“THE AGUS/PULANGUI HYDROPOWER COMPLEX: GOING A BRIDGE TOO FAR”

Ten years after the passage of the EPIRA, the electricity industry restructuring and privatization of the NPC remain in shambles. Institutions remain compromised even as  power rates in the Philippines are the second highest in Asia next only to Japan, the regulator remains politicized and vulnerable to charges of regulatory capture, competition policy has yielded to rent-seeking among the buyers of the NPC, corruption in the power sector remains camouflaged under the political and economic cover provided by industry “unbundling”, consumer choice is only for the few and the question of universal access to affordable, safe, reliable power has been surrendered to the market with all the vagueries of sweetheart deals, cartels and inside trading. Privatization has opened the floodgates to the most brazen forms of political opportunism and the power sector continues to feed on the wishful thinking of neo-liberals as the driving force of the unfettered greed that operates within.  The ADB and its handmaidens in the NPC and PSALM, continue to myth make and provide cogent reasons for the need to accelrate the pace and scope of privatization.  But like the emperor’s new clothes, current events expose all the wrinkles and warts to the glare of the full sun. Now the privateers in the shadows of the corridors of power, lust as they gaze with experienced eyes on the apex to their takeover ambitions, the crown jewel: the APHC.

The ADB privatization strategy that was translated through the EPIRA, had skirted the political bombshell that is the APHC.  EPIRA had set up a time delay fuse of ten years under the “bridge” on the road to final and full privatization.  Meanwhile, the other “bridges” constituting the other NPC assets all fell to the privatization juggernaut.  Ten years hence, the PSALM and NPC are saying lets push and lay bare the the final bridge.  They argue that the sale of APHC will be the key to lowering the stranded costs and liabilities of the privatization of NPC.  They say that privatizing the APHC is the last building block to the competition strategy envisioned by the planners of the ADB.

But the issues that both the NAPOCOR and the PSALM raise to push the sale are false issues in that they proceed from wrong assumptions: the assumption that the Philippine government has no choice except to undertake an asset sale in privatizing the NAPOCOR and that the proceeds from selling the APHC (Agus Pulangui) are necessary to contain the stranded costs of  NAPOCOR, and the even worse assumption that APHC should even be sold.  We believe that the upcoming debate on the APHC, coming as it does in the heat of an election season, has the potential to be the bridge too far for the ADB, the NPC, and PSALM.  It may serve as the trigger to reexamine the whole subject of the privatization of the NPC, and to revisit the glaring damage wrought through three Philippine Presidents on the Filipino consumer.

A debate with PSALM and the ADB means rejecting the logic of both the ADB and PSALM. It was always for these institutions in insisting that the only way to privatize is to engage in an asset sale (i.e., an asset is sold free from any exisiting financial liability).  The Government and Congress through legislation, could have, and can still insist on a an equity sale (i.e., an asset is sold along or with a portion of its exisiting financial liability).  An equity sale would have given the Government a greater leeway in protecting the interest of consumers and taxpayers.  Instead the Government and Congress played dead and followed the path of least resistance in pushing for an asset sale – selling at a discount, debt-free – these assets.  They (the privateer, PSALM, and NAPOCOR) will counter this argument by saying that selling the assets with their liabilities would have deterred the private sector from buying these power plants and that the privatization of NPC is key to relieving the financial burden that NPC lays on our Governent.  But the truth of the matter is that the privatization of NPC has served as a device to privatize profits and to socialize the liabilities.  You have to remind the privateers that 10 years into NPC privatization that: (a) there has been a continuous spiralling upwards of power rates; (b) that the power of consumer choice has been limited only to those with loads of 1MW and above (that is to say only shopping malls and large commercial and industrial power users have choice as to their power supplier and that they alone, not the captive residential poweruser, are the only ones who enjoy volume discounts from the purchase of electricity).  Meanwhile, we as customers or as taxpayers, absorb the “stranded costs” of NPC, ensuring that the new owners of these assets go laughing all the way to the bank.

Many of the privatized assets  were set up and established through World Bank and Asain Development Bank loans that are now treated as stranded costs for Juan de la Cruz to assume(but the new owners whether Lopez, Aboitiz, Alcantara or Razon acquire these plants Debt-free!).  To add insult to injury, the “take-or-pay” contracts of the IPPs where our Government promises either to “take” what the IPP generates or to “pay” for the same amount, even if the IPP doesn’t generate the power because the givernment doesn’t need it,  was and is still  loaded up as part of the “stranded costs” for consumers or taxpayers to pay for also.  After the Asian Financial Crisis of July 1997. many of these power plants never had to generate power at all (meaning to say that they had almost no costs or expenditures) because the country enjoyed had an excess capacity on paper of anywhere from 4,000 MW to 8.000MW that we were paying for.  Guido Delgado will probabaly justify that by replying that we had to contract expensive energy to get out of our brownouts immediately, that the Asain financial crisis caused a fall in energy demand and that no one can predict the future, and that the Philippine Government should honor their contracts with the IPPs lest we be accused as being “balasubas” or scoundrels.  He will comfort us by saying that these “take or pay” contracts are akin to having a spare tire for the car or a fire extinguisher in the house.  But what about the contractual liability or “word of honor” of these IPPs?  Many set up plants that could not meet their contracted or “promised” capacity (but which the Philippine Government paid them for and which we continue to pay them for even now), even without constructing their promised capacity many enjoyed guarantees from government to buy 120% (note: not 100%) of their supposed capacity, a few did not even operate but which still earned mllions of pesos through arbitrage (they were buying cheaper power from NPC and selling it to customers such as PEZA with a huge mark-up).Certainly our house does not require 15 expired fire extinguishers or our car need 15 overpriced substandard spare tires.

While no one can predict the future, it is also true that both engineers and accountants know the nature of electiricity:  You can’t keep it in a warehouse when demand is low and bring out the supply when the demand peaks.  Electricity is subject to the law of physics, and  legal constructs such as “take or pay” are mere inventions to ensure the maximum profit recovery of the IPP owners.  We have always believed that the EPIRA was not necessary to privatize NP.  But the EPIRA was needed by the privateers to ensure that the liabilities of NPC would be absorbed by both the taxpayer or consumer.  The EPIRA also would lay down the legal fiction that the generation sector, and that includes APHC, would not be considered, by definition of the new law as a “utility”.  The latter was done to ensure that the generation sector would not be subject to the public utilities law which mandates that a utility cannot exceed 12% RORB.  Not being subject to the ROI ceiling the Generation sector can now make as much profit – as so-called “competition” or cartels/or sweetheart deals – depending on your view – will allow.

The PSALM would have us accept the perspective that the sale of APHC is key to lowering the NPC;s stranded costs which consumers will eventually absorb.  And yet when the EPIRA was passed in June 26, 2001, we were all made to believe that the total NPC stranded costs were PHP 550Biliion.  Congress ensured that roughly one-half of this amount would be absorbed through the appropriations process over a period of ten years.  The other one-half was passed on to the consumers as the infamous PPA.  The resulting consumer outcry caused the Government to bury the PPA under the rug:  they supposedly “unbundled” rates so that consumers would be able to transparently determine what they were paying for exact to the last cetavo. But unbundling really just served to camouflage and disguise what was the PPA (Note: unbundling was supposed to be a revenue neutral exercise, but somehow the ERC allowed a multiplier formula in that also brought up all the now segregated components of the final rates).  As early as then, we were already warning that the consulting groups valuating the assets of the NPC for eventual sale were in a potential conflict-of-interest position as they were not barred from participating in the actual bidding process.  We were of the view that there was a very real danger that there would be an overvaluation of the liabilities (which taxpayers and consumers will pay for according to EPIRA) and an undervaluation of the assets (we have information that some buyers even have deferred payment arrangements).

Today NPC tells us that their stranded costs and liabilities are now a whopping PhP 992 billion for which they ask a 30 cetavo per kwh increase for the next 25 years.  We thought we had already paid for this. In the light of the dim track record of both the NPC and the PSALM and the shady behavior of the privateers, we strongly suggest that there should be a proper audit with citizen’s participation.  Even as we speak, there are allegations of “silent” profits” among and between the privateers and NPC such as in Naga, Cebu and Dingle, Iloilo.  We apparently have a situation were 49%of the privatized NPC generating assets are owned by the Aboitiz group even as just as half ot the distribution sector is under the Lopez group.  Competition to own is apparently fierce but somehow it is not bringing price relief to consumers.   While EPIRA itself limits cross-ownership among and between the generation, distribution and transmission sectors, the reality of vested interest groups being present across all sectors persists along with allegations of sweetheart deals that ensure the raising of rates as the electricity flows seamlessly (because it is really a natural monopoly) through the now artifically segregated and supposedly separately owned generation, transmission and distribution sectors.   But why are power tariffs skyrocketting?  Why did we sell TRANSCO to Monte Oro Grid (aka Ricky Razon) and National Grid of China for a 25-year concession fee amount which they will recover in only 2 years of operation?  Why doesn’t the so called Wholesale Electricity and Spot Market mechanism work?  There is much that NPC and PSALM will have to explain.  There is also much more investigation work that has to be done in the distribution sector which as of now have not yet factored in their own “stranded costs”.  Indeed if “stranded costs” is mere euphemism for graft and corruption, then perhaps the solution is not to sell Agus and Pulangui but to send someone to jail.

When the debates in the Congress were raging from 1995 to 2001 on the EPIRA, the issue of APHC was a proverbial  “hot potato”.  Your legislators deferred the matter to ten years down the line.  They instinctively knew that APHC was the crown jewel of the NPC.  They instintinctively knew that the power rates be would be jacked up the moment that the APHC was in private hands. And there was the emotional issue of the waters of the Ma. Christina being part of the Mindanaoan people’s ancestral domain.  What would be a more alarming scenario than a privately held APHC not generating power in the rainy season when the waters are high and plentiful and the price of power is low, because the owner determines that the APHC somehow should be “rehabilitated” and “maintained”, only to subject it to full use in summer when the water is low and correspondingly the electricity price goes up?  What is even more frightening is a scenario of oligarchs and politicians buying into APHC, even as they scheme to acquire ownership of CEPALCO and the co-ops through their proxies or their dummies.

The PSALM and NPC have been scaremongering that the NPC liabilities will continue to grow unless we swallow the bitter pill and privatize APHC.  It is time to scare back.  When the ADB sponsored its high-faluting consuner impact assessment on the privatization of the NPC, their consultant’s assumed the existence of perfect markets.  There are no perfect markets in this country, and restructuring has led to cartels and less accountability.  In fact we still have a young consumer movement, a small middleclass and a smaller stock market to ensure democratization of ownership of the power sector.  We were told that competition would drive the rates down.  In fact, bilateral contracts and winking arrangements are still the order of the day.  We were told that the consumer would have the choice as to his power provider.  But how can there be power of choice when there is not even universal access to electricity in our sitios.  Even the act of umbundling has led to an exercise of rate-raising.  Meanwhile the ERC has gone merrily along permitting the piloting of anti-social preactices such as pre-paid metering of power sales, and a performance-based rate-making formula intended to flummox the most skilled and knowledgeable of consumers.  It is about time that we make power a political issue.  Not to be used, as one Senator did, by promising that it would be his problem too. But in terms of demanding accountability and in terms of exacting a platform and plank on power sector concerns that is beyond slogans and speaks to our concerns.

Our resistance to the sale of APHC will allow us to raise the following issues:

1.    NPC should still hold on to assets of “last recourse” such as APHC in order to keep the electricity market honest.  When the Government divested itself of all its shares in Petron, they lost the capacity to bid in prices that would moderate the greed of the oil sisters.  National security and public interest militate that APHC be kept in public hands.  APHC forms part of our national patrimony.

2.     The penalties in the anti-monopoly law should be increased to reflect the new economic realities.  There should also be an expansion od the definition of what constitutes anti-competitive behavior to deter cartels and oligopolies.

3.    Consumers should be represented on the ERC.  There is nothing political about the desire for affordable, safe and reliable energy.

4.    The NEDA should assist consumers and consumer groups in their applications or petitions before the ERC.  This is to even the playing field as the IPPs can afford to retain the best lawyers and economists.

5.    Revisit the IPP contracts with a view to amending the EPIRA.

6.    Promote true consumer ownership of the electric co-ops through CDA registration and compliance with the New Cooperative Code.

7.    Either prohibit Cross-ownership in the power sector or renationalize the assets of NPC, but subject NPC management to the same constraints and pressures of the private sector.

8.    Provide a default mechanism in tariff-making that would compel Government to bid in a lower price to signal players as to the true cost of power.

9.    Moratorium on pre-paid power sales and performance-based ratemaking until full consultations natiowide with consumers have been conducted.

The first forum was held on September 15 (Tues), 1:00-5:00 pm at Aberdeen Hotel, Quezon City with 50 participants from ALNI/Philippines and NECU and NEWU officers nationwide. Representatives from PSALM and NAPOCOR management were invited. The second forum wiull be held on September 18 (Fri), 1:00-5:00pm at Dynasty Hotel, Cagayan de Oro City. We expect NECU and NEWU regional officers and sectoral representatives, including workers from Agus-Pulangui hydropower complex in Mindanao, and other groups with serious concerns about the Agus-Pulangui privatization. We hope that ADB can participate and listen to the continuing concerns raised by Napocor unions.

ALNI/Philippines is a coalition of 16 trade unions, people’s organizations, NGOs and thinktanks currently co-chaired by the Federation of Free Workers (FFW), the Trade Union Congress of the Philippines (TUCP), and the Association of Philippine Electric Cooperatives (APEC).  They are committed to engage IFIs and the Philippine government in a constructive dialogue on policies, program and projects that have direct impact on Filipino workers and society at large. As such, ALNI/Philippines has been in strategic partnership with NECU and NEWU since 2007 over workers’ concerns in the ADB-assisted power sector restructuring and Napocor privatization.  (For more info on ALNI/P, see: http://alniphilippines.ripchordwebsolutions.com/)

ALNI/Philippines have been engaged in ADB-related activities, the recent one is its representation to the ADB Annual Meeting in Bali last May.

Earlier, NECU and NEWU officers had a meeting with Mr. Zhai Yongping at the Napocor office last August 17. In that meeting, ALNI/P extended the invitation to ADB to participate in the two fora. The unions also discussed, among others, the current status of the Napocor privatization, the continuing costs of power restructuring and violation of workers’ rights, e.g., non-recognition of Napocor unions; no obligation to retain existing workforce in sale of Napocor plants.

These are just some of the issues which will be raised on September 15 and 18. It is hoped that ADB will participate in view of the Bank’s avowed commitment to consultation and participation (C&P), as well as internationally-recognized Core Labor Standards and related labor laws that ensure protection for workers’ rights.  These issues are not new, they have been raised by the unions two years ago in an October 2007 letter to ADB President Haruhiko Kuroda.

So,  their report can be gleaned below:

EXECUTIVE SUMMARY
National Solidarity Mission
Reclaiming our Lives, Reclaiming our Ancestral Land
28 August – 1 September 2009
Surigao del Sur

This report is the result of the National Solidarity Visit to the Surigao del Sur Lumad Evacuees that was spearheaded by Task Force Surigao headed by its spokesperson Representative Luzviminda Ilagan of the Gabriela Partylist. 179 participants from 52 National, Regional and Caraga organizations attended the entire mission.

This NSM report aims to examine the cause of the massive evacuation of the lumad communities in Lianga, San Agustin, Tago and Carrascal in Surigao del Sur that occurred from June to August 2009, to assess the situation of the evacuees at the time of the mission and to present recommendations to mitigate the effects and prevent the same from occurring in the future.

The Tribal Filipino Program of Surigao del Sur (TRIFPSS) and Alternative Learning Center for Agricultural and Livelihood Development (ALCADEV) schools play a pivotal role in the development of the Malahutayong Pakigbisog Alang sa Sumusunod (MAPASU) communities, a concrete manifestation of the strong unity of the Manobo in Lianga and other nearby lumad communities. Moreover, these schools inspire the Manobo people to exercise and advance their right to self-determination in defense of their ancestral domain. The TRIFPSS or ALCADEV teachers, living within the community, are higly esteemed as educators, advisers and critics in the community. They provided the stabilizing presence that allowed the lumad people to thrive, secure in the knowledge that dependable and sincere people are working with them to realize the tribal communities’ full potential. The education of their children and their regular exercises in democratic decision-making have created a strong sense of community.

For the bankrupt and desperate Arroyo administration, these communities represented the last bastion that must be destroyed to gain access and exploit the abundant forest and mineral resources in Lianga to fill its depleted coffers. The Department of Energy (DOE) has again put the entire ancestral domain of these Andap Valley communities as among the listed DOE-recommended areas for the mining of coal in their 2009 Philippine Energy Contracting Round that closed last June 2009.

Military presence in the lumad communities began to build up also in June 2009. In the guise of bringing development through the implementation of education, electrification, road-building and small socio-economic projects, the military aggressively campaigned for the conscription of community members into the Task Force Gantangan – Bagani Forces or else surrender as NPA. They talked to children of stealing the firearms of the NPA, distributing flyers with the pricelist for surrendered arms. They sought to supplant the schools that the communities founded with their own schools, purportedly to “legalize” them, openly accusing TRIFPSS and ALCADEV of being illegal and some staff of being NPA.

Because the military was staying within the communities with their high-power firearms always at the ready and conducting armed patrols in the communities’ perimeter, there were reported incidents of engagements, allegedly with the NPA, around the communities.

These conditions spurred the massive evacuations from June to August 2009. The evacuees suffered inhuman conditions at evacuation centers, receiving inadequate social services from the government. They lived mainly from the community leaders’ efforts to approach local, national and international organizations to appeal for assistance. It was again through their own efforts that food, medical services and other support reached them during their evacuation.

The Manobo community leadership, through MAPASU, engaged government, non-government, church and sectoral organizations at the local, national and international level, to lobby for their immediate return to their communities. It was only when the issue came to the attention of national leaders that the military announced their pullout from the communities with the caveat that they will still return to implement the projects that they had to put on hold while the people were in evacuation.

The NSM delegation accompanied the communities during the return to their homes on August 30, after more than 6 weeks in evacuation. There were documented cases of defacement of property with anti-communist slogans, malicious destruction and loss of property. Some farms were destroyed because of the prolonged period when the crops were not tended.

In Pantukan, Carrascal, the military was still in the community, living less than 75 meters from the back of the Roman Catholic Chapel when the NSM delegation visited. The military’s clotheslines where still full and in plain view when the mission arrived. They were also harassed by two motorcycle-riding men in civilian clothes who were believed to be intelligence agents who took pictures of the delegation while interviewing residents.

Under the OPLAN Bantay Laya 2, the military operates in three modes – combat, intelligence and civil-military. Aside from allowing the Philippine Government to declare a “strategic victory” against the CPP-NPA-NDFP before its deadline in 2010, these modes that are in full operation in Surigao del Sur, more importantly, will pave the way for the uninterrupted operation of mining companies in the area. The projects that were supposedly for the development of these communities are actually nothing more than consolation prizes and bribes for the wholesale plunder of the mineral and other forest resources in their ancestral domain. The TRIFPSS and ALCADEV schools are vilified and TFG-BF are recruited to undermine the unity and strong sense of community identity that have become inherent in the Manobo communities in the MAPASU areas.

Despite the fact that the Manobo communities have already returned to their homes, with the media pronouncements of the AFP regarding the 13 Manobo residents in the MAPASU area who are already charged with warrants of arrest ready to be served, their persistence in implementing their “development projects” and continued vilification of ALCADEV, its learners and staff, these communities continue to be under threat.

We therefore recommend:

1. For the Philippine Government to withdraw OPLAN Bantay Laya 2 and pull out military troops from civilian communities in Surigao del Sur;

2. For the AFP and the Philippine Government to idemnify members of the community who incurred damages/losses to property and livelihood due to the prolonged military occupation of their communities and homes;

3. For the AFP to stop the recruitment to the illegal Task Force Gantangan-Bagani Forces and to consider the interests of these lumad communities and allow the civilian government line agencies to handle the development projects that they plan to implement with community consultations to ensure their full, prior and informed consent;

4. For House of Representatives’ Committees on Human Rights, Education and Indigenous Peoples’ Concern to immediately tackle the resolutions that were submitted by the office of Rep. Luz Ilagan regarding issues relating to the massive evacuations in Surigao del Sur and conduct onsite investigations to address them;

5. For Commission on Human Rights Chairperson Atty. Leila de Lima to investigate so that responsible persons may be held accountable for the conditions in Surigao del Sur that spurred the massive evacuations, the inhuman conditions due to the lack of social services that the evacuees suffered at the evacuation centers and the threats that still confront these communities even after they have returned home;

6. For National Commission on Indigenous Peoples Commissioner Eugenio A. Insigne to conduct an on-site investigation to help resolve contentious issues regarding the recognition of the ancestral domain and right to self-determination and to act decisively to protect the legitimate interests of the Manobo communities affected by this massive evacuation;

7. For President Gloria Macapagal Arroyo to be reminded that the Philippine Government is a signatory to the Universal Declaration of Human Rights and that it is also a party to all the major Human Rights instruments, thus it is bound to observe all of these instruments’

Lanao Power Consumers Federation (Lapocof), a group composed of civil society in Iligan and Lanao, will lead the conference of this “expert group.”

Such was a result after the consultation done by the Mindanao Coalition for Transparent Accountable Governance (MCTAG) in partnership with the Mindanao Business Council (MinBC) at Davao city last August 25 and 26 relating to the Unequal Distribution of Electricity in the Island, the alleged Impending Power Crisis in Mindanao and How to Bring Down Power Rates.

The Privatization of the Agus/Pulangui Hydro Complexes was also hotly debated which however ended in a consensual agreement that “indeed the Agus/Pulangui Hydro Complexes should not be sold.”

In this connection it was decided that there would be an Experts Group Meeting on September 11, 2009 in Iligan City to be spearheaded by the Lanao Power Consumers Federation. This group is further composed of representatives of these groups:

a. Consumers, Residential, Commercial and Industrial

b. Distribution Utilities, Privately Owned Corporations/Companies and Cooperatives,

c. Transmission Backbone Concessionaire, NGCP;

d. Generators of Electricity, NPC and the Independent Power Producers

e. Local Government Units

f.  National Government Entities: PSALM, DOE, ERC, WESM

The group plan to come up with two parallel papers:

(1) a Resolution to be submitted to Congress and the Senate;

(2) Recommendations for Amendments to the EPIRA to exempt the Agus/Pulangui Complexes from the privatization of NPC assets. Also the group has to come up with a proposal as to what market set up would be appropriate in an environment wherein the Agus/Pulangui remains in the care of NPC. The proposal will try to address the concerns of the different sectors involved in the electricity industry.

and (3)  Tackle the issues on Share of the Wealth Tax, Community Host Benefit, Environmental Fund, Missionary Electrification, and Lifeline Rate.

The venue of the expert conference is at Elena Tower Inn, Iligan City.

To sustain the discussion about the sale of Agus and Pulangi Complexes by 2011, let me qoute a report from Iligan City Information Office about the position of officials here.
“Subling gipahayag ni Mayor Lawrence Lluch Cruz nga suportado sa mga opisyal sa siyudad ang mga paningkamot karon sa Lanao Power Consumers Federation (LAPOCOF) nga babagan ang privatization sa Agus ug Pulangi Hydro-Electric Plants pag-abot sa tuig 2011.” MORE TO READ…

The local officials of Iligan city fully backed the advocacy of Lanap Power Consumers Federation, a partnership of civil society in Iligan city working for consumers welfare, against the sell-out of Agus and Pulangi complexes in 2011 to cope with its whooping debt of National Power Corporation (NPC).

In fact, as a manifestation of their commitment to pursue this campaign, officials made a resolution:

Resolution urging PGMA, the National Power Corporation (NPC), Power Sector Assets and Liabilities Management Corporation (PSALM) and the Appropriate Committee on Congress to cease and desist from selling the hydroelectric power plants particularly Agus and Pulagui in the disposal of assets of National Power Corporation, pursuant to Electric Power Industry Reform Act of 2001  (EPIRA) Law.

Resolution No 09-246

Whereas, the body deliberated on the disturbing report that the National Power Corporation (NPC) is slowly losing its hydroelectric power plants. According to the report, the PSALM corporation which is tasked of selling seventy (70) percent of the state’s power assets by the end of the year, to fully deregulate the power industry and case government burden brought by NPCs debts, has been ordered by Malacanang to complete the sale of assets to bring about true competition and lower rates;

WHEREAS, it can be recalled that the structure of the power industry in the country, after the passage of Republic Act 9136, otherwise known as EPIRA saw the chopping of NPC into Generation Company and Transmission Company both owned and managed by PSALM. Under EPIRA, the government is required to sell plants with a combined capacity of 4,200 megawatts before 2010;

WHEREAS, Iligan city which hosts three hydroelectric plants in the Agus River Hydro Complex is worried as for decades, these plants have softened the impact of high process of electricity produced by diesel and coal fired plants. It is certain that once sold to private corporatios, specifically foreign-owned it will result to the stratospheric prices of electricity which is beyond the capability of poor people to pay;

WHEREAS, the  body will not raise a howl of protest over the selling of NPC power plants, provided these are only limited to oil thirsty diesel and coal fired plants which pollute the environment and are expensive to operate;

Resolve that the SP urges PGMA, NPC, PSALM and the appropriate committees in Congress to cease and desist from selling the hydroelectric power plants particularly Agus and Polanggui in the disposal of assets of NPC pursuant to EPRIA 2001 Law.

Carried unanimously by the City Council. This resolution is authored by Moises G. Dalisay, Simplicio N. Larrazabal and Orlando M. Maglinao

They also planned to discuss this matter with the following bodies:

a. League of City Mayors

b. League of City Councilors

and c.) sought congressman Varf Belmonte to sponsor a bill amending theEPIRA, a law dubbed by city councilor Chonilo Ruiz as “treacherous.”
View here the powerpoint presentation of Dr. Melchie Ambalong of the Mindanao Commission on Women & Lanao Power Consumers Federation.

∞

I was listening to officials of Lanao Power Consumers Federation (Lapocof) discussed about their vehement opposition to the present administration plan to sell Agus and Pulangi complexes by 2011.

Whether income that would be derived from this planned sale will be used to pay for the soaring debt of Napocor or not, is something that I still need to know.

You may ask me what is the relation of this Agus and Pulangi Complexes  to our lives? My answer is “look at your ceiling and stare your lights.. be it bulb, flourescent or chandelier… stare at your electric fans, TVs, airconditions and your electric socket.”

These complexes are the sources of electricity generated by our hydropower plants.

And yes, the government is selling these by 20101

So I am inviting you to read the reasons why electric consumers, local officials and NPC officials are opposing this sale.

———

August 28, 2009

This is with regards to a crucial provision of RA 9136 of 2001, the Electric Power Industry Reform Act (EPIRA) which is vital to the development, welfare and future of the whole Mindanao. This is the sale of the Agus/Pulangi Hydro Complexes by 2011.

Chapter V of the EPIRA, Sec 47 (f) “The Agus and the Pulangi complexes in Mindanao shall be excluded from among the generation companies that will be initially privatized… Said complexes may be privatized not earlier than ten (10) years from the effectivity of this Act. The privatization of Agus and Pulangui Complexes shall be left to the discretion of PSALM Corp., in consultation with Congress.

LAPOCOF, an NGO composed of several sectoral, religious, concerned individuals of Iligan City and the two Lanaos are opposed to the privatization of the AGus/Pulangi Hydro Complexes.

EPIRA states that Congress is to be consulted. Also in Chapter VIII, “General Provision Sec 62.  it states that the Joint Congressional Power Commission (JCPC) in (b), endorse the initial privatization plan… for approval by the Presidnet of the Philippines. And in (g)”determine  inherent weaknesses in the law and recommend necessary remedial legislation or executive measures.”

With these powers vested by EPIRA in congress, we humbly ask congress thru our representative, the honorable congressman Varf Belmonte to see to  it that Agus/Pulangi Complexes will not be sold by 2011.

WHY ARE WE OPPOSED TO THE SALE OF AGUS AND PULANGI COMPLEXES?

1. Generation Rate Increases

For the assets to become attractive, electricity rates have to be high. The higher the winning bidder  bids, the higher the electricity price we have to pay in the future so the winning bidder can recover its investment.

This can be observed with the nature of electricity rate hikes. Following the suggestion of the Asian Development Bank (ADB), the National Power Corporation (NPC) petitioned rate hikes in order to attract investors. Out of the Php 1.98/kwhr, NPC petitioned in 2004, P 1.03kWh was approved by the ERC in 2005.

We saw also that as privatization and the bidding process is about to start for the sale of the Transmission sector, charges also increased from P 0.7716/kwh in May to P0.9163/kwh in July 2006.

Last Feb. 16, 2009, ERC granted provisional rate increase to NPC in Luzon at P0.4628/kwh, Visayas at P1.460/kwh and Mindanao at P0.7147 kwh with a public hearing conducted on Feb. 25, 2009. We wrote ERC telling them that the consumers had the impression that the public hearing done after the granting of increase was for the sake of compliance. People believe that there is collusion between the ERC and the government so that NPC can be very attractive to investors by 2011.

Another reason for the price increases is that when retail competition starts, the other generation plants such as coal, geothermal and oil can be competitive against hydro.

We believe that there are going to be incremental hikes again and again till NPC is up for bidding by 2011. This is an irony because the attractive rate of GENCO is for investors to buy GenCo. This same rate is a disincentive for investors to set up plants in Mindanao. Investments generate employment that would improve the buying power of the people which in turn is a driver for businesses to thrive.

We believe that if there is a strong movement opposing the sale of the Agus/Pulangi complexes, then the reason for rate increases to attract investors will stop.

2. Low Cost of Power. Investor Incentive

Mindanao’s greater competition advantage is the low cost of power it presently enjoys.  Effective March 209, the generation charge for the Philippines approved by the ERC are as follows:

Luzon –    P 4.2648/ kwh

Visayas–  P  4.0339/kwh

Mindanao-P 2.8177/kwh

Mindanao has the lowest generation charge because of the Agus/Pulangi hydro complexes. This is the edge that Mindanao has over Luzon and Visayas. In terms of infrastructure, development, peace and order etc., we lag behind Luzon and Visayas. We cannot afford losing one edge, the low cost of electricity which could be the only major come on for investors to set up establishments in Mindanao.

3.High RORB (Return on Rate Base)

For 2008, the rate base current audited value of all NPC-Agus/Pulangi complexes is P 14,327 billion. The net revenue is P 4,927 billion which gives an RORB of 39.66%

Power distribution utilities are being pegged down by the ERC to an RORB of 12% only. The RORB of 39.66% of the Agus Pulangi complexes is very very high indeed.

The high rate of return is just tremendous at nearly 40% because hydro power relies solely on water to generate electricity. This is God given gift  to the people of Mindanao. A gift that should lead Mindanao to development and progress.

4.Sale of Other GenCos

Our experience with the sale of Masinloc Geothermal Plant located at Zambales. The assets are valued at P930 million. The investors paid only 40% and the remaining balance is payable for seven years at $80 million yearly which is actually the income of the plant itself.

We are afraid, that the Agus/Pulangi complexes will be sold at a giveaway price.

5.Motive for Gain

For NPC to operate and maintain the Agus/Pulangi generating plants, the gain motive is not a factor. There is only the ROI or return on investment to be considered. Except for Agus 1, all hydro plants have high net income even after paying all the financial charges. The net income for 2008 of almost P5 billion is quite a sizable sum added to the coffers of the government. Common business sense dictates that these hydro complexes should be retained at all costs.

6. The WESM (Wholesale electricity spot market)- –EPIRA envisions that with deregulation and a free market in place, electricity rate will go down based on the assumption that retail competition will drive places down.

We are wary of such rosy pronouncement based on our experience with the Deregulation of the Oil Industry which has not driven down the prices of crude and gasoline.

Based on the following observations of the EmPower Consumer group of Luzon, we quote, “contrary to its mission of providing good choice and cheap supply of electricity, WESM has become a trading center of the most expensive electricity in the country. In March, its peak trading was P10.68/kwh. In April, it reached almost P12/kwh. In fact, the recent high rate of electricity in Luzon is because of the more expensive power bought through the WESM which is the heart of the privatization and restructuring program.

One other reason why we are wary of this WESM is the ERC’s dismissal of the Power Sector Assets and Liabilities Management Corporation (PSALM) market abuse case alleged by the Philippine Electricity Market Corporation (PEMC), the operator  of the WESM. The ERC dismissed this for lack of sufficient evidence, despite the detailed market data submitted by PEMC clearly showing that PSALM exercised its market power to raise the WESM spot price.

7. Retail competition in Mindanao

WESM began Commercial Operations in Luzon in June 2006 with 73% of NPC’s assets privatized. Presently groundwork for launching of the Visayas Supply Augmentation Auction (VSAA) is started which in time will lead to WESM operations in the Visayas.

There is yet no mention of any plan to start and open market in Mindanao.

The basis for privatizing NPC assets is for retail competition to start. Since it cannot yet start in Mindanao our Congress need not proceed with the sale of Agus and Pulangi complexes.

8. Market Power /Abuse

The Generation mix of Mindanao is,

NPC (MindGen)                                                                        56.26%

Agus/Pulangi complexes                 (55.38%)

Diesel (IDPP/PB104)                          (00.88%)

IPPs                                                                                             43.74%

Mindanao Coal

Southern Mindanao Power

Western Mindanao Power

Mt. Apo Geothermal 1 and 2

Mini Hydros

Since the Agus/Pulangi Hydro Complex is a significant share of the total capacity available to the Mindanao Market, there is a high possibility that a private firm owning the Agus/Pulangi complex would profitably drive up prices since it controls a significant chunk of the market. Given the weak regulatory tradition in the Philippined, the most likely scenario is the exercise of market power by the firm owning the Agus/Pulangi complex with price manipulation rather than competitive pricing.

Added to that is the possibility that the owner of this major generating plant who can dictate the price would be able to gooble up other smaller plants which cannot withstand the competition. Or smaller plants would be forced to merged with the dominant player. With this scenario, there would be no retail competition defeating the purpose of the EPIRA.

Quoting from EmPower Consumers, “the present Luzon WESM operation brought about a transition from government monopoly to an enhanced private monopoly. The promised competition embodied in the WESM is one of form with little substance. Hence, instead of rate reduction, Luzon have one of the highest rates today.”

We, therefore should do everything in our power to stop the sale of the Agus/Pulangi complexes. The sale for the sake of deregulation to start electricity retail competition in Mindanao will not bring down electricity rates. Possibility of higher electricity rates will be outcome of the Agus/Pulangi sale.

In closing, let us quote PGMA’s and Angelo Reyes’ congratulatory messages published in the July 29, 2009 issue of the Philippine Daily Inquirer for the 3^rd anniversary of WESM entitled, “Brighter Days, Better Way.” PGMA’s message “… WESM have helped ensure that the country will always have a sustainable source of electric power which is necessary to fuel economic prosperity and development. WESM/Reyes ensured private investors a sustainable source of electricity.

Not one word was mentioned regarding lowering cost as promised by EPIRA.

The conference resulted to the drafting of SIPA 2009, which can be gleaned below.

Starting a new one here,  I believe, is both an opportunity and a requirement of dedication because I have decided that this site is going to be my virtual space to advocate specific issues for better governance,uhm, what with the upcoming 2010 election brewing on.

So, welcome to Perspectives Unlimited! This page is enjoying the privilege of free press and the freedom of expression imbued and are inherent in every human being.

I hope you would join me in this journey to find reasons and inspirations to better our lives and to explicate those matters I have chosen not to speak out of uncertainty. I am pretty sure that my concern is also your concern and we hope that our divergent opinions or perspectives are respected.

Have fun in my cyber room.