M. on May 2, 2016; on Visayas was 1,878
MW at 2:00 P.M. on May 11, 2016; and on Mindanao was 1,593 MW at 1:35 P.M. on June 8, 2016. [1]
However, only 12% of Filipinos have no access to electricity.

Manila

La Electricista

La Electricista , founded in 1892, was the very first electric company to provide electricity in Manila . It
built the first electric generating plant in the country, the Central Power Plant, on Calle San Sebastian
(now R. Hidalgo) in Manila City.

Meralco

Meralco was established as the Manila Electric Railroad and Light Company in 1903. It was created to
provide light and an electric railway system to Manila.

During World War II the transportation infrastructure of Meralco was destroyed and instead of rebuilding
the railway, the company focused its efforts onto its electric services.

During the 1960s a group of Filipino investors led by

Eugenio Lopez Sr. bought Meralco from the American investors. Meralco proceeded to expand during
this time period, it was also during this period that Meralco became the very first billion peso company
in the Philippines .

During the 1970s the Philippine Government made it a state policy for the government to own all major
generating facilities. Meralco sold all of its generating plants to the National Power Corporation (NPC)
and, thus, electric distribution became its core business.

Power Generation
Power generation in the Philippines is not considered as a public utility operation, which means
interested parties do not need to secure a congressional franchise to operate a power generation
company. However, power generation is regulated by the Energy Regulatory Commission (ERC) who must
issue a certificate of compliance to interested parties to ensure that the standards set forth in the
Electric Power Industry Reform Act of 2001 (EPIRA) are followed. [4] The ERC is also responsible for
determining any power abuse or anti-competitive behavior. Power generation is a value added tax zero-
rated (i.e. not subject to 12% VAT) to ensure lower rates for end-users.

Electricity in the Philippines is produced from various sources such as coal, oil, natural gas, biomass,
hydroelectric, solar, wind, and geothermal sources.

Fossil Fuels

Coal, oil, and natural gas are the most abundant

fossil fuels in the Philippines.

Coal

Coal has the largest reserve and is often the cheapest fossil fuel. There is therefore a high demand for
coal around the globe. Throughout the years the demand for it has become steady despite the growing
environmental concerns. Coal has the highest contribution to the power generation mix but the local
demand for it is not limited to power generation. The Philippines has a vast potential for coal resources.
According to Energy Global, there is potentially an approximate of 270 billion tons of coal resources.

Oil and natural gas

In June 2011, the Philippine Department of Energy (DOE) estimated a total of 27.9 billion cubic feet of

oil and a total of 53.9 trillion cubic feet of gas . The estimated total oil production in June 2011 in the
Philippines was 63 million barrels.

Renewable resources

The government has approved feed-in-tariff (FIT) rates for renewable energy in 2014 for wind, solar,
hydroelectric and biomass energy at a rate lower than those asked for by renewable energy developers.

Hydroelectric , geothermal , biomass , wind power and solar plants operate in the Philippines.
Geothermal power

Main article: Geothermal power in the Philippines

Palinpinon Geothermal Power Plant in

Valencia , Negros Oriental

Geothermal power is the dominant renewable energy resource in the Philippines. According to DOE, the
Philippines is second largest geothermal power producer in the world behind the United States of
America . DOE estimates a total potential of untapped geothermal resource is about 2,600 MW.

Hydroelectric power

Magat Power Plant

Hydropower is the second dominant renewable energy resource in the Philippines. There are various
hydropower plants spread out across the country. Large hydropower plants (more than 50 MW
generating capacity) are connected directly to the main transmission grid whereas small (10-50 MW
generating capacity) and mini (101 kW to 10 MW generating capacity) hydropower plants are connected
to local distribution systems.

Biomass power

The Philippines has an abundant supply of biomass resources including agricultural crop residues, forest
residues, animal wastes, agro-industrial wastes, municipal solid wastes and aquatic biomass. The most
common agricultural wastes are rice hull, bagasse, coconut shell/husk and coconut coir. [ citation needed
]

According to DOE, [ citation needed ] based on the information from Department of Agriculture and the

Department of Environment and Natural Resources , the Philippines could produce substantial volumes
of residue which could be used as fuel.

Wind power

Main article: Wind power in the Philippines

Bangui Wind Farm in Bangui , Ilocos Norte

The Philippines being situated on the fringes of the

Asia-Pacific monsoon belt , exhibits a promising potential for wind energy. Wind power plants are the
third most operated renewable energy source in the country.

Power transmission

Power transmission in the Philippines is a common carrier business (i.e. regulated by the government,
serves its franchise area without discrimination, responsible for any losses incurred during delivery). It is
regulated by the ERC who has rate-making powers and the final say in the valuation of transmission
assets. Pursuant to the EPIRA and the Transmission Development Plan or TDP, [7] maintenance and
operations of the nationwide transmission system was subjected to competitive public bidding
conducted by the Power Sector Assets and Liabilities Management (PSALM). [8] The

National Grid Corporation of the Philippines (NGCP) [9] was the highest bidder. It assumed control of the
national transmission system from the

National Transmission Corporation (TransCo), [10] whom assumed the same function from the now
defunct National Power Corporation, by way of RA 9511 its congressional franchise of 25 years
renewable for another 25 years for a total of 50 years. Assuming it secures a renewal, NGCP's franchise
will end on December 1, 2058. Concession , unlike outright sale, allowed government , through TransCo,
to retain ownership of the country's transmission assets such as poles, towers, substations, lines, right-
of-way (ROW), cables, etc., according to Section 8 of Electric Power Industry Reform Act (EPIRA) law
which states that no entity, company, or person other than TransCo who shall own any transmission
facilities. [11][12][13][14] TransCo is also responsible for making sure that NGCP complies with the
standards set by its congressional franchise.

Grids

The Philippine transmission system is composed of three grids, the Luzon Grid, Visayas Grid, and
Mindanao Grid. One characteristic of the grids is that most bulk generation sites are found far from the
load centers, necessitating use of long-distance transmission lines. The Luzon Grid is interconnected with
the Visayas Grid through HVDC Leyte-Luzon , a

high voltage direct current transmission line and

submarine cable with a transfer capacity of 440 MW between Naga and Ormoc. The Visayas Grid is
composed of five small grids (sub-grid) connected with submarine cables, but arranged in a radial
configuration, that may disconnect one sub-grid in case a fault develop on one submarine cable
interconnection. The Mindanao Grid is composed of 138,000 volt lines for long-distance transmission,
and primarily relies on hydropower, usually from Agus Hydroelectric Power Plant in Iligan and Pulangi IV
Hydroelectric Power Plant in Bukidnon . The National Grid Corporation of the Philippines placed
proposals for submarine cable links between Visayas and Mindanao, to unify the three principal grids,
[15] and between off-grid Mindoro and Luzon, to increase power reliability in the off-grid island . [16]
While the three main grids encompass each island group, many islands still remain off-grid, relying on
localized power plants or power barges for supply.

Resiliency and security

The Philippines transmission grids are prone to natural disasters, aging that causes the steel and wood
towers to corrode or decay, and grid security are compromised by squatters and insurgent groups.
Squatters, or "informal settlers", pose a danger to transmission lines and a hindrance to line
maintenance, especially in Metro Manila. The Mindanao Grid is prone to sabotage, led by insurgent
groups and unknown assailants, and many transmission towers have been damaged or collapsed from
consecutive bombings, that may cause a

cascading failure of the grid. [17] Damage to several power plants and a transmission line after the April
2017 earthquake swarm in Batangas reflected the need of power resiliency, resulting the Department of
Energy to draft a policy to improve power supply resiliency. [18] Also, many poles, towers, and other
transmission facilities that are made of steel were painted with aluminum paint by National Grid
Corporation of the Philippines to extend their lifetime, especially those that were constructed by
National Power Corporation. Decayed non-steel poles or towers, however, are replaced with more stable
structure such as steel and cement poles or a newer wood pole.

National Grid Corporation of the Philippines

Main article: National Grid Corporation of the Philippines

The National Grid Corporation of the Philippines (NGCP) is the transmission system operator for three
grids constituting the Philippine grid and as a franchise holder, it is in charge of operating, maintaining,
and developing the country's state -owned power grid . [19]

National Transmission Corporation

Main article: National Transmission Corporation

The National Transmission Corporation (TransCo) is a government-owned and controlled corporation

which is an owner of the country's power grid that is being operated, maintained, and developed by the
National Grid Corporation of the Philippines (NGCP). As owner of the transmission facilities, it assumed
all of
National Power Corporation 's (NAPOCOR) substation and transmission assets. It also owns, maintains,
and operates all distribution facilities and provider of power on some economic or freeport zones and its
nearby barangays in the Philippines.

Power Distribution

Main article: List of electric distribution utilities in the Philippines

Electricity line post in Tagaytay

The circulation of electricity to end-users is a controlled common carrier business requiring a national
franchise. [20] The power to grant national franchises is exclusively vested to the Congress of the
Philippines . Distribution of electric power to all end-users or consumers of electricity may be handled by
private distribution utilities, cooperatives, local government units presently undertaking this function
and other duly authorized entities, under the regulation of the ERC. [21]

A distribution utility has the task to provide distribution services and connections to its system for any
end-user within its franchise area, as there are different distribution utilities available for different areas,
consistent with the distribution code. They are required to provide open and non-discriminatory access
to its distribution system to all users.

Retail rates charged by distribution utilities are subject to regulation of the ERC under the principle of full
recovery. Under full recovery, distribution utilities subdivide their retail rate into two distinct categories,
namely pass through charges and wheeling charges. Pass through charge follows the principle of full
economic recovery where a distribution utility may pass on all the charges it incurred in the distribution
of power such as the price of the power, transmission charge, systems loss charge, etc. to its customers.
The wheeling charge is an additional premium charged to the customer akin to a mark-up on the cost of
power acquired by the distribution utility. The wheeling charge follows the principle of reasonable return
on base (RORB) which allows the distribution utility to operate viably as determined by the ERC.

According to the National Electrification Administration (NEA), the distribution sector is composed of 119
electric cooperatives, 16 privately owned utilities and six local government-owned utilities as of 2009.
[22] These distribution utilities may acquire electricity from generation companies or the WESM, when
certified as the distribution of electricity requires a national franchise, for distribution to residential,
commercial, industrial and other users. NEA, the government agency in charge of implementing
programs to reinforce the technical capability and financial viability of rural electric cooperatives, may
act as guarantor for purchases of electricity in the WESM by any electric cooperative or small distribution
utility to support their credit standing.

Currently, Meralco is the Philippines' largest distribution utility with a franchise area of 9,337 square
kilometers covering Metro Manila , the entire provinces of Bulacan, Rizal and Cavite , parts of the
provinces of Laguna , Quezon and Batangas , and 17 barangays in Pampanga. The franchise area is home
to 23 million people, roughly a quarter of the entire Philippine population of 89 million.
Power distribution outside the Metro Manila area is handled by private distribution utilities and electric
cooperatives.

Private Distribution Utilities (PDUs)

Private Distribution Utilities are electric distribution companies that are owned by private entities. As of
2012, there are 19 private-investor owned electric distribution companies in the Philippines. [23]

AEC - Angeles Electric Corporation

BELS - Bauan Electric Light System

BEZ - Balamban Enerzone Corporation

BLCI - Bohol Light Co., Inc.

CEDC - Clark Electric Distribution Corporation

CELCO - Camotes Island Electric

CELCOR - Cabanatuan Electric Corporation

CEPALCO - Cagayan Electric Power and Light Co., Inc.

COLIGHT - Cotabato Light and Power Company, Inc.

DECORP - Dagupan Electric Corporation

DLPC - Davao Light and Power Company, Inc.

IEEC - Ibaan Electric and Engineering Corporation

ILPI - Iligan Light & Power, Inc.

LEZ - Lima Enerzone Corporation

LUECO - La Union Electric Company, Inc.

MECO - Mactan Electric Company, Inc.

MEZ - Mactan Enerzone Corporation

MERALCO - Manila Electric Company

PECO - Panay Electric Co., Inc.

SFELAPCO - San Fernando Electric Light and Power Co., Inc.

SEZ - Subic Enerzone Corporation

TEI - Tarlac Electric, Inc.

VECO - Visayan Electric Company, Inc.