NEDA sees power rates decline due to competition
Wednesday, November 03, 2004
By EDU H. LOPEZ
Power rates are seen to fall with greater competition and lower capacity fee payments arising from the privatization of generating companies and the establishment of the Wholesale Electricity Spot Market (WESM).
Socio-economic Planning Secretary Romulo Neri says this will allow end-users with monthly average peak demand of at least one megawatt to purchase electricity directly from generators starting in July 2006 for Luzon.
For the independent power producers (IPPs) of National Power Corporation (NPC), PSALM will also seek to reduce stranded costs by concluding ongoing negotiations for the remaining nine IPP contracts.
Reacting to some criticisms on the short-term development plan, Secretary Neri says cleaning up of NPC’s books will be the first priority.
"This will entail an increase in power costs initially as power rates rise to reflect their true cost. Inter-grid, intra-grid, and inter-class cross subsidy will be removed by 2005 to eliminate market price distortions."
Neri says this will lower the costs of electricity paid by industrial and commercial consumers, but will increase the cost of power paid by residential consumers who are currently benefiting from the crosssubsidy.
The government will also introduce time-of-use pricing which will allow the NPC and eventually the GENCO investors to charge the true costs of electricity at different times of the day, Neri added.
Meanwhile, Neri stressed that under the current planning process, agencies were given an indicative planning figure against which they will prioritize theirs programs and projects consistent with the plan.
"This was never undertaken in previous planning exercises which led to a wish list of PAPs. Setting an indicative planning figure consistent with the fiscal program thus, forces agencies to prioritize their projects," said Neri.
This list of projects and programs (PAPs) to be funded within the national government budget comprises list A of the medium-term investment plan which will be the basis for programming and monitoring the use of national government resources over the medium-term and the annual budget presented to Congress.
Neri says agencies will identify financing strategies for projects that are also supportive of the plan but can no longer be funded by national government resources.
These can include funding from local government units, government-owned or controlled corporations, official development assistance or through build-operate-transfer scheme.
On the approval of projects by the Investment Coordinating Committee (ICC), Neri stressed that the projects are evaluated vis-Ã -vis their consistency with the medium-term development plan, financial and economic viability, and agency preparedness.
Since 2001, the ICC and NEDA Secretariat have instituted measures to ensure due diligence in project preparation.
These include requiring proponents to adhere to the General Procurement Act which prescribes competitive selection of project contractors and consultants; emphasizing outputbased specification for BOT-type project proposals; and requiring proponents to have a mediumterm agency funding strategy approved by fiscal oversight agencies and consistent with the medium-term development plan priorities and fiscal program.
The medium-term funding strategy includes rightof-way cost sharing and local community implementation.
However, Neri says the ICC process can still be improved through the following measures: strict observance of the 8-10 weeks processing period, the ICC will be proactive in defining projects and programs, and the ICC calendar of activities and action documents will be available electronically.
Neri says the ICC Secretariat evaluation period of 4-6 weeks will be closely monitored. Measures to ensure due diligence in project preparation by th proponent or implementing agencies will also be instituted.
He noted that in previous plans, there was no official MTPIP to guide the ICC process so projects are processed on a first-come, first-served basis.
Thus, the preparation of MTPIP will, in fact, make the ICC approval process less difficult. The accompanying MTPIP of the new plan will be officially released in December 2004.
posted by philpower @ 9:01 AM,
