7-pronged strategy set to cut down NPC’s costs
Wednesday, September 29, 2004
By MYRNA M. VELASCO
Anticipating that state-owned National Power Corporation (NPC) would be posting cash deficit of $1.8 billion this year sans stop-gap measures, energy officials have been prompted to draw up a sevenpronged approach to cut down the power firm’s escalating costs.
The strategies laid down are: a) prioritization of capital expenditures; b) cost-cutting in operating expenses; c) increase plants’ operation efficiency through heat rate improvements and forced outage reductions; d) competitive pricing due to adoption of electronic bidding of fuel procurements; e) continued implementation of economic load dispatch in Luzon; f) reduction in manpower complement; and g) maximize the use of local coal through blending with imported coal.
Energy Secretary Vincent S. Perez noted that while it’s the first time that these strategies are being made public; most of these policies are already being instituted; and have so far provided initial gains in NPC’s cost-cutting bid.
For instance, he cited that efforts on heat rate improvements in the Luzon grid had posted a record of 9,717 British thermal unit (BTU) per kilowatt hour (kwh) last year as against 9,829 BTU/kwh in 2002.
The energy chief also noted considerable reduction in forced outages to 2.58 percent in 2003 as against the previous year’s 3.42 percent.
Manpower reduction in NPC by almost 40-percent since 1993 has also reduced substantially its operating costs; further trimming down its workforce by 985 to 3,679 in 2003 from the 2002 level of 4,664.
The other area where costs were slashed is on coal purchase of the power firm, as it increased its procurement from domestic sources.
Perez noted that utilization of coal produced from the Semirara mining facility has jacked up to 1.5 million metric tons last year from 1.2 MMT in 2002.
At the same time, blending of coal supply have also been implemented for the requirements of the Sual and Masinloc facilities.
However, the energy secretary opined that the true-to-form measure that would provide ultimate relief to NPC’s cash drain would hinge on three concrete moves.
Firstly, he said that there is a dire need to ensure successful privatization of the National Transmission Corporation and the generation assets of NPC.
The other would be on requisite for tariff adjustments approved by the Energy Regulatory Commission (ERC) to reflect true cost of electricity.
The state-owned power firm was earlier granted a provisional authority to raise generation charges by R0.98 per kwh; but energy officials noted that this would not be enough to fully cover foregone costs due to artificially lowered power rates.
The third approach would be for the national government to accelerate its planned absorption of some R500 billion worth of NPC’s outstanding debts.
posted by philpower @ 1:06 PM,
