Rey
Gamboa (The Philippine Star) - August 27, 2019 - 12:00am
With the Supreme Court
ruling voiding with finality 99 power supply agreements that did not go through
competitive biddings, the 52 affected distribution utilities are now starting
anew the process of securing much-needed power supplies that they will sell
their customers.
Things may seem
easy-peasy now, but it unfolds that a number of loose ends – which may be more
than we all bargained for – need to be tied up lest big parts of the country
are plunged into more brownouts and higher power rates.
Apparently, some
ambiguity in the Supreme Court (SC) decision may result in an immediate end of
supply contracts made after June 30, 2015 and currently operational. This would
affect 743 megawatts of electricity consumed in various distribution utility
(DU) areas.
The immediate option of
the affected DUs would be to get electricity instead from the spot market,
where pricing is very much affected by supply and demand, and can swing from P5
to as high as P30 per kilowatthour. Normal DU supply contracts, on the other
hand, carry contract prices from P3 to P6 per kwh.
If the DU is based in
Luzon or the Visayas, well and good. It’s bad news if the DU is Mindanao-based
because the spot market currently does not operate in the area, which only
means power outages will happen.
The good news is that
affected DUs can have a competitive bidding concluded within the year, and a
valid contract with selected power supplier delivering electricity shortly
thereafter. There will be some adjustments made, however, if the power supply
contractor is not the invalidated contract holder.
Deterrents to foul play
Questions about the
transparency of competitive biddings have arisen, specifically since some of
the power supply bidders for Meralco are affiliates.
Hopefully, this will
not become an issue that would further delay the completion of supply contracts
for the country’s biggest DU, which we are all aware of, is responsible for
providing electricity to Metro Manila and its surrounding environs.
This year saw Meralco
stretching its supplies to the maximum, with calls for several yellow and red
alerts during the summer months when intense heat pushed consumption demand
higher and diminished supply from hydroelectric power plants.
The Department of
Energy (DOE) sits as an observer in the biddings, but DOE’s role may not be
enough to ensure that the consumer will in the end benefit from the best price
offer.
The memorandum of
agreements signed between the Philippine Competition Commission and the DOE,
and between the PPC and the Energy Regulatory Commission, should be a better
deterrent for any price manipulation as DUs bear in mind that any agreements they
make may be rescinded in the future should there be proof of foul play.
‘Murang’ kuryente
The signing into law of
the Murang Kuryente Act last Aug. 8 should help partially alleviate the growing
liabilities of the National Power Corp. (NPC) even after the power industry had
been deregulated through the 2001 Electric Power Industry Reform Act (EPIRA).
By tapping into P208
billion of the net government share of the Malampaya funds, the Power Sector
Assets and Liabilities Management Corp. (PSALM) hopes to avoid billing
electricity users with a universal charge, found in monthly consumer billings,
that covers stranded contract costs and stranded debts of NPC.
PSALM also sees the law
as a chance to use the Malampaya funds to cover its yearly shortfalls as well
as avoid additional borrowings to cover NPC’s maturing debts.
The Murang Kuryente Act
is expected to bring down electricity rates by P0.86 for every kwh until such
time that the Malampaya funds will be available. In the end, consumers are
paying for the sins that NPC committed since its inception in the 1930s.
Still struggling
Now on its 18th year of
existence, PSALM is still struggling to pay off the loans that NPC had incurred
prior to the passage of EPIRA, then estimated at more than P800 billion, and since
then with its management of power plants that supply electricity to missionary
areas.
PSALM, as the
government corporation tasked to privatize NPC’s assets, is still optimistic of
bringing its balance sheet to the black by 2026 when its corporate life ends.
As of end-March, PSALM
reported total liabilities at P436.3 billion, of which P258.9 billion were
debts and P177.4 billion being lease obligations with independent power
producers or power generators with contracts with NPC.
In June, however, PSALM
secured a $1.1-billion syndicated loan to pay off some of NPC’s maturing loans.
The previous year, it had borrowed P23 billion largely to cover for overdue
accounts of IPPs and electricity cooperatives. All these loans are guaranteed
by the Philippine government.
Unremitted collections
Earlier this month,
PSALM reported that 11 electricity cooperatives owed P238.3 million in
universal charges it collected from electricity users but had not remitted to
the agency. Demand letters have been sent out with appropriate warnings, but
collection would be a big challenge given the huge amounts.
During the remaining
years of PSALM’s corporate life, it plans to accelerate the divestment of NPC’s
remaining assets to be able to fulfill its mandate. There is widespread
skepticism that this will be enough to pay off all the debts accumulated
through the years, especially since NPC continues to pile on debts.
No wonder the
Philippines has still one of the highest costs for electricity in the region.
Is EPIRA really working?
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