[Opinion] Privatizing Leyte Geothermal

Although it is considered as a national wealth being a power supply jewel in the Visayas region – the Unified Leyte Geothermal Power Plant, will soon succumb to the pressures of privatization being exerted by both the government and the private sector power players in the country’s electricity industry.

Last October, the state-run Power Sector Assets and Liabilities Management Corp. (PSALM) opened up the bidding process for the 640-MW geothermal plant located in Tongonan. Leyte. The geothermal plant is responsible of providing clean energy and cheap electricity to the consumers in the Visayas region.

The geothermal plant also serves as the source of supply of a portion of the electricity demand of rural electric cooperatives, including those cooperatives serving consumers in Panay Island.

The power supply contract from the geothermal plant is instrumental in neutralizing the increasing cost of electricity generated by coal plants. The power supply profile for Visayas illustrates that electricity from Leyte’s geothermal plant continue to dominate the supply of electricity compared coal, although the latter is rapidly becoming a dominant player with the Global Business Power Corp. of Metrobank group fast becoming at the position of command.

The continuing dominant role of the geothermal plant in the energy mix is the reason why electricity consumers outside the franchise area of Panay Electric Co. (PECO) in Iloilo City continue to enjoy lower generation rate. But all these will soon change once the Unified Leyte Geothermal Plant will get privatized. The privatization will again deliver an irreversible impact to consumers in the Visayas.

Moreover, the sale of Unified Leyte serves as an experiment for the future privatization of similar plants. If the arrangement will prove effective, the case of Unified Leyte will set a precedent for the privatization of Agus-Pulanggi plants in Mindanao, a highly contested privatization which is being contested by the Mindanao stakeholders and the Bangsa Moro.

The immediate impact of privatization will be on the rates. The first to go up will be the generation charge. The generation charge, being the biggest item in the over-all cost of monthly electricity, will deliver a crippling blow to all the consumers in the Visayas. In its entirety, the generation rate increase will result into consumers paying higher effective rate.

It is highly anticipated that whoever will acquire control of the Unified Leyte will right away design and implement improvement effort in the guise of optimizing the capacity of the geothermal plant. The justification can also come in the form of harnessing the geothermal source to its full potential. All of these will fall in the lap of consumers for private owners will perpetually bind consumers into paying capital recover fee or CRF. The CRF is a major component in the computation of the generation charge.

Its privatization will also defeat the neutralizing effect of the geothermal energy as a source of clean and cheap electricity as against coal. With the anticipated passed on of CRF and other factors that brings up electricity cost, it is likely that sooner the cost of electricity from geothermal will become at the equal level with coal.

It is a fact that every single expense of power players are passed on to consumers. From the gasoline used for its vehicles, juicy bonuses they provide to its executives and employees, environmental protection initiatives they implement under its corporate social responsibility projects, donations from solicitations for barangay fiestas and festivities, support for electoral candidates, legal team, or pubic relations and advertisements to media. These items are all included in the operations expense of companies that control generation, transmission and distribution of electricity.

Whoever will be able to acquire ownership of Unified Leyte – Aboitizes, San Miguel Corp. or Global Business Power – will exactly make milking cows out of the consumers. The claim is not founded on assumptions, but concretely illustrated from experience. In Iloilo City alone, we are experiencing this from PECO and Panay Energy Development Corp. (PEDC).

The influence peddler in the privatization of the Unified Leyte Geothermal Plant has been successful in influencing PSALM to undertake the bidding process into two separate bids. The experiment outlines a 60-40 arrangement. The 60-percent or the 385-MW will be open for private players while the 40-percent or the 255-MW will be offered to electric cooperatives with good financial standing.

The electric cooperatives at Region 8 or Eastern Visayas has been at the forefront against the privatization of the geothermal plants yet the mechanism set by PSALM somehow provides a semblance of equal opportunity for would be players including electric cooperatives. The pressure, however, is upon electric cooperatives for most, if not all, does not posses good financial standing in order to join in the bidding. It requires that electric cooperatives come up with huge financial capacity to serve as capital for them to join in the bidding for the cost per megawatt is set at P5-million.

Aware of the limitations of the electric cooperatives, World Bank is said to have offered the electric cooperatives in Eastern Visayas the financial facility in order for them to bid out the 40-percent at low interest rate. With all the requirements for bidding in place and the financial backing World Bank at hand, the bidding for the Unified Leyte Geothermal Plant is all set for a go.

The projected impact of the privatization of the Unified Leyte to consumers in the Visayas is certain. What remains uncertain, however, are the intervention from the end of the stakeholders. Without the stakeholders joining hands to stop the privatization process, the wheels of privatization will roll out.

Leave a Reply