Bu-lat-lat (boo-lat-lat) verb: to search, probe, investigate, inquire; to unearth facts Volume IV, Number 23 July 11 - 17, 2004 Quezon City, Philippines |
NPC:
The Debt Zap
The
specter of an impending power crisis, meaning more power brownouts, is
being raised to scare the public into accepting outrageous power rate
increases resulting from the 77 percent increase in generation charges
that the National Power Corporation (NPC) plans to bill power
distributors. Lost in the
discourse is the question of why, in the first place, did the NPC end up
with a whopping debt. By
Alexander Martin Remollino The
specter of an impending power crisis, meaning more power brownouts, is
being raised by some economic officials to scare the public into accepting
outrageous power rate increases resulting from the 77 percent increase in
generation charges that the National Power Corporation (NPC) plans to bill
power distributors. This will
in turn be passed on to power consumers by distributors such as the Manila
Electric Company (Meralco). Napocor
has recently announced an increase in its generation charges, which is
expected to take effect after July. From the current national average of
P2.57 ($0.459) per kilowatt hour (kwh), NPC’s rates will climb to P4.56
($0.0814)/kwh in Luzon, P4.59 ($0.082) in the Visayas, and P3.13 ($0.056)
in Mindanao. Energy
Secretary Vince Perez last week said the rate increases are necessary to
enable Napocor to cope with the payments for its P500 billion ($8.93
billion) debt. Napocor’s debt may reach P1.3 trillion ($23.2 billion) if
no steps are taken to address its financial burden.
According to this logic, NPC’s debt burden will gravely affect
its financial viability and therefore its capability to continue
generating electricity leading to power outages.
Media
reports quoted NPC president Rogelio Murga as saying, “At the end of the
decade, we see a reformed power sector. We just need to make sacrifices
for about two years. If not, NPC would be burdened with a huge debt.” “With
this attractive rate adjustment, maybe investors will come and build power
plants and mitigate the crisis that is expected to hit the power sector by
2008,” said Murga. Lost
in the discourse is the question of why, in the first place, did NPC end
up with a whopping debt. Bolt
back
NPC
was established in 1936 with then President Manuel L. Quezon’s signing
of Commonwealth Act 120. It
was mandated to develop the country’s hydropower. Later on, the
development of geothermal, oil, coal, and other power sources was included
in its mandate. In
Nov. 1972, President Ferdinand E. Marcos signed Presidential Decree No.
40, which directed NPC to build power plants and transmission lines
throughout the country, and supply power to all private and local
government-owned utilities and cooperatives. In effect, NPC was able to
monopolize the Philippine power industry. NPC
under the Marcos regime had a program for building additional power plants
to adjust to the country’s rising demands for power supply. Part of this
was the construction of the Bataan Nuclear Power Plant (BNPP), north of
Manila. But
corruption, which had always been part of the existing system but was
particularly rampant during the Marcos years, got the better of things and
by the time the BNPP project was completed, its cost had been bloated at
$2.3 billion. The
government of Corazon Aquino, who succeeded Marcos in 1986 in a people’s
uprising mothballed the BNPP even as it continued paying Westinghouse the
“cost” of building the plant. The
BNPP is costing the government P3 billion ($53.6 million) a year. Engr.
Ramon Ramirez, a convenor of the broad consumer group People Opposed to
Warrantless Electricity Rates Increases (POWER), said “The trouble (with
that) is that this plant would have generated more electricity in response
to the increasing demand, modest though it may have been.” “The
result was that the supply was not enough to meet the demand at that time,
so we started to experience fluctuating electricity at home, which
eventually turned into long hours without electricity,” he added. The
Aquino government sought to address the problem by issuing an executive
order permitting private corporations to build power plants, paving the
way for what are now called independent power producers (IPPs). This was
complemented by Republic Act 6957 or the Build-Operate-Transfer (BOT) Law,
which gives incentives to private-sector investments in public utilities. FVR’s
onerous contracts with IPPs
As
president, Fidel V. Ramos asked Congress for emergency powers purportedly
to address the power crisis. Thereafter the legislature passaed the
Electric Power Crisis Act, which gave Ramos the power to enter into
negotiated contracts with IPPs. According
to Ramirez, “Because the need was urgent and the people were already
raging against brownouts, those who signed the contracts with IPPs excused
themselves by saying that they were forced to accept onerous terms like
the take-or-pay scheme. Under
this scheme, NPC agrees to buy a certain amount of power within the
contract period and then pay for its quantity, whether or not the
electricity generated is used.” The
electrical engineer cites as an example the case of the 50-megawatt power
plant in Zamboanga City, Mindanao in southern Philippines, from which only
20 percent of the power generated is used.
But the government agreed to pay for the total power generated by
the plant because of the take-or-pay term, which he calls “a technical
term for fraud.” Because of this arrangement, Ramirez says, Napocor
loses about P400 million ($7.14 million) a year. Another
case is that of the Iligan I and II Diesel Power Plants in Misamis
Oriental, also a province in Mindanao from which only 11 percent of the
electricity generated was used from 1994 to 1998 even as NPC was paying
for all of it. During the said period, Ramirez said, Napocor lost some
P900 million ($16.07 million), or about P180 million ($3.21 million) a
year. Even
as the power outages eventually stopped, the Ramos administration’s
negotiations with IPPs continued. According to Ramirez, the Ramos
government went on entering into contracts with IPPs even when there was
already more than enough power supply. The
1997-1998 Asian financial crisis, wherein the value of the peso plummeted
from P26.50 for every dollar to P40 for every dollar, aggravated the debt
burden of NPC as its contracts were dollar-denominated. Zapping
power consumers
The
administrations that succeeded the Ramos regime have done nothing either
to resolve the dilemma brought about by NPC’s debt burden. During
the term of Joseph Estrada (July 1998-January 2001), the Asian Development
Bank (ADB) issued a Power Restructuring Program paper which stated that
the $300-million power sector loan being negotiated by NPC from ADB and a
$400-million loan from the Miyazawa Fund were contingent on the condition
that “Borrower shall have enacted a law, the Omnibus Power Industry Law
to govern the power industry.” The
Electric Power Industry Reform Act (EPIRA), sponsored by Sen. John Osmeńa
who lost his bid for reelection last May, was enacted in 2001 after
President Gloria Macapagal-Arroyo was installed in Malacańang by a
popular uprising. The EPIRA allows NPC to pass on its debt burden to power
consumers in the form of rate increases. Because
of NPC’s debt burden, power consumers are to put up with an increase of
more than P100 ($1.79). The
increase, according to POWER, is outrageous considering that the current
minimum wage of rank and file employees and workers is a mere P250 ($4.46)
per day. Pretty much like the government zapping the people with electric bolts. Bulatlat.com We want to know what you think of this article.
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