Privatization of Mindanao’s hydro-power plants gets a snag

Privatization of Mindanao’s hydro-power plants gets a snag


THE Northern Mindanao Electric Cooperatives Association will ask the Power Sector Assets and Liabilities Management Corporation to stop its ongoing privatization of Mindanao’s hydro-electric power plants which would inevitably lead to higher prices of power in the island.

“Contrary to what other parties who have vested interests on the privatization claim, this would read to the escalation, rather than rationalization of power rates in Mindanao, thereby erasing what little competitive advantage we have in attracting investors to our island already beset by so many other distractions,” said Engr. David A. Tauli, Sr. Vice President for Engineering of the Cagayan Electric Power & Light Co. (Cepalco).

Tauli will present a NORMECA petition asking the PSALM to stop the planned privatization of Mindanao’s hydro-electric power plants to the House Committee on Energy on Tuesday, 26 January 2010.

The Energy Committee will initially deliberate on House Joint Resolution No. 51, re: “A Joint Resolution Expressing the Determination and Sense of the Congress of the Philippines to Exempt Agus and Pulangui Hydro Complexes from Privatization as Mandated by R.A. 9136, also known as the Electric Industry Reform Act (EPIRA)”, authored by House Speaker Prospero C. Nograles; and H.R. No. 1553, re: “Resolution Expressing the Strong Opposition of the House of Representatives to the Sale and Privatization of the Agus and the Pulangui Hydroelectric Plant Complexes in Mindanao”, authored by Rep. Vicente F. Belmonte, Jr.” (1st District, Lanao del Norte & Iligan City).]

Addressed to Energy Sec. Angelo Reyes (who also heads PSALM), the petition is signed by Adrian A. Ebcas, NORMECA President; Tauli, and Bernard R. Benavidez, president of the Misamis Oriental Rural Electric Service Cooperative I (MORESCO I). Tauli said NORMECA has also furnished copies of the petition to the Energy Regulatory Commission, the Joint Congressional Power Commission, the Regional Development Councils of Mindanao, the Office of the President of the Philippines, the National Electrification Administration, to other government agencies, and to various government officials, National Power Corporation (NPC) and the PSALM.

The petition alleges that the NPC and PSALM have been rejecting applications of customers in Mindanao to increase the contract energy specification in their Contract for the Supply of Electric Energy (CSEE). Reasons reportedly given for the rejections include the ongoing privatization of NPC, the lack of power capacity in Mindanao, or the transfer of CSEE’s to PSALM.

“As a result, distribution utilities have been unable to secure power for additional loads and new customers,” Tauli said. “This, despite the large amount of base-load power capacity (estimated to be in excess of 300 MW as of December 2009) still available from power plants controlled by NPC Mindanao that could be used to provide the increases in energy requirements applied for by some customers.”

In addition, Tauli said NPC-Mindanao has been imposing penalties on some customers for consumption in excess of their contracted electric energy, as well as those who do not consume their contracted energy allocations.

“NPC-Mindanao has been charging a single monthly rate, disregarding the fact that its generation comes from two types of plants with significant differences in generation costs : low-cost hydroelectric plants and high-cost non-hydro generators owned by Independent Power Producers and contracted by NPC,” the petition reads. “As a result, the monthly rates charged to customers are not commensurate to the large variations in monthly costs of operations of NPC due to changes in the mix of generation from the two types of power plants.”

Not the least, the petition cites how PSALM has been carrying out since March 2009 a highly publicized program to privatize the hydroelectric plants on the Agus and Pulangi rivers in Mindanao, in blatant violation of Republic Act No. 9136 ( the Electric Power Industry Reform Act of 2001) which excludes the Agus and Pulangi complexes from initial privatization, and setting June 2011 as the earliest date when the Agus and Pulangi hydro plants may be privatized.

The petition urged Reyes to direct the NPC and PSALM to approve the applications for increase in contract energy specifications in the CSEE by existing customers who are applying for changes in their contract energy specifications, until all the available capacity controlled by NPC Mindanao is contracted through the CSEE’s; and grant the reduction in the contract energy specifications of customers who apply for reduction, and make this released capacity available for contracting by other customers.

The petition further demanded the immediate and periodic publication of the existing available power capacity in Mindanao from NPC-owned generators and NPC-IPP generators that can be supplied to customers, as well as the available capacity contracted by existing customers through CSEE’s, for the purpose of making transparent to their customers and to the general public in Mindanao the power capacity still available from NPC for sale to customers.

The petition also asks NPC –Mindanao to stop charging penalties to customers who exceed their contracted energy in the meantime that there still is available power capacity not contracted by customers; and, in the event that all available capacity or energy is contracted by customers, not to charge penalties to customers who exceed their contracted capacities in the months when the coincident peak demand of all customers of NPC in Mindanao does not exceed the power capacity available in that month.

The petition also asks the DOE to unbundle the NPC-Mindanao rates into two components: for generation from the existing hydroelectric plants on the Agus and Pulangi rivers (estimated to be 1.80 pesos per kWh at present, using the Return-on-Rate-Base method of rate determination) and the other for generation from all other NPC-owned or contracted power plants, such as the Mindanao coal plant, the Mt. Apo geothermal power plants, and the oil-fueled power plants of the Western Mindanao Power Corp and the Southern Philippines Power Corp (estimated to be an average of 4.07 pesos per kWh), and apply the unbundled rates to the monthly consumption of customers for each category of electric energy supplied in the billing month, based on actual generation mix in the month for which the energy consumption is being billed.

Not the least, the petition asks the DOE to stop all activities for the privatization of the hydroelectric plants on the Agus and Pulangi rivers until the PSALM Corporation, in consultation with Congress, decides to proceed with the privatization of the hydroelectric plants in 2011 as mandated by R.A. 9136.

“We will try to have the petition signed by all customers of NPC in Mindanao and as many organizations of NPC customers as we can reach during the month of January before we submit it formally to the DOE secretary and provide copies to government officials and agencies,” Tauli said. “The NORMECA will be the main sponsor in submitting the petition to the DOE, but others among us will use the petition to lobby various government officials and government agencies to pressure PSALM and NPC into doing what we are petitioning them to do.”