ILIGAN CITY (MindaNews/31 August) – Various sectors here including city officials have cried foul over the alleged “internal collusion” behind the plan to increase the generation rates of the National Power Corporation, now the Generation Corporation (GenCo) to reportedly make the firm attractive to bidders in a bid to hasten the deregulation of the country’s power industry.

PSALM Corp. which is tasked to sell 70% of the state-owned power firm’s assets by the end of the year “to fully deregulate the power industry and ease government burden brought by NPCs debts, has been ordered by Malacanang to complete the sale of assets to bring about true competition and lower rates.”

Lapocof suspected that there is an internal collusion to increase generation rates to make it attractive to bidders “for expected return of investment” if purchased.

“Its observable based on the nature of electricity rate hikes that there is indeed collusion among those whose agenda is to hasten the generation assets’ sale. Following the suggestion of the Asian Development Bank (ADB), the NPC petitioned rate hikes in order to attract investors. Out of the Php 1.98/kwhr NPC petitioned in 2004, P 1.03kWh was approved by the ERC in 2005,” Ambalong said showing the comparative reports of electric hikes.

She said the same thing happened prior to the privatization of Transmission Corporation (TransCo) when charges increased from P 0.7716/kwh in May to P0.9163/kwh in July 2006, before the bidding process started.

“Last Feb. 16, 2009, ERC granted provisional rate increase to NPC in Luzon at P0.4628/kwh, Visayas at P1.460/kwh and Mindanao at P0.7147 kwh with a public hearing conducted on Feb. 25, 2009 only for compliance and were in fact inconsiderate to the position of the electric consumers’ disapproval. People believe that there is collusion between the ERC and the government so that NPC can be very attractive to investors by 2011,” she said.

Lapocof suspected that “there will be incremental hikes again and again till NPC is up for bidding by 2011. This is an irony because the attractive rate of GenCo is for investors to buy GenCo. This same rate is a disincentive for investors to set up plants in Mindanao.”

“Mindanao has the lowest generation charge at P2.8177/kwh because of the Agus/Pulangi hydro complexes. This is the edge that Mindanao has over Luzon and Visayas. In terms of infrastructure, development, peace and order etc., we lag behind Luzon and Visayas. We cannot afford losing one edge, the low cost of electricity which could be the only major come on for investors to set up establishments in Mindanao,” the group said.

A research shows that NPC’s Agus and Pulangi complexes earmarked a net revenue of P4,927 billion in 2008 or return on rate base (RORB) of 39.66%.

The Energy Regulatory Commission (ERC) allows a 12-percent RORB.

“The high rate of return is just tremendous at nearly 40% because hydro power relies solely on water to generate electricity. This is God-given gift to the people of Mindanao. A gift that should lead Mindanao to development and progress,” said Norberto Ollier, a Lapocof official.

The group noted the manner of sale of other state-owned power generation companies “such as Masinloc Geothermal Plant located at Zambales whose assets are valued at P930 million but investors paid only 40% and the remaining balance is payable for seven years at $80 million yearly which is actually the income of the plant itself. “

It suspected that if the sale is pushed through “the Agus and Pulangi complexes will be sold at a giveaway price. Therefore, there is no motive for gain.”

City councilor Chonilo Ruiz called EPIRA a “treacherous law”.

“EPIRA has not lowered electric rates. The deregulation of the oil industry has not in fact driven down the prices of crude and gasoline,” Ruiz said.

Lapocof said that “since Agus and Pulangi hydro complexes have a significant share of 55.38% in power generation for Mindanao market any private investor who could purchase [them] would wield market power by price manipulation rather than make a reasonable competitive pricing. Such would end in a private monopoly of pricing in retailing electricity.”

“With these realities, we should do everything in our power to stop the sale of the Agus and Pulangi complexes. The sale for the sake of deregulation to start electricity retail competition in Mindanao will not bring down electricity rates. Possibility of higher electricity rates will be outcome of the Agus/Pulangi sale,” it warned.

Mayor Lawrence Lluch Cruz and the city council of Iligan fully backed Lapocof’s advocacy.

Cruz said he will bring this issue to attention of the League of City Mayors in Mindanao and the city council to the League of Councilors.

The city council has passed Resolution 09-246 urging president Gloria M. Arroyo, the NPC, PSALM and the appropriate committee in Congress to cease and desist from selling the hydroelectric power plants particularly Agus and Pulagui complexes.

The resolution also stated that “Iligan city which hosts three hydroelectric plants in the Agus River Hydro Complex is worried as for decades, these plants have softened the impact of high process of electricity produced by diesel and coal fired plants. It is certain that once sold to private corporations, specifically foreign investors, it will result to the stratospheric prices of electricity which is beyond the capability of poor people to pay.”

Moises Dalisay, chair of the city council's committee on energy, said that Iligan will “not raise a howl of protest over the selling of NPC power plants, provided these are only limited to oil thirsty diesel and coal fired plants which pollute the environment and are expensive to operate.”

The union of employees in GenCo also supported this resolution and has started seeking support from other local government units. (Violeta M. Gloria/MindaNews)

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