Mindanao power cooperatives now open to sale of STEAG in three years

Business World Online
Posted on September 02, 2015 06:46:00 PM
By Carmencita A. Carillo, Correspondent

DAVAO CITY -- The Association of Mindanao Rural Electric Cooperatives (Amreco) has presented to the government two options for the planned auction of STEAG State Power, Inc.’s (SPI) 200-megawatt (MW) coal-fired energy output to independent power producer administrators (IPPAs), but at the same time promised to plant legal obstacles before the auction if it goes through this year.

“We are not opposing the privatization of operation and administration of STEAG’s coal-fired power plant, but we are only asking a deferment of three years,” Amreco Executive Director Clint Django G. Pacana said in a press conference here yesterday.

Amreco launched a campaign in Cagayan de Oro City last week in its bid to gather up to 200,000 signatures from consumers of its member cooperatives to protest the planned auction of STEAG, which is supposed to be concluded this month.

The Power Sector Asset and Liabilities Management (PSALM) of the National Power Corp. (NPC), according to Mr. Pacana, has postponed the conclusion of the bidding process to Nov. 25 in consideration of Amreco’s resolution sent to the Office of the President seeking intervention.

In the letter sent to President Benigno S. C. Aquino, III, Amreco gave the government two options on the SPI plan.

The first option is the deferment of the privatization of STEAG for three years or until such time that the new coal-fired and renewable energy power plants lined up in Mindanao are already operational.

“Why can’t PSALM wait for the commissioning of these committed generating facilities in the island before bidding out the IPPA to private consumers?” Mr. Pacana said.

Among the new coal-fired plants under construction or testing stage are the Alsons-owned Sarangani Energy Corp.’s 210-MW coal-fired power plant in Sarangani province, Aboitiz Power Corp. subsidiary Therma South, Inc.’s 645-MW plant in Davao City/Davao del Sur, and SMC Global Power Holdings Corp.’s 600-MW plant in Davao del Sur. Another Aboitiz subsidiary, Hedcor Bukidnon, Inc., is also building two hydropower plants with a combined capacity of 68 MW and is expected to be completed by end-2017.

The second option presented by Amreco is the inclusion of a lock-in provision on the existing contract price between Amreco and the PSALM-NPC that is effective until 2016.

Nonetheless, Amreco intends to bring the case to court if the privatization is concluded this year.

“If they are still proceeding with the bidding this November, then we will be forced to question with the Supreme Court the constitutionality of the STEAG auction,” he said.

In the same case to be filed, he added, they will also question the recent privatization of the management of the contracted capacities of Mt. Apo Geothermal Power Plants 1 and 2 as well as the planned privatization of the Agus-Pulangi Hydropower complexes.

Mr. Pacana said they were caught by surprise on the Mt. Apo privatization as they were unaware of the process and timeline.

Mr. Pacana said the rate charged by PSALM to its distribution utilities from the NPC power plants is pegged at an average of P3 per kilowatt hour (kWh) for the bundled rates from hydro, coal and geothermal plants, and effectively increased the mixed rates to P5/kWh.

“Privatization of the STEAG will definitely increase the rates of the coal plant, thus introducing increase in the rate component of the mixed generation cost,” he added.

“This would result in increased power rates in Mindanao, which is detrimental to consumers... these untimely privatizations of the power plants at the height of the insufficiency of the generating capacity in Mindanao forces a seller’s market scenario, which have already increased and are expected to further increase the power rates,” Mr. Pacana said. source