ORMOC CITY—The three electric cooperatives (EC) in Leyte have until Dec. 25 to enter into a power-supply contract with Tongonan I Geothermal Power Plant (TGPP) and be assured of stable electricity for the long term. The last call was aired by Green Core Geothermal Inc. (GCGI), operator of TGPP, as it warned it may not entertain the Leyte ECs once the window of opportunity closes.
The TGPP was commissioned and operated by the National Power Corp. (Napocor) in 1983 primarily to supply Leyte and Samar with electricity. The GCGI acquired and took over the operation of the plant on Oct. 26. However, the ECs in Leyte, namely, Leyte-II Electric Cooperative (Leyeco II), Leyte-III Electric Cooperative (Leyeco III) and Leyte-V Electric Cooperative (Leyeco V) continued to source their bulk-power supply from Napocor through a transitional supply contract (TSC).
Napocor continues to operate the Unified Leyte power plants. Last Dec. 25, however, the TSC contract of Leyeco V expired and Napocor has not yet renewed it. This is because the Energy Regulatory Commission (ERC) has released a resolution in 2005 yet requiring ECs to enter into bilateral contracts with generators with available capacity. In the case of the Leyte ECs, the Power Sector Asset and Liabilities Management Corp. assigned them to TGPP operated by the GCGI.
However, the three Leyecos refused to sign a TSC with the GCGI due to pricing issues. GCGI sells power at P4.70 per kilowatt-hour (/kWh) compared with Napocor’s P4. Energy Secretary Jose Rene Almendras has given a one-year extension for Napocor to supply power to Leyeco V despite the expiry of its TSC.
“Leyeco V may have given itself another year of being supplied by Napocor, but where will it go if the grace period lapses?” asked Manny Candelaria, deputy marketing manager of First Gen Corp., mother company of GCGI. By that time, it would be too late to go to GCGI as its offer for a TSC is good until Dec. 25 this year.
GCGI has priority customers in Leyte, namely, Leyeco II, Don Orestes Romualdez Electric Cooperative (Dorelco), Philippine Associated Smelter and Refining Corp. and Philippine Phosphate Fertilizer Co. However, the TSCs of Leyeco II and Dorelco will expire on Dec. 25, that would leave TGPP with excess power which it can supply to other ECs.
GCGI is prioritizing Leyeco III, IV and V due to their proximity to TGPP. Already, ECs from other regions, especially the Visayas Electric Cooperative (Veco), are asking GCGI for a TSC. But GCGI is delaying the sale to other ECs to give the three Leyecos a chance to catch up.
Candelaria explains that Napocor’s P4/kWh is a subsidized rate and a root of its P470-billion debt. Moreover, there is no assurance the rate will be maintained especially so that Napocor has filed an application with the ERC to adjust its Time of Use rate to P4.70, the same price of GCGI.
Candelaria finds it ironic that the three Leyecos are cold to their offer while other ECs in Western and Central Visayas (Aklan, Iloilo, Capiz and Cebu) that are far from their plants have switched to GCGI after realizing that its rate is more competitive than their former generators.
For instance, Panay Energy Development Corp.’s rate is P8/kWh, Cebu Energy Development Corp. P6 and Kepco-SPC Power Corp. (KSPC) P5.50. All three generators utilize coal-fired power plants that are prone to monthly rate adjustments unlike GCGI which imposes a fixed rate for 12 months.
Geothermal plants offer lower rates, being VAT-free, and the price adjustment factor is indexed to Philippine inflation rate. This is the advantage of utilizing renewable energy over plants that use fossil fuel because they adjust to international market prices for coal and fuel. Their rates are also based on foreign exchange and US inflation rates considering the plant equipment and components are imported.
The GCGI plants’ spare parts are also imported but the company opted to cut cost on its other operations to maintain its competitive price, Candelaria said. Moreover, based on GCGI’s computation, its true cost of generation is more than P5 but it opted to offer a price lower than KSPC’s.
The GCGI’s pricing components include the P10-billion acquisition cost for TGPP and the Palimpinon plant in Negros Oriental, the P2.5-billion capital and rehabilitation cost of these plants, as well as operation and maintenance costs.
ECs in Aklan, Iloilo and Capiz that used to buy electricity at exorbitant rates immediately jumped on GCGI’s price after they were offered.
“Ang daling mag-decide ng customers from Cebu and Panay na walang geothermal. Di na nila pinapatagal because they’re getting [power] from [the more expensive] coal and diesel,” Candelaria quips. “It’s a no-brainer. If you’re a sensible [EC] general manager, kakagat ka—kuha agad [sa GCGI].”
GCGI’s newest customer is Negros Oriental II Electric Coop (Noreco). Noreco had an agreement with four other ECs in Negros (just like the three Leyecos) to negotiate as one consumer to get a preferential rate from generators. But Noreco broke off from the group before its contract with the other power provider expires this December.
Candelaria admits GCGI will raise its rates annually based on inflation but this is not for profit but to cover the increasing cost of their operation, like the maintenance of their production and injection wells, procurement of spare parts and rising personnel salaries every year.
If they fail to respond to the offer before Dec. 25, GCGI will be forced to sell bulk power supply to other interested ECs like Veco, the second biggest power utility in the country after Manila Electric Co.
Candelaria fears that if Napocor doesn’t extend its one-year grace period, the three Leyecos will be forced to enter into agreements with coal and diesel-based generators. Not only will they pay a higher basic price, the huge system losses due to their distance from the plants will further raise electricity cost to Leyte consumers.
In Photo: Tongonan 1 power plant in Leyte (Felix Codilla III)
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