POSTSCRIPT / June 12, 2007 / Tuesday

By FEDERICO D. PASCUAL JR.

Philippine STAR Columnist

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Power crisis concocted to justify expensive coal?

EPIRA LAGS: The Electricity and Power Industry Reform Act (Epira) was enacted in 2001 to create a healthy atmosphere in the energy sector with the privatization of assets of the National Power Corp. by at least 70 percent so competition could set in.

Privatization was envisioned to contribute substantially to lowering or at least stabilizing electricity rates, and to attract serious investors.

But the opposite is happening: Electricity rates are on the rise and Napocor’s privatization has hardly moved. After six years of Epira, only 11 percent of Napocor assets have been privatized.

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POPO FACES TEST: What would you do if you were head of the Department of Energy and your subordinates in the power sector are continuously ignoring, or even undermining, your orders?

Energy Secretary Popo Lotilla cannot just watch helplessly as Napocor officials continue to follow their own agenda and cook their own deals without regard for the mandate to privatize — under a schedule synchronized with the national development plan.

Is somebody who is more powerful and closer to the President thwarting the leadership of Lotilla in his assigned department? Or is he part of the problem?

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EXIT STRATEGY: Is the so-called Napocor “mafia” really that untouchable?

Despite their costly bungling, Napocor officials are being handled with kid gloves. In contrast, the consuming public is being dealt deadly blows of never-ending brownouts and ever-rising electricity rates.

At the rate things are going at Napocor, President Gloria Arroyo will never be able to work out a safe and graceful exit strategy before her term ends in 2010.

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WESM FAILURE: President Arroyo and Secretary Lotilla have been designing and installing systems to make good her promise to deliver stable and low-priced electricity to complaining consumers.

One such mechanism was the Wholesale Electricity Spot Market (WESM), designed like a stock exchange where suppliers offer electricity at competitive (lowest possible) rates.

But the ambitious WESM failed. Reason: The monopolistic Napocor — resisting privatization — is still there lording it over the industry and virtually dictating rates.

Napocor was tagged as the culprit in last year’s price manipulation at WESM. Was anybody in the state firm penalized for it? Nobody.

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OLD STORY: Now the same story is being replayed. Napocor still dominates a field littered with many power plants groaning from short supply of (expensive) fuel and coping with their sad state of disrepair.

With fuel overpricing and plant inefficiency, electricity prices at the WESM in the April billing cycle soared by P2 per kilowatt-hour to P8/kwh estimated settlement price from P5.936/kwh in March.

Volume of electricity traded during the March 26-April 25 billing cycle reached 540 million kwh valued at P4.4 billion.

The impact of the drastic rise in WESM prices on 4 million customers of the Manila Electric Co. (Meralco) was calculated at P0.50/kwh, passed on as a component of generation charge. The giant utility firm procured P2.2 billion worth of electricity from the WESM last month.

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RATE SHOCKS: Since there is a regulatory lag, the pass-on of the rate adjustment will be deferred until the Energy Regulatory Commission approves the utility’s application. But just the same, when it comes the adjustment triggers “rate shocks” in electricity bills.

What had gone wrong in the power industry is something for the books, because of questionable circumstances surrounding the underperformance of Napocor’s power plants during the expected dry hot season.

All of a sudden, several Napocor plants were either generating below capacity or mysteriously conking out — as exemplified by the sudden temporary closure of the Bataan power plant.

Some of the Independent Power Producers (IPPs) were at a loss because their fuel supplies was running low and Napocor could not deliver fuel promptly as contracted.

The worst happened when the plants operating on cheaper fuel and those running on geothermal energy were found to be generating at low capacity. Napocor was forced to fall back on more expensive oil-fired plants.

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COMMISSION!: The chaotic result was the power outages in Metro Manila and some parts of Luzon. This artificial (avoidable) power crisis only resulted in higher electricity charges. Kulang na nga’ng kuryente, mahal pa!

There must be something sinister being hatched by the “mafia.” The reported emergency acquisition of high-priced coal may have been triggered by an artificial crisis contrived to justify the astronomical purchase of coal at around $85 per metric ton.

Unknown to most consumers, IPPs are not allowed to buy or import their own fuel. They are forced to procure fuel only through or from Napocor, which buys and delivers the fuel to the IPP kunwari to “convert” it to power.

Malacanang and Napocor have refused to disclose who pockets the fat commission from the massive regular importation.

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OLD TRICK: That a supposed fuel shortage suddenly hit a “surprised” Napocor – forcing it to make “emergency” purchases of expensive coal — is belied by the state power firm’s own records.

Data showed that Napocor had known since last year its 2007 coal requirements. Yet it delayed procurement and awarded only in April an “emergency” coal contract for five shipments at $81-$89 per metric ton to Hunter Valley.

Had Napocor officials imported the fuel at the time they had ascertained the projected coal requirement, the price would have been not more than $60 per metric ton.

Creating an “emergency” to justify a rush purchase without bidding is an old trick of crooks in government.

What is Secretary Lotilla, or his boss at Malacanang, doing about this? Maawa naman sana sila sa tao!

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(First published in the Philippine STAR of June 12, 2007)

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