Subsidy for power oligarchs

CONSUMERS' DEMAND!
Herman Tiu Laurel
4/16-22/2012



The Mindanao power crisis has now raged on for months; yet the BS Aquino III government at first refused to act upon the request of Mindanao power consumers and electric cooperatives (EC) to deploy four existing emergency power barges lying idle at several sites. One of these was in Davao, two in the Visayas, and one in Navotas. The Department of Energy (DoE) said it was still waiting to privatize these before they could be used to help Mindanao, with the bidding schedule set in late April.

So what was Malacañang really after throughout this period of procrastination? Was it to give Mindanao’s power consumers no choice but to swallow the “bitter pill,” i.e. the exorbitant power price offered by Therma Marine Inc. (TMI) of the Aboitizes from two power barges it obtained from Napocor at $30 million, later turned around and revalued at $80 million to make it the basis for new power rates? Was it also to give TMI the wherewithal to demand a contract period that ranges from three to five or up to 20 years, with the rate base escalated along with the reappraisal to current replacement cost of the power barges?

Mindanao consumers and ECs have understandably refused to purchase the high priced power of the Aboitizes. This e-mail we received last week from Mr. Jojo Borja, a major stockholder of Iligan Light and Power Inc. (ILPI), highlights the brick wall the BSA III government and the Aboitizes ran into when trying to force Mindanaoans into swallowing such exorbitant electricity prices:

Mentong,

According to Barangay Capt. Mateo Cortez who is also Vice President of Normic, they just had a public hearing that was attended by Napocor and NGCP. PSALM did not attend. You may call him and check out the actual status of the cooperatives in Mindanao. They are members of the 33 Rural Cooperatives of Mindanao who instead opted for darkness as they refused to be blackmailed by Therma Marine into signing very expensive long term POWER SALES AGREEMENTS (PSA). With the recent “orders“ of Almendras that they must buy (power from TMI)… they agree(d) but only for one year to give PSALM enough time to repair the four power barges. If Aboitiz will insist on a five-year take-or-pay contract… the cooperatives will rather choose the rolling brownouts.

In the case of Iligan City, ERC (Energy Regulatory Commission) ALREADY APPROVED the PSA between Mapalad Energy Generation Corp. and Iligan Light and Power. ERC, in spite of this representation’s (appeals) to it that the consumers of ILPI own a 104-MW (plant) AND THAT ILPI SHOULD NOT BUY 2 units of 7.5-MW inefficient, obsolete diesel power generation plants at P400 million. (But still, the) ERC RAILROADED THE APPROVAL OF AN ADDITIONAL GENERATION COST of P2.23 per kWh for the next 20 years… a rate that will increase after the first year for cost overruns (similar to what TMI did) and every three years thereafter as the value of the obsolete power plants will be reappraised as… allowed by EPIRA.

Jojo

The first part of the e-mail is self-explanatory, but what is striking is Normic’s decision preferring the “rolling brownouts” to paying 50% additional to the Aboitiz’ Group’s TMI which will provide the electricity from two power barges it “bought” from Napocor-PSALM and reappraised from $30 million to $80 million to hike the rate base for its electricity supply, in order to sells its power at P11/kWh compared to the normal P2.60/kWh in Mindanao.

The second part of the e-mail highlights the distorted and corrupt consequences of EPIRA (Electric Power Industry Reform Act)--in this case, Iligan City, which acquired the 104-MW BOT power plant transferred from the Alcantaras’ IPP to Napocor and then to the city for non-payment of real estate taxes.

Iligan City had, in fact, wanted to operate the plant for the crisis; but the ERC refused to give it provisional authority and instead approved new capacity at a higher additional cost imposed for the next 20 years.

BSA III started feeling the heat as the public began to understand the issues and see the oppressive and exploitative attempts of government and the oligarchs to blackmail the people of Mindanao on the power issue. Malacañang and the DoE did finally find a solution, announced in the newspapers and summarized in this headline in the Bulletin: “Mindanao Subsidy to Reach P5-B,” based on number-crunching made by the Power Sector Assets and Liabilities Management Corp. (PSALM) and Napocor, to cover the months of April, May and June this year with power bought by government from TMI, at a price that the private company wants, with the report stating, “The calculation was in reference to the P0.50 per kilowatt-hour (kWh) average hike in Mindanao blended rates if the power barges and other thermal facilities will be aligned as stop-gap measure to their electricity woes.”

The blended rates are the mix of the high power price from Aboitiz with the nearly free cost of power from the Agus-Pulangi hydroelectric system, among others.

BS Aquino, the reports say, will be in Mindanao for the touted Power Industry Summit--purportedly to explore the most immediate and feasible solutions to the grid’s power supply crisis. But from the looks of it, his solution is to subsidize the high profit of the Aboitizes and not the demands of Mindanao power consumers for a fair power rate.

BSA III is extracting from the people’s resources--taxes to be precise--to fund the high power rates of the Aboitizes. The Joint Congressional Power Committee co-chair and Senate committee on energy chairman, Sergio Osmena III, is reported to be averse to the idea of the government extending subsidies just so the power rates in Mindanao could be kept artificially low. He says the government cannot forever submit to consumers’ bid for subsidies while he sheds crocodile tears for the poor alleging that such subsidies take their toll on budget for social services. Of course, we should inform Osmeña that it is his ilk being subsidized and the “lifeline rate” subsidy for the poor are actually charged to paying customers of Meralco and all other paying power consumers.

Other oligarchs are jumping on the bandwagon of the Mindanao power crisis: For some time now, the heir of the Cojuangco political throne, Rep. Mark Cojuangco, has been promoting aggressively the revival of the Bataan Nuclear Power Plant (BNPP), which the Fukushima nuclear tragedy put a hold on. Now he and his group are reviving it, using the Midnanao power crisis as an opportunity.

Major national dailies have already headlined this, “Mindanao may go nuke… Region willing to host Bataan power plant or build new one” by Christine F. Herrera of the Manila Standard; but I wonder when such a consultation was ever made. It did quote one businessman and a so-called Agham party-list man Angelo Palmones, who were quick to see the money opportunity. But what they don’t seem to understand is that the BNPP uranium reaction nuke power is already “so last century.” There is now a new and 10,000 times safer nuke energy source, Thorium, which the new nuke powers, China and India, are treading.

Cojuangco reportedly wants a new plant for Mindanao which some reports peg at $10 billion, but that would just be an excuse for the Western nuke power companies to dump the perilous uranium reactor technology and uranium stockpiles on the Philippines.

One late but still welcome development in the national debate on power privatization comes from Rep. Erin Tañada who, as per this report, “Napocor privatization a mistake, says lawmaker,” wants government to return to power generation as solution to Mindanao shortage” in a report by Gil Cabacungan. But, of course, what is right for Mindanao is right for the rest of the country, and we hope more and more ordinary citizens like readers of OpinYon take up the challenge to compel our legislators to free the country from the clutches of oligarchs and demand the EPIRA to be junked, and form a new paradigm of public ownership through such means a cooperativization or consumer ownership of the power sector and distribution utilities.

(Tune in to 1098AM, DWAD, Sulo ng Pilipino/Radyo OpinYon, Monday to Friday, 5 to 6 p.m.; watch Destiny Cable GNN’s HTL edition of Talk News TV, Saturdays, 8:15 to 9 p.m., with replay at 11:15 p.m., on “Fuel and power solutions” with Dr. Amanda Cruz and FDC; visit http://newkatipunero.blogspot.com for our articles plus TV and radio archives)