Higher NAPOCOR rate to avert power crisis
Monday, September 20, 2004
By LENIE LECTURA
TODAY Reporter
The power crisis that was originally expected to hit Luzon in 2008 is likely to be averted but the situation in Visayas and Mindanao has now entered a critical period such that as early as next year the much-feared return of massive blackouts, similar to those that hit the country a decade ago, is set to hit these regions.
Luzon was forecast to start experiencing power shortages in 2008, and Visayas and Mindanao in 2005. Based on Department of Energy’s Philippine Power Development Plan for 2008 to 2013, power demand is seen to increase by 4,800 megawatts (MW) in Luzon, 1,250 MW in the Visayas and 450 MW in Mindanao for a nationwide aggregate of 6,500 MW for the six-year period. To meet such demand would require investments of around $6.5 billion, which the government is unlikely to produce given its financial difficulties. Moreover, it takes four to five years to put up a new power plant.
Energy Secretary Vincent Perez Jr., however, assured that Luzon would have the needed capacity in time before the power crisis strikes. “There will be a company that will be putting up the much-needed capacity in Luzon. This will solve the expected power crisis in time,” Perez said in an interview last week.
The energy chief had earlier identified Harbin Power of China as a possible investor for a power facility in Luzon. However, he did not provide details of Harbin’s interest in invest in the Philippines. Harbin’s interest cropped up during the recent Beijing trip of President Arroyo.
Perez said China Export Import Bank is also willing to provide financing for future power projects of Chinese power firms in the Philippines. Perez expects to firm up talks with China EximBank within the next 12 months.
The energy secretary said the country has regained investors’s confidence following an approval from the Energy Regulatory Commission (ERC) to raise the generation rates of the National Power Corp. (NAPOCOR) by an average of 98 centavos per kilowatthour (kWh) starting September 26. The provisional authority granted to NAPOCOR, which is half of what NAPOCOR originally asked for, represents a 40-percent increase from its previous rate. The regulators are expected to issue its final decision before the year ends.
“This is a good start. Investors who were earlier apprehensive of investing in the power sector because of the artificial rates of NAPOCOR are now thinking otherwise. I am just worried about the prices of electricity in Visayas and Mindanao. In Luzon, we have already gained the momentum. We have to act now. We don’t want to be on the same situation in ’90s. We do not wish that to happen again,” Perez said.
Based on ERC’s order, NAPOCOR’s rates will vary from each grid. For Luzon, the rate will be increased by 48 percent or P1.23 per kWh; Visayas by 7.8 percent or 22.02 centavos; and Mindanao by 15 percent or 26.65 centavos. At present, the existing rates of NAPOCOR for the entire Philippines is P2.44 per kWh. Visayas has the highest rate with P2.8172 per kWh, followed by Luzon’s P2.5736 per kWh and Mindanao’s P1.8032 per kWh.
The ERC computation estimated that the newly approved generation rate will result in P110-billion additional revenues a year for the troubled state-run power firm.
Some consumer groups and businessmen have raised concerns that the issue of power crisis in the near-term has been put on the back burner.In an advocacy paper entitled “The Roadmap to More Foreign Investment,” the American Chamber of Commerce in the Philippines said one of the group’s worries is the possible power shortage.
“Given the four to five-year gestation period in building new power plants, we appear to be entering in a critical period in which further drift in implementing power sector reforms will increasingly doom the economy to repeat its 1991-1994 blackout experience,” it said.
In fact, the group cited that a number of businessmen from Cebu are already experiencing rotating brownouts.
The Amcham study also cited DOE statistics which forecast power demand to grow at an annual rate of 9.7 percent from 2003-07. “Experts predict the possibility of demand exceeding supply in 2006-07 in the Luzon grid if no additional capacity is built before then,” the study pointed out.
In a separate statement, the members of the Cebu Chamber of Commerce and Industry said they are worried about an impending power shortage in the province which will derail its economic progress.
“The need for additional capacity has to be met, otherwise business will suffer,” Cebu chamber president Robert Go said. “We hope government will foster the necessary environment to attract the investments which would ensure that Cebu’s power needs in the coming years will be met.”
The Cebu businessman pointed out that the DOE’s Philippine Development Plan shows that Cebu will require an added capacity of 100 MW in 2008, 100 MW in 2009, 50 MW in 2010, 150 MW in 2011 and 50 MW each in 2012 and 2013 or a total of 550 MW. This will entail $550 million worth of investments.
Perez said the privatization of NAPOCOR and the new rates granted by the ERC “ in some way” will help avoid the emerging power crisis. A multisectoral task force is also expected to release within the next few weeks a comprehensive program that would help avert the impending power crisis.
Industrialist and Consumer and Oil Price Watch chairman Raul T. Concepcion said the group, to be led by the DOE and NAPOCOR, would draw up a plan that will seeks to resolve the power rate issue of NAPOCOR and address the looming power crisis in the country in the next three to five years.
“We can not deny that there would be power shortage if we will not be able to make sure that we have the true cost of generating power. Before we can address the power crisis, we need to correct the generation rates of NAPOCOR first,” Concepcion said.
Concepcion is also optimistic that investors would start coming in once the government resolved the rate issue of the state-owned power generation firm.
“If there would be assurance that everything will be in order by the end of the year, I believe investors will take a look at the power industry. We know that it [power crisis] is already starting in Cebu; that is why there are businessmen from Cebu that are sounding the warning bells,” he said.
Mirant Philippines Inc. president Ed Bautista said the ERC decision “definitely” makes the power generation sector more attractive to foreign investors.“At a time, the generation sector languished under the perception that it is not reflecting the true cost of generation. The recent development should change this perception. We hope that this will also help in the acceleration of the NAPOCOR’s privatization. This will send a good signal to potential and existing investors that the government is doing something to solve the financial problems of NAPOCOR,” Bautista said.
posted by philpower @ 2:18 PM,
