Govt asked to subsidize power rate from TRANSCO sale
Wednesday, September 29, 2004
By RODERICK T. DE LA CRUZTODAY Reporter
An opposition senator on Thursday asked the government to use half its earnings from the National Transmission Corp. (TRANSCO) and Malampaya natural gas project to subsidize impending power-rate increases.
“The government can alleviate the plight of the consumers by reducing the cost of power,” Sen. Juan Ponce Enrile said during a breakfast forum hosted by the Manila Overseas Press Club at La Dolce Fontana Restaurant in San Juan, Metro Manila.
On September 4, the Energy Regulatory Commission granted the National Power Corp. (NAPOCOR) a provisional authority to increase its rates by an average of 98 centavos per kilowatt-hour to raise some P37 billion for the payment of its debt. NAPOCOR had originally asked for a rate increase of P1.87 per kilowatt-hour.
The Department of Finance computed that with the NAPOCOR power-rate adjustment, the government’s public sector deficit (CPSD) would go down to P216 billion, representing 4.2 percent of the gross domestic product (GDP) from P253 billion or 5 percent of GDP. NAPOCOR’s losses have the largest contribution to CPSD.
Enrile noted that the state-owned TRANSCO has a 16.5-percent return-on-rate-base (RORB) amounting to P16 billion, while the government could collect as much as $500 million or more than P27 billion from the Malampaya gas project.
The solon, who earlier filed a resolution calling for a congressional probe on the supply side of the energy sector, said that if the government would give up half its earnings from TRANSCO and Malampaya, it could raise as much as P21 billion to partly offset the increase in power rates. “We have to do a major effort to lower the price of power per kilowatt-hour to lessen the burden on the people,” Enrile said.
Enrile noted that the electricity rate in the Philippines is already one of the highest in Asia, because the Filipino people are made to pay even for wasted power under the present system.
Reacting to Enrile’s proposal, Sen. Manuel Villar, chairman of the Senate finance committee, said this would only aggravate the fiscal problem. “The danger with subsidizing power rates is that it could bring us back to the fiscal problem,” he said. “We need every centavo at this moment.”
Villar also called for an amendment of the Electric Power Industry Reform Act (EPIRA) of 2001, particularly its provision on open access, which allows industrial, commercial and residential users to bypass electric utilities and tap power plants owned by NAPOCOR or independent power producers directly for electricity.
The law only allows open access if 70 percent of NAPOCOR’s generating assets are sold, but with power rates seen climbing over the next few months, Villar wants such provision lifted, so that power users could have access to cheaper electricity soon. Open access allows power users to avoid paying charges to utilities. “This would result in lower electricity rates,” Villar said. “It is about time to revisit the EPIRA law.”
Senator Ralph Recto, chairman of the Senate committee on ways and means, defended the planned power rate adjustment of NAPOCOR, saying this would trim the huge debt of the state-owned power firm.
The Asian Development Bank said the fiscal consolidation in the Philippine economy is heavily dependent on what happens to the power sector. “Urgent actions are needed to stop the financial hemorrhaging in the power sector. It is clearly being recognized by the different branches of government and we see now a real opportunity to move forward on that front, something that has been stalled for a quite long while since the passage of the EPIRA law in 2001,” ADB country director Thomas Crouch said.
Crouch assured that the ADB fully supports the framework for reforms in the power sector. “ADB has been a significant contributor in financial terms also in terms of providing advice as to the best way to reform the sector. We’re not in the business of prescribing what should be done. That is the proper and correct role of the government. But we’re certainly in the business of providing advice.”
However, Crouch said the ADB needs to be reassured that there is a very sustainable macroeconomic framework in place before it can come in with support for the power sector.
In a related development, the five companies that have expressed an interest in bidding for TRANSCO were given until Friday to resubmit an updated term sheet clarifying a set of issues raised by the Power Sector Assets and Liabilities Management Corp. (PSALM), or face disqualification from the privatization sale.
“They were asked to clarify some questions raised by PSALM,” Energy Secretary Vincent Perez Jr. said, without elaborating. “It does not have anything to do with pricing. They have until 5 p.m. Friday to resubmit their revised term sheet.”
Perez said the PSALM board will meet to evaluate the revised term sheets. “Afterwhich, we will decide,” he said.
The government received five offers last month for TRANSCO’s assets, valued at $2-billion TRANSCO assets. Though officially unidentified, reports have said the interested bidders are Singapore Power Ltd., American firm AES Corp., TransGrid of Australia, and one Finnish power firm. With L. Lectura
posted by philpower @ 1:06 PM,
