POSTSCRIPT / March 1, 2007 / Thursday


Philippine STAR Columnist

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Napocor can't ignore Epira bid requirement

REJOINDER: For lack of space last Tuesday, I deferred commenting on a letter of a reader from Lanao defending a National Power Corp. contract with the Lanao Hydroelectric Development Corp. to market electricity that its proposed Agus 3 power plant may generate.

Our reader, Aleem Abdul Malik, noted that “Lanao has been in the dark for several years now despite having six Agus plants.”

That is precisely the problem that Napocor should address without its officials being distracted by pecuniary interests. It is criminal for them to give priority to earning fat fees or commissions that will only add to raising the retail price of electricity.

Mr. Malik said “We are paying P4.98/kwh in our electrical bill in Lanao and we will be paying P10/kwh four years hence in 2011 given the steady increase of more than 10 percent in power rates every year.”

The irony is that energy coming out of Lanao is cheap (an average of P2/kwh), but because Napocor mixes it with the Mindanao power grid, the resulting average cost goes up to some P4.98/kwh. Napocor is punishing consumers in Lanao with expensive electricity, yet some of the residents welcome the onerous Napocor contract with LHDC.

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NO BIDDING: Mr. Malik does not agree with my questioning the LHDC’s having won the Napocor contract without public bidding.

He says: “Please tell us if Napocor can legally bid out the lands of the former governor (Pagarungan), including municipal permits and environmental compliance certificate (ECC) issued to LHDC without violating his legal and constitutional rights.”

Sorry, but the lack of public bidding is questionable. Even if you own the land and complied with other legal requirements, the Electric Power Industry Reform Act (Epira) is clear on the issue that new power outputs to be contracted (in this case, the 225-megawatt Agus 3 hydro project, which is a merchant plant) should be bid out.

The letter of Napocor President Cyrill del Callar to electric cooperatives and direct utilities appears to circumvent Epira. Why did we have to pass a reformist Epira if we would just ignore it?

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LUTONG MACAO: On Asisclo Gonzaga, a former Napocor official who is now negotiating with Napocor for LHDC, I have nothing personal against him. But I find it awkward and unbecoming for him to deal with his former “barkada” at the state-owned power firm on a plant that is still to be built.

That smells like “lutong macao” to me.

On LHDC’s being undercapitalized and in need of financing: It seems that is now the shortcut to making big bucks in this country — work out a contract even if you do not have the money, then look for funds by waving the contract to would-be investors.

It is okay for LHDC or any adventurer to borrow, say, $300 million, as long as the loans and investment are not covered by any government guarantee.

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GOOD NEWS: But all is not that dark on the power front. Days ago we woke up to the good news that power rates had been reduced and that this would soon be reflected on our electricity bills.

This dulled the impact of full-page newspaper ads of “friends of the Genuine Opposition” reciting supposed facts to show that the economy was better off during the time of former President Joseph Estrada than it is now under President Gloria Arroyo.

This welcome news came after the Energy Regulatory Commission granted two petitions of the Napocor to adjust rates leading to cutbacks in retail electricity fees.

Since the opposition has nothing to offer by way of alternatives, it will have to think fast and manufacturer more of those destructive ads or be content with just making “kantiaw.”

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PETITIONS OKAYED: The ERC allowed Napocor to cut its rates starting this month after it provisionally approved its petition for adjustments on its incremental fuel and independent power producer (IPP) costs, which is known in industry parlance as the Generation Rate Adjustment Mechanism (GRAM).

The ERC also approved Napocor’s petition for adjustments pertaining to foreign exchange rate fluctuations under its Incremental Currency Exchange Rate Adjustment (ICERA).

These modifications in the GRAM and ICERA would result in power rate reductions of 4.3 centavos per kwh in Luzon, 31.51 centavos per kwh in the Visayas and 4.5 centavos per kwh in Mindanao for the first month of implementation (Feb. 26 to March 25 billing period).

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STRONG PESO: Chairman/CEO Rodolfo Albano of the ERC said the adjustments do not yet reflect the positive impact of the strong peso on power rates. This means that more savings can be expected soon in electricity costs.

In compliance with a Supreme Court ruling, power distributor Manila Electric Co. (Meralco) is expected to file a petition before the ERC asking that retail prices be reduced to reflect the power rate cutback.

The falling rates demolished opposition claim in their expensive ads that economic growth is just a “mirage.” The administration attributed the rate cutbacks to the improving economy on the Arroyo watch and some reforms at Napocor.

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BETTER DAYS: The economy has been performing much better than expected over the past year that even the critical Makati Business Club has been infected with the “virus” of government-induced higher growth.

Most of its members conceded in a recent survey that they see better days ahead as a result of the improving economy. They expressed optimism that such a high growth path can be sustained by the government.

The rebounding peso is just one of the positive indicators of an economy on a high growth path resulting from the tough reforms implemented by the Arroyo administration to strengthen the country’s macroeconomic fundamentals.

With higher revenues, the government will be in a better position to lower power rates and raise spending on such social services as primary health care, basic education and low-cost housing.

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(First published in the Philippine STAR of March 1, 2007)

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