Senate, DOE tangle on NAPOCOR’s woes
Thursday, September 16, 2004
Consumers may have to pay more than P4 per kilowatt- hour (kWh) next year owing to the serious financial problems of the state-owned National Power Corp. (NAPOCOR), which Sen. Miriam Santiago said was a result of “mismanagement.”
Santiago said documents submitted by NAPOCOR president Rogelio Murga at Wednesday’s Senate energy committee hearing showed that electricity rates could go up to as much as P4.20 per kWh by next year, a rate that Murga said would be “enough to cover the operating cost of NAPOCOR.”
Asked when this would take effect, Murga replied, “if possible by 2005, that would be enough to cover for operating cost of NAPOCOR.”
Senators came down hard on Energy Secretary Vince Perez, who tried to explain that the NAPOCOR problems could not be blamed solely on the Arroyo administration, citing a combination of the peso’s depreciation, unrecovered costs from independent power producers, the government’s efforts to reduce electricity rates, lower regular power sales and higher operating expenses.
Sen. Juan Ponce Enrile was upset to know that when NAPOCOR started piling up losses with the President’s decision to cut by 85 centavos the purchased power adjustment fee in 2002, the government started to bring it back through subsequent rate increases approved by the Energy Regulatory Commission. “This was not known until the hearing this morning and we are talking of accumulated losses since May 2002.”
According to Santiago, NAPOCOR’s net operating loss already stood at P36 billion, not including other liabilities that have piled up over the years.
“Because of its mismanagement, we are looking at an estimated P4 increase in electric rates next year,” Santiago told reporters after the hearing even as she noted that several senators, including Sergio Osmeña III, Enrile and Joker Arroyo were questioning the credibility of NAPOCOR’s figures.
Osmeña and Enrile, who took turns grilling NAPOCOR officials, remained unconvinced by Perez’s explanation that NAPOCOR’s losses, which Perez pegged at only P16 billion, were due to several factors. The Arroyo administration, he insisted, only inherited these losses. NAPOCOR bled with P523 billion in debt as of last year.
Perez and other energy department officials said President Arroyo’s decision last year to cap NAPOCOR’s purchased power cost adjustment (PPCA) -- the costs which the state power firm is allowed to bundle into charges electric utilities pay it for buying power and which is passed onto consumers -- largely contributed to the company’s losses.
The PPCA cap of 40 centavos per kilowatt hour (kWh) left the company with little room to service its debts and run its operations. Perez said the company’s underrecoveries due to this cap amounted to P2 billion last year. Unrecoverable natural gas fuel expenses, on the other hand, cost the power firm P8.5 billion.
Mrs. Arroyo imposed the PPCA cap to lower consumers’ electricity bills as her administration made efforts to privatize NAPOCOR, a key factor economists and the business community have cited to drawing in foreign investment to build more power plants across the country and reduce electricity rates -- now considered one of the most expensive in Asia.But Malacañang’s efforts to sell off NAPOCOR have been stymied by poor investor sentiments on the Philippines, and a hostile legislature during Arroyo’s first term of office. Hopes are rising that Arroyo would be more successful now that she has secured a fresh mandate, won over more congressional allies, and somewhat eased investors’ concerns of an uncertain policy environment.
Perez caught the ire of senators probing into the causes of NAPOCOR’s huge losses, who also called for his resignation in the face of rising electricity and oil costs and a looming power crisis expected to hit Mindanao by next year. “There are attempts to pin the blame on us, but we are the ones trying to fix it,” Perez whined.
At a news briefing after the Senate hearing, Perez told reporters that, “It is grossly unfair to blame the President. To call on my resignation is also unfair. What is important is for both legislative and executive branches to work together to solve the problems of NAPOCOR and eventually the national government’s.”
Shortly after first assuming office in January 2001, Arroyo got Congress to pass power sector reforms that had been pending for two administrations. But her administration’s efforts to carry out these reforms a step further by selling off NAPOCOR’s electricity grid and power plants were stymied by stiff resistance posed by a hostile Senate, which was deadlocked between her political allies and opponents, who questioned the legitimacy of her mandate.
Opposition senators had blocked Arroyo’s efforts to pass a franchise bill laying out the terms and conditions in which buyers of the National Transmission Corp. (TRANSCO), which operates the national grid, complicating efforts to sell NAPOCOR’s power plants. The franchise bill is seen as crucial to any sale of NAPOCOR’s power-generation assets, as it would establish what toll rates power plant operators would have to pay TRANSCO to allow electricity they generate to pass through its grid, and ultimately to utilities.
Discouraged by Congress’s failure to pass a TRANSCO franchise bill, and coupled with concerns about political uncertainty leading up to May’s presidential races, foreign investors held back their interest in NAPOCOR’s privatization despite the energy department’s efforts to whet their appetite.
Having secured a fresh mandate in May’s presidential races, which also helped her win over more congressional allies, foreign investors have been looking at NAPOCOR’s privatization with more interest. Malacañang hopes to have 70 percent of the state power company’s assets sold off by the end of next year.
Perez emphasized that NAPOCOR is severely capitalized. Out of P1 trillion in assets posted last year, he cited that paid-in capital only accounted for P27 billion, or three percent of the company’s asset base. “This means that the rest are borrowed money,” he said.
Perez said the energy department is drawing up proposals for the absorption of the P200 billion of NAPOCOR’s debts by the national government.Senators accused NAPOCOR officials of fudging figures to “window dress” multibillion-peso liabilities as part of a Malacañang ploy to shield Mrs. Arroyo from public scorn when skyrocketing electric bills hit consumers soon.
“The figures are not convincing, they don’t tell the whole story about the NAPOCOR mess,” Enrile said.
According to Enrile, the latest rounds of electric rate increases could be traced to President Arroyo’s directive to reduce the P1.25 increase in PPA, or purchased power adjustment fee, by 85 centavos in 2002.
Santiago said the energy committee which she chairs will continue its inquiry on how NAPOCOR incurred huge losses that Osmena III placed at around P75 billion based on officials documents obtained by his office.
Briefing reporters after the hearing, Santiago noted that NAPOCOR’s losses were not just due to the Asian financial crisis, but were caused more by “corruption in onerous contracts with independent power producers signed by former President Fidel Ramos.”
“We are still paying for the extravagance of Ramos,” she said, recalling that the IPP contracts were awarded by Ramos without bidding during his administration. “The IPPs never performed the service stipulated in their contracts and instead bled the NAPOCOR dry. That is why it is deep in debt,” she said.
Separately, the Freedom from Debt Coalition (FDC) welcomed the Senate probe into NAPOCOR’s problems, citing that it would bolster its calls to junk the company’s IPP contracts -- another burden Perez cited -- by pointing out to lawmakers how “grossly disadvantageous” they are to the government and electricity users.
The FDC said losses that NAPOCOR suffered as a result of the PPCA cap could have been stemmed had Arroyo taken steps to not just reduce the PPCA, but canceling all “onerous” IPP contracts outright. An interagency review committee’s report concluded that only 6 out of 35 IPP contracts were clean, with most having varying degrees of legal infirmity.
Santiago pointed out in the hearing that NAPOCOR was financially doing well until 1998. She said IPP contracts helped contribute to the government’s fiscal problems, cost the nation some $7.3 billion when former President Ramos authorized the bulk of these deals. Santiago said the IPP deals went directly against World Bank warning at the time that if these contracts proliferate, the country would experience a power crisis. B. Fernandez, L. Lectura, J.L. Villanueva
posted by philpower @ 8:51 AM,
