Rate hike eyed for grid damage

Posted on 10:53 PM, September 27, 2010

Consumers to shoulder costs of Ondoy, Pepeng and bomb attacks

THE PRIVATE OPERATOR of the country’s power transmission lines wants consumers to pay for P172.8 million in damage caused by tropical storms Ondoy and Pepeng as well as terrorist bombings, declaring these as "force majeure" and therefore not covered by insurance.

Parts of the country were left without power following Ondoy and Pepeng. -- AFP

Rate increases to be implemented starting 2011 to 2015 were sought by National Grid Corp. of the Philippines (NGCP) in a petition filed before the Energy Regulatory Commission (ERC) last Sept. 24. Rate-setting rules approved by the regulator were cited as the basis for the firm’s bid to recover repair costs.

The company wants to charge P0.0604 per kilowatt-hour (kWh) monthly in 2011, P0.2004/kWh in 2012, P0.3084/kWh in 2013, P0.2945/kWh in 2014, and P0.2968/kWh in 2015 as "Force Majeure Event Pass-Through Cost" to power consumers in Luzon and Mindanao.

NGCP said a number of substations and transmission lines in Metro Manila and the northern, central and southern Luzon regions were damaged by the heavy rainfall and flooding caused by storms Ondoy and Pepeng in September and October last year.

Transmission towers in Kauswagan and Linamon, Lanao del Norte, meanwhile, were bombed by "unidentified perpetrators" In October 2009. The following month, two more towers at the Agus 5-Aurora 138 kilovolt transmission line and the Abaga-Aurora 138 kilovolt transmission line were damaged by bombings carried out by "lawless elements," the firm said.

Mutya Alabanza, NGCP spokeswoman, said in a telephone interview that not all assets handled by the firm under its concession to operate the country’s power grid could be insured by state-run Government Service Insurance System (GSIS). The NGCP also does not have a choice as the transmission lines are owned by the state, which by law can only be insured by the GSIS, she added.

"We are entitled to apply for force majeure event recovery. The insurance covers only a certain percent of the transmission assets which are government property. Mostly these are in substations and a certain radius from it. Due to the nature of the transmission business, NGCP cannot recover the cost through a cost and markup scheme so we either have to recover through our performance base or a reasonable pass through," Ms. Alabanza said.

She pointed out that NGCP’s performance was affected by storm damage and it could not recover the cost of repairs through the regular performance-based rate-setting.

A GSIS official who asked not to be named confirmed the NGCP’s statements, saying: "The transmission lines are not really part of the insurance cover of NGCP. It is not covered from the start. They know that is not covered."

NGCP informed the ERC of the force majeure events in October and December 2009.

ERC executive director Francis Saturnino C. Juan said in a text message that NGCP had a one-year grace period to file for claims after informing the ERC of a force majeure event. Ms. Alabanza said it took the NGCP a year to file a claim as it was "difficult to scope the damage."

Tropical storm Ondoy dumped heavy rains in Metro Manila late September last year, causing massive flooding and devastating parts of the metropolis. Typhoon Pepeng came soon after and caused flooding in central and northern Luzon.

Power substations in Sucat, Parañaque; Zapote, Las Piñas; and Biñan, Laguna were flooded by water from the Laguna Lake, NGCP said. Towers in the Ilocos region, Mt. Province, Cagayan Valley, Batangas, Cavite, Laguna and Quezon, were either deformed or toppled due to soil erosion, the firm added.

NGCP took over operations of the national electricity grid from the state-run National Transmission Corp. in 2009 after winning an auction for a 25-year concession the previous year for $3.95 billion in what was the country’s biggest privatization deal.

The NGCP consortium is composed of State Grid of China (40%), One Taipan Holdings Corp. of Henry T. Sy, Jr., (30%) and Calaca High Power Corp. (30%). -- E. N. J. David