POSTSCRIPT / November 13, 2007 / Tuesday


Philippine STAR Columnist

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Napocor officials sued over coal overpricing

OVERPRICED FUEL: Some civic groups filed graft charges last Friday against officials of the National Power Corp. for allegedly delaying and overpricing coal purchases, thereby contributing to the rise of electricity rates.

The alleged modus operandi gleaned from documents is: Some Napocor officials delay importing coal for power plants, schedule biddings that strangely fail, then rush emergency negotiated purchases at an overprice.

Private independent power producers in the Napocor grid are not allowed to buy their own fuel, but must import it through the state power firm that virtually dictates the price passed on to the IPPs.

Postscript has been discussing this apparently anomalous practice involving billions of pesos, but it is only now that some taxpayers stepped forward with formal complaints.

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DEL CALLAR ET AL.: Named respondents were Cyril del Callar, Napocor president; Dr. Eduardo Eroy, vice president for logistics; Juan Carlos Guardarrama, vice president and chairman of the bids and awards committee; and Urbano Mendiola Jr., head, Management Committee Secretariat.

The complaint was filed with the Office of the Ombudsman by militant groups under the umbrella organization People Opposed to Warrantless Electricity Rates (Power).

Other complainants include the consumer groups Samahan ng Nagtataguyod ng Agham at Teknolohiya para sa Sambayanan (Agham), and the cause-oriented group Bagong Alyansang Makabayan (Bayan).

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EMERGENCIES: An episode cited involved the “emergency purchases” amounting to P665 million made last summer (April, May and July) when it turned out that many power plants did not have enough coal to meet the increased demand for electricity.

This was unusual, if not suspicious, because everybody in the industry knew that demand goes up in summer. Besides, the Napocor knew exactly how much fuel the IPPs had and would need, yet delayed buying fuel till the last moment.

And when it was done, it was allegedly at an overprice, or that the price was well above (sometimes double) the prevailing market level. Had the purchases been done early enough, the fuel could have been bought much cheaper.

Records showed that the Napocor entered into contracts with Hunter Valley Corp. via negotiated award on April 2, 2007, and with PT Andalan Tiga Berjaya on May 7, 2007, and on July 26, 2007.

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ANOTHER ONE: There is industry talk that some officials earn millions from commissions and the overpricing of fuel and other items being purchased by the power state firm.

The padding of costs adds to the retail price of electricity. The price share of fuel is shown when the final cost in the monthly bills is unbundled, or broken down into its many components.

“Based on data that we gathered, the combined overprice for the three transactions last summer may reach P665 million,” POWER convenor engineer Ramon Ramirez said. “This amount will be eventually shouldered by consumers.”

The practice is so blatant that another “emergency purchase” this month has been reported in the industry as being in an advanced stage of preparation.

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NEGLIGENCE: Ramirez said Napocor officials should explain before the Ombudsman and the public the exorbitant prices at which they bought the fuel.

“Was the coal shortage really unavoidable or was it just plain negligence?” he asked. “Were the emergency purchases made to favor a particular supplier, thus the haste in the approval of the negotiated contracts?”

Agham chairman Dr. Giovani Tapang said that captive consumers will eventually shoulder the increased generation rates and recovered through the distribution utilities.

The distributors, the biggest of which is the Manila Electric Co. (Meralco), collect the added cost and turn it over to the Napocor.

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MIKEY’S ROLE: A big question is why Malacanang, which is going through the motions of looking for ways to lower electricity rates, is not doing anything about the reported overpricing.

President Gloria Arroyo cannot be unaware of what is going on. How come it took consumers themselves to file complaints before government action is taken?

Some quarters are also asking why the President’s son, Pampanga Rep. Juan Miguel “Mikey” Arroyo, is suddenly chairman of the House committee on energy when he has no background in power generation, distribution or utility management.

While the overpricing and the continuous rise in electricity rates have been going on, congressman Arroyo has not even hinted at calling for an inquiry or passing remedial legislation. What is he doing in the committee?

Assistant Ombudsman Mark Jalandoni said he would see if the complaint should undergo evaluation first or be directly subjected to a preliminary investigation. He noted that the power issues are of public interest.

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BROWNOUTS: The complainants said that the first of the questioned summer purchases of coal was overpriced by more than P540,000,000, the second by more than P50,000,000, and the third by more than P75,000,000.

They said the effects of the Napocor’s “grossly inexplicable negligence and failure to perform its legal duty to ensure the quality, reliability, security and affordability of the supply of electric power through the efficient, orderly and transparent management and operations of its undisposed power generation assets have resulted in periodic and massive power supply disruptions.”

Last April, they added, “the Luzon power grid suffered rotating brownouts for reasons attributed to the Napocor’s fuel supply problems, particularly the lack of adequate coal supply to the power plants owned or operated by it, either directly or through its contracted Independent Power Producers.”

In one critical brownout last April 18, the state-owned National Transmission Corp. (Transco) declared a system red alert in the Luzon grid due to a lack of system reserve.

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(First published in the Philippine STAR of November 13, 2007)

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