[Opinion] The State of Play in the Visayas Power Industry

The consumers of electricity in Panay-island are facing the prospect of new round of power rates increase as a result of the privatization of the remaining power generating assets of the National Power Corp. (NPC) in the Visayas together with the entry of more coal-fired power plants and the privatization of the geothermal plant in Leyte.

In October 2012, PSALM or the Power Sector Assets and Liabilities Management Corp. pressed the green light for the privatization of the 640-MW geothermal plant located in Tongonan, Leyte. Mandated by the Electric Power Industry Reform Act of 2001 (EPIRA), the 640-MW Unified Leyte Geothermal Power Plant (ULGPP) is responsible of supplying clean and cheap electricity to the distribution utilities and rural electric cooperatives serving the consumers in the Visayas.

The rural electric cooperatives in Panay-island continue to source a portion of its electricity requirement from the geothermal plant dispatched through the Leyte-Cebu-Negros-Panay grid. Apparently, gradual increase of electricity rates has been the trend under privatized power industry.

The privatization of ULGPP, however, seems to have provided an opportunity for electric cooperatives with the financial capacity to participate in the bidding for the contract. PSALM has announced that the bidding for ULGPP will be done in two separate bids or through a 60-40 percent arrangement. The 60-percent or the 384-MW will be offered to the private sector while the 40-percent or the 255-MW will be made accessible to electric cooperatives. The electric cooperatives are open to the arrangement yet the cost is set at P5-million per kilo Watt-hour (kWh).

The impending award of contract to the winning bidder of ULGPP has raised renewed concern from consumers because of the prospect of control over the geothermal plant, especially if only one major private player or a consortium of private sector players will be able to clinch the entire 60-percent capacity. There are numerous unresolved issues that continue to hound the the awarding of contract, hence it remains pending until today.

But on the other section of the generation sector, a parallel issue is also taking shape – the imminent monopoly of the generation sector from coal plants. This, after Global Business Power Corp. (GBPC) of the Metrobank group announced that it will pursue expansion projects of its existing coal-fired power plant in Iloilo City operated by Panay Energy Development Corp. (PEDC). The project will provide an additional 82-MW capacity to the existing 164-MW and will entail P8-billion investment.

In Cebu, GBPC is also set to pour in another P8-billion investment in order to replace retiring power plant facility of Toledo Power Co. (TPC). Located in two separate locations, the TPC plants are comprised of two generating facilities: 60-MW is running from coal and 40-MW is operated from diesel fuel. With a consolidated capacity of 100-MW, GBPC is set to pipe in 82-MW from coal the moment TPC generating facility will be fully replaced.

Aware of possible negative reactions from the anti-coal movement and in anticipation of consumers’ resistance, former GBPC President Arthur N. Aguilar was quick to declare that the two expansion projects will put GBPC closer to hitting the 30-percent limit set by EPIRA. Apparently, the statement does not only serve as a hint of GBPC’s underlying intention, but it can be treated as a declaration that GBPC’s direction is to optimize the 30-percent allowable cap set under Section 45 of EPIRA which cover “Cross Ownership, Market Power Abuse and Anti-Competitive Behavior”. The provision provide a limit to generating company not to go beyond 30-percent market power in the total installed capacity for the Visayas grid.

It showed from the June 2011 data of the Dept. of Energy (DoE) that Global Business Power Corp. (GBPC) already occupy a stable position having acquired 24-percent of the entire generation mix in the Visayas. On the other hand, the percentage share of National Power Corp. and the Power Sector Assets and Liabilities Management Corp. (NPC/PSALM) consolidated assets up for privatization totaled to 37-percent.

Yet with the privatization of NPC/PSALM’s remaining assets will pave the way for the entry of private power players who are aiming to get a hold over the energy sources in the Visayas especially the geothermal energy in Leyte.

It is highly anticipated that once privatization rolls out in the Visayas, consumers from Leyte, Cebu, Negros and Panay islands will face a new round of rates increase. It will likewise deliver a three-fold impact: First, it will disperse ownership of the geothermal energy source into 60-40 percentage sharing; second, it will diminish influence of geothermal energy in the Visayas generation mix; and 3.) it will make possible the consolidation of GBPC in the Visayas with coal at the command of the generation mix.

It appears, however, that GBPC will be compliant to the 30-percent cap, a limit set by the Electric Power Industry Reform Act (Epira) and control measure for monopoly of the power generation. But in spite of the set limit, it will not change the fact that the coal in the generation mix in the Visayas. This will put GBPC at the position of control of the Visayas generation sector and the GBPC initiative when taken in its entirety will neutralize, if not eliminate, the historical and dominant role that clean energy has played in the Visayas and replacing its future with dirty coal.

In the coming years, it will be “coal in” and “geothermal out” in the Visayas, in particular, and in the whole country, in general. Apparently, the ‘coal-in-geothermal-out’ configuration is indicative that the mainstreaming of renewable energy sources remains far fetched despite the passage of relevant laws which is geared towards its full realization. This is not just a new trend in the power industry; it has become a norm and further strengthened by the policy of “public-private-partnership”.

These ongoing changes will mean four things for the Visayas electricity consumers. First, electricity consumers will pay more for electricity as a result of the following: one, fluctuating cost of coal fuel in the international market; two, possible passed-on to consumers of capital recover fee, and; three, long years tied up to power purchase contract approved by the Energy Regulatory Commission (ERC).

Second, the rise into dominance of GBPC will not only serve as a setback in mainstreaming the use of renewable energy sources in the Visayas; it rather pushes back renewable energy in the entire picture when logically it is a future source of electricity.

Third, people in the communities especially those which are located within the primary impact area of coal plants will be confronting the impacts of plant operations from air, water to land pollution. Coal plants are now a major problem in the communities hosting it yet the government does not care enforcing laws that regulate ash damping and coal transport and handling.

And fourth, more coal plants will aggravate what is considered a worsening environmental situation in the midst of equally worsening climate change situation. in areas where these plants are established.

An overarching concern about coal plant operations is its impact to the environment, to the people, and to electricity consumers through exorbitant rates. Currently, GBPC’s coal plant operation goes unchecked and its pollution unmitigated putting into question the carrying capacity of the immediate environment where these coal plants are operating. All of these developments when taken into account suggests that a grim future awaits people in the Visayas.

The Panay-island power stakeholders have suffered too much and too long from the multiple impacts of EPIRA and the privatization of the Visayas power industry. The imminent monopoly of GBPC only illustrates that EPIRA is an inadequate legal instrument. The failure of EPIRA will not require further emphasis by saying that privatization is an anti-consumer framework – it is anti-people. For environmentalists, it likewise requires no emphasis – EPIRA is anti-environment.

The obvious failure of EPIRA is not only revealed by rising cost of electricity that consumers have been paying, but the future and measurable cost that consumers will be paying as a result of the monopoly of the power sector, like what GBPC have achieved, and will be achieving in the Visayas grid if our people will allow them to.

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