IPPA privatization brings higher power rates for M’nao

Editor at large

THE head of a consumer group in Mindanao has alleged that the ongoing privatization of government-owned generation plants is raising power rates higher than those approved by the government.
“The Independent Power Producer Administrator (IPPA) privatization process is being used by the Power Sector Assets and Liabilities Management (PSALM) Corporation to sell power from Mindanao Power plants at higher rates than those approved by the Energy Regulatory Commission (ERC),” said Engr. David A. Tauli, president and spokesperson of the Mindanao Coalition of Power Consumers.
PSALM is the government corporation tasked to liquidate government owned assets in the power industry within 25 years.
“Prior to February 2015, the generation of the Mt. Apo 1 & 2 geothermal power plants was being sold to Mindanao power consumers at the NPC-MinGen bundled rate of less than P3.00 pesos per kilowatt hour (kWh), under the contracts of PSALM customers in Mindanao with PSALM-NPC, covering the generation of all PSALM-owned or controlled power plants in Mindanao, which includes the Agus-Pulangi hydro plants, the STEAG coal plant, and the Mt. Apo geothermal power plants,” Tauli said.
However, starting February 2015, he said the Bukidnon Second Electric Cooperative (BUSECO) started charging its member-consumers at more than PhP 5.00/KwH for the 10 megawatts (MW) of power being delivered to BUSECO from the Mt. Apo 1&2 geothermal power plants, the Independent Power Producers Administrators (IPPA) contract of which was recently awarded by PSALM to FDC-Misamis Power Corporation.
“The EPIRA clearly provides that any privatization of PSALM-owned generating plants should not result in increasing the rates charged to customers of PSALM and should not result in the reduction of the contracted power of these customers,” Tauli noted.
Tauli added that the existing bundled rates approved by the Energy Regulatory Commission (ERC, the government agency charged with setting power rates) for generation of the NPC-MinGen power plants can be changed only upon approval by the ERC of an application for revision of the bundled rates.
“Note that the rates being charged by PSALM for the NPC-MinGen power plants are “bundled”, which means that PhP 3.00/kWh is the average of the respective rates for hydro plants, coal plants, and geothermal plants, with the rates for coal being highest and the rates for hydro being the lowest,” Tauli explained.
“Consequently, an application to change the bundled rates should be done with all the different types of plants being considered. The rates for any type of plant cannot be changed without corresponding changes in the rates for the other types of plants,” he added.
In raising the rates of geothermal generation from 3.00 pesos to 5.00 pesos per kilowatt-hour, he said PSALM, BUSECO and others party to the interim power supply agreement between the two entities have violated the following rights of power consumers: (a) the EPIRA prohibition against using privatization of government-owned power plants to increase rates; (b) the EPIRA prohibition against using privatization to reduce the contracted power of PSALM customers; and (c) the requirement to get ERC approval prior to changing the bundled rates of the PSALM-owned power plants in Mindanao.
“What is appalling about this process of cheating Mindanao power customers is that there appears to be collusion among PSALM, at least six electric cooperatives, one generating company, and the ERC,” Tauli said. “The rates of more than P5.00/ kWh that BUSECO is passing on to their member-consumers for the generation from the Mt. Apo geothermal plants could not be effected without the agreement of all these parties.”
“In March 2015, the PSALM advertised the bidding for the IPPA for the 210-MW coal power plants of the STEAG. If the BUSECO initiative to increase the rates being charged to their member-consumers for generation from the Mt. Apo geothermal power plant is not reversed, then the PSALM will use the same IPPA process to increase the rates for generation from the STEAG coal power plants,” he added.
Rep. Edgardo R. Masongsong of 1-CARE Party list supports Tauli’s contention.
“We need to protect the electric consumers first more than anybody else,” the legislator said. “I have formally filed a complaint on the subject against the BUSECO OIC before the National Electrification Administration (NEA). My action is a manifestation that I put the electric consumers first over friends and my own electric cooperative.”
Prior to his appointment as first nominee of the First Consumer’s Alliance for Rural Energy (1-CARE) Party List, Masongsong was BUSECO’s General Manager. 1-CARE represents rural electricity users and seeks to protect them from abuses by power distributors and generators. It was granted party list status by the Commission on Elections (Comelec) on Jan. 10, 2010.
However, an executive of the Energy Regulatory Commission (ERC) clarified rate regulation ceases to be through NPC rates but through a review process which is not necessarily based on the winning bid for privatized NPC assets.
“It can be said not just of the privatization of the Mindanao plants, but of the privatization in general, that PSALM’s main objective is to sell high,” said Atty. Francis Saturnino Juan, ERC executive director. “By selling high, it realizes more. With more proceeds, more debts are settled and stranded debts are reduced. Lesser stranded debts mean a lower universal charge.”
Once the plants or contracts are privatized, Atty. Juan said the rate regulation ceases to be through the regulation of NPC rates but will be done through the review process for the contracts entered into by the successors and in setting the rates.
“The ERC looks into the book value of the asset acquired or the reasonable cost for the successor, and not necessarily the winning bid,” he explained. “Also, with privatization, NPC’s portfolio of plants changes from that existing when its rates were last set. Hence, it may already signal that its rates be reviewed and updated to reflect the change.”
Section 38 of the Republic Act No. 9136, otherwise known as the EPIRA, created the ERC as an independent, quasi-judicial regulatory body, replacing the Energy Regulatory Board, created under Executive Order No. 172.
Under Section 43 of the EPIRA, the ERC is tasked to promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the electricity industry.
To carry out this undertaking, the ERC has been tasked to promulgate necessary rules and regulations, including Competition Rules, and impose fines or penalties for any non-compliance with or breach of the EPIRA, the Implementing Rules and Regulations of the EPIRA, and other rules and regulations which it promulgates or administers as well as other laws it is tasked to implement/enforce.


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