New review of IPP contracts slated
Monday, September 18, 2006
Move seen to further delay Napocor privatization
By MYRNA M. VELASCO
The call for a new round of review of contracts with the independent power producers (IPPs) is seen causing snags in the ongoing privatization of the National Power Corporation (NPC) and also the sale of equity shares for Philippine assets being pursued by US firm Mirant Corporation.
At the same time, this will impede inflow of investments for new power capacity, needed as early as 2010 or 2011, because no investors will pour in capital with some uncertainties in the air.
The re-opening of the IPP contracts is one of the key provisions in measures filed in the Senate seeking amendments in the Electric Power Industry Reform Act.
"That is going to be under consideration but there is no decision yet," House committee on energy chairman Alipio Cirilo V. Badelles has noted; though for him, this is an unnecessary exercise at this point.
Instead, he wants Congress to assess the result of the first IPP contract review, to ascertain how the savings generated from the process will flow in as benefits to electricity consumers.
"What we want is to check the results of the last review," the lawmaker stressed; adding that they are scheduled to issue a resolution next month.
Badelles added that moves to re-open IPP contracts the next round "might trigger instability", which could be bad-timing when invitation for new investments are aggressively set.
The Philippine Independent Power Producers Association, Inc. (PIPPA) also made previous manifestation that they will oppose calls for second review; noting that "another round of renegotiation will be detrimental to the industry as it will make us run afoul with our creditors and investors."
It would be noted that regulatory uncertainties in the power industry have already weighed down on government efforts to attract investments; and has also been delaying no end the introduction of policy reforms in the sector.
On relentless call to trigger new round of contracts review, the Department of Energy intimated that it is being cautious about this whole exercise as it wants to prevent a scenario where the Philippine government, being the one extending guarantees to most of the IPP contracts, would be dragged to arbitration proceedings.
The first phase of renegotiation was mandated under EPIRA and has been carried out by an interagency committee in 2002. The "mutually acceptable" terms of renegotiation were sorted out by the Power Sector Assets and Liabilities Management Corporation (PSALM) with the IPP project sponsors.
The government has reported around $ 1.0 billion of savings generated from the contract renegotiations with the IPPs; and will eventually flow through consumers as reduction in their electricity bills, once the Energy Regulatory Commission (ERC) establishes the universal charge for such component in the rates.
posted by philpower @ 9:07 AM,
