II. The Philippine Energy Plan (PEP)

1. EXECUTIVE SUMMARY (Volume 1: National Energy Plan)

The Philippine Energy Plan 2005 Update (PEP 2005 Update) outlines options to ensure reliability and adequacy of supply of various forms of energy. Against the specter of the continually increasing oil price in the world market and power shortage on the domestic front, this PEP 2005 Update sets out to appraise the possibilities and courses of action towards providing adequate supply to the increasing energy demand through resource development and savings, as well as power market reforms.

Plan Framework

The PEP 2005 Update is anchored on the five-point national development agenda as set forth in the 2004-2010 Medium-Term Philippine Development Plan (MTPDP), one of which is the attainment of energy independence.

This over-arching objective is further specified into two-fold energy sector agenda to wit: pursuit of energy independence; and, implementation of power market reforms. The planning parameters of the PEP 2005 Update include: a) low economic Gross Domestic Product (GDP) growth targets set by the National Economic and Development Authority (NEDA), i.e., the ranges of 4.9 to 6.5 percent from 2004 to 2007; 6.8 to 7.0 percent from 2008 to 2010; the 6.5 percent growth rate from 2011 to 2014 is based on the average growth rate of the 2005-2010 forecast of NEDA; b) foreign exchange rates as provided by the Bangko Sentral ng Pilipinas of Php 55.00/USD in 2004-2005 and Php 55.50/USD for 2006-2010; the DOE extended the 2010 level of Php 55.50/USD for the period 2011-2014; and c) population growth projections of the National Statistics Office of 2.0 percent in 2001-2004 and by 1.9 percent from 2005 onwards.

With energy independence as its theme, this Update calls for the development of the country's indigenous energy resources and promotion of clean technologies to sustain energy-efficient energy supply and demand chains that will eventually lead to increased self-reliance and provide the much-needed boost to the country's economic front. The DOE has set forth a goal of 60 percent self-sufficiency level in 2010, and hopes to achieve this by:

-Increasing indigenous oil and gas reserves
-Aggressively developing renewable energy resources
-Increasing the use of alternative fuels
-Forging strategic alliances with other countries
-Promoting a strong energy efficiency and conservation program

On the other hand, the implementation of power market reforms includes a transparent privatization process of the generating assets of the National Power Corporation (NPC) and the transmission assets of the National Transmission Corporation (TransCo). The planned operationalization of the Wholesale Electricity Spot Market (WESM), the electricity trading mechanism among generators, suppliers and wholesale consumers, will be implemented in phases, starting with Luzon and Visayas in 2006. Industries and consumer groups will benefit from the open access scheme in the competitive generation market, and provide them with the flexibility to choose their electricity suppliers at the least possible cost. These efforts will thereby create an investment climate attractive to private domestic and foreign investments.