PGMA's speech during the 25th General Membership Meeting and Silver Anniversary Celebration of the Philippine Rural Electric Cooperatives Association (PHILRECA)

PGMA's Speech during the 25th Annual General Membership Meeting and Silver Anniversary of the Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA), Philippine Trade Training Center (PTTC), Pasay City

August 06, 2004

Maraming salamat. Maraming salamat, Secretary Vince Perez, President Villena, the first representative of the Electric Cooperatives to the board of NEA; Administrator Bueno from the Career Service; Father Pacquing who continues to advise me on Rural Electrification; Roger Murga, Allan Ortiz, Paul Aquino, Pedrito Bacullo, officers and members of PHILRECA, guests, ladies and gentlemen.

First of all, A Happy Silver Anniversary to all of you! Second, to our awardees, especially the Hall of Famers, the most outstanding electric cooperatives and managers, and the most improved cooperatives, congratulations!

Congratulations! Also for winning three seats through APEC. And thank you for supporting me all the way in the last elections. Also for the steady power throughout the elections, thank you. and because we have not had a system-wide blackout in Luzon for the past two years, congratulations! To the Luzon Electric Cooperatives.

Well, as Father Silva recounted, in my last administration, we made a strong start in the power industry. And among things that we've been able to do together was to bring electricity to more barangays than in any other administration. Again, as Father Silva referred to, in my inaugural address, I said that one of the ten points of my legacy will be to bring power to the entire country. Let's do it together.

In my State of the Nation Address last July, I announced five reform packages: economic growth and job creation, anti-corruption through good government, education and youth opportunity, social justice and basic needs, and energy independence and savings. Before the SONA, I explained to a group of public school educator leaders the education and youth opportunity package. And before a group of business leaders, I explained the economic growth and job creation package.

Today, because I'm before the leaders of your industry, I would like to explain our energy independence and savings package.

Gaya nang sabi ni Vince, ni Father Pacquing, isusulong natin ang pagsusuri at pagsasagawa ng reporma sa kuryente, upang masiguro ang sapat at maka-aasang elektrisidad para sa mga pamayanan at industriya. The reform program was initiated in 2001, the first year of my first administration, with the passage of the Electric Power Industry Reform Act after a delay of seven years. Studies from the Asian Development Bank and Financial and Technical Advisers indicate that we will need an additional 6,000 megawatts of generating capacity over the next 10 years, if we are to avoid shortages. It takes three years lead time from planning to construction to operation to establish a power plant. Thus, our power industry needs to act now.

Studies also showed that we will need 400 billion pesos in order to finance these power plants, as well as the supporting transmission and distribution facilities of which you're part. Historically, the main companies providing these power-related assets have been the Napocor for power generation, the Napocor and now the transmission company for power transmission, and Meralco and you the electric coops for power distribution. All these sectors I inherited in 2001 in bad financial shape. So, the challenge was: how can all of these including you finance our future needs?

In my Sate of the Nation Address last July, I called on our people to be prepared for tough decisions ahead. Yet tough decisions have already been made by our electric cooperatives for the past two years. I thank you for giving the example. I said tough decisions that includes downsizing the bureaucracy. NEA already made the tough decision, from seven hundred, as Father Silva said, to three hundred sixty. So, we have a lean and mean NEA bureaucracy, a model for the others to follow. As for the coop sector itself, AKELCO, BOHECO II, SAMELCO, CASURECO IV, you made the tough decisions and you made a tremendous turnaround. You did it, congratulations!

Now, we have to deal with the rest.
Take the case of Napocor. In the past six years, Napocor has incurred losses of almost a hundred billion pesos and from several decades debts of almost 10 billion dollars. On top of these losses and borrowings, the level of service of Napocor has been complained about, has been unreliable. And in the course of its operations, we have heard accusations of inefficiency and corruption.

The country cannot forever be saddled by Napocor's debts, nor should our people forever be overburdened with the high cost of electricity. That's why we have to reform the power sector. We have to privatize Napocor's transmission and generation assets. That's why I have asked congress -- and I hope our three APEC representatives will help us - I've asked Congress for the immediate passage of the Transco Bill to help us plug the public sector deficit.

The PSALM and the DOE will fast-track privatization of at least 70 percent of the generating assets in Luzon and the Visayas by 2005. I would also like to see the opening of at least ten island provinces to private sector participation.

But the first key to privatization is to create an investment climate that is attractive to both domestic and foreign investors. The second key is to create a privatization process that is transparent and free of corruption.
And I'm also asking for more efficiency among you our electric cooperatives. You've already done so much. Now, I ask you, let's go for a single-digit systems loss percentage by 2010 to make our cooperatives globally competitive. And I know you can do it.

We need a reform package industrywide of energy savings and independence because we've always been dependent on imported energy and therefore vulnerable to the vagaries of global politics and economics, particularly events bearing on oil supply such as war, terrorism and currency fluctuations. We should not be held hostage to these conditions.

I'm, therefore, setting the policy directions and announcing them today towards our goal of energy independence and savings:

First, we need to increase our reserves of indigenous oil and gas. We must develop and actively promote oil and gas exploration.

The PNOCwill search for indigenous energy resources. The PNOC-EDC Geothermal Company will ally with the private sector to become a regional geothermal player. And not only that, not only the region, we aim to become the number one producer of geothermal energy in the whole world. In line with that early this year, we launched the first ever international geothermal bid round to invite private sector investment in ten geothermal fields located throughout the country. Several major Japanese companies have already indicated their interest.

PNOC-EC will be upgraded to improve success rates in discovering new oil and gas reserves.

PNOC-Petrochemical Company will be given a key role in the revival and strengthening of the country's midstream petrochemical industry and eventually establish a Naptha Cracker Plant.

PNOC shipping will modernize its fleet through strategic alliances with the private sector to ensure that petroleum products will be delivered to the remotest islands. So, that's the first.

Second, we need to aggressively develop our renewable energy potential such as biomass, solar, wind and ocean resources.

For example, there are opportunities for the development, utilization and commercialization of 16 wind power areas in the country.

Third, we will increase the use of alternative fuels.

We can significantly reduce our dependence on oil imports by making natural gas our fuel of choice. It's not only indigenous, it's also cleaner fuel.

We introduced natural gas in public transport vehicles early this year. Now the government will ensure that natural gas-powered buses will start plying the major routes of Metro Manila up to Calamba, Laguna by 2005.

In 2010, we expect 60 percent of the targetted 1,500 buses plying the Metro Manila route to run on natural gas.

Inactive power plants such as Sucat, Limay, Malaya and the Bataan Nuclear Plant should also be converted into gas-fired plants in 2005 to ensure that additional capacity will be in place in Luzon by 2008, certainly by the time I step down in 2010.

The program for coco-diesel as an alternative fuel for vehicles should be accelerated. I've ordered all government vehicles to use a one percent blend in their diesel requirements.

A nationwide implementation of one to five percent coco-biodiesel to be implemented by 2006 to 2014 would decrease imported fuel dependency by three percent. The use of coco fuel as an alternative to diesel fuel will create more jobs and income for coconut farmers and improve air quality.

I'm proposing that any new taxes on petroleum products shall allocate a portion to develop alternative transport fuel in the country.

Also, in the DBP, there is a hardly used window for loans for the environment. So, I urge the private sector who want to work on the cleaner natural gas and coco diesel to avail of this environment loan in the Developmen Bank of the Philippines.

Fourth, energy independence also comes in the form of strategic alliances with other countries, particularly our long-time energy partners like Saudi Arabia, our Asean neighbors, China, and our new partner, Russia.

For instance, the Philippines and Thailand are arranging for the use of the former U.S. naval fuel storage facility in Subic such as to make it a regional facility. I think Prime Minister Thaksin and I will both be in China first week of September. So, Vince, arrange for a meeting between us so we can find out how far we've gone on this arrangement.

And finally, number five, we must save on energy through the implementation of strong efficiency and conservation programs.

I'm directing the DOE to spearhead a nationwide energy efficiency and conservation program. All these initiatives will significantly reduce our energy importation that will lead to 60 percent energy self-sufficiency for the Philippines by 2010.

I have laid down this framework upon which future leaders can build. We must brace for more work ahead of us. But I can tell the whole Philippines before our pioneering electric coops, our electric cooperatives have been able to do it. Now, the rest of the country can do it in the future.

To you, coops congratulations!

To the rest of the country, let's follow the good example that our cooperatives have given in the last three years.

Congratulations! And thank you.

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