Coping with the Power Hikes

When the chips are down, it is usually the poor who suffer. A jeepney driver is on the road 12 hours a day but his meager earnings are gobbled up by incessant power rate hikes.

By Aileen EstOquiA
Contributed to Bulatlat

Mang Danny’s day starts early. By dawn - and even before most people had risen from their beds - he is already on the road driving for a living.

A native of Bicol, Mang Danny (not his real name) plies the UP-Katipunan route in Quezon City 12 hours a day.  He and his wife moved to Manila early in their marriage to look for greener pastures.

But the new pasture he found wasn’t in any way greener.

“Pag di ka bibiyahe ng isang araw, wala ka ring kakainin (If you don’t drive for even just one day, you will have nothing on your table),” he says sadly.

Even with that situation, he can only drive six days a week because of the color-coding vehicular system. So on the days that he doesn’t, his family gets their food from a nearby store and pays for it later.

Mang Danny lives at an urban poor community in Kaingin Dos, Quezon City with his wife and five children. His eldest, a 21-year-old son, works at the Shoemart shopping mal to augment the family’s income. This child and the second one weren’t able to go to college due to financial constraints.

Surviving

In Metro Manila, a study by the research think tank IBON Foundation reveals, a family of six must earn P613.30 ($11.36) to survive. But Mang Danny earns only around P250 a day; P400 at most if he’s lucky.

With his earnings, he pays P25 everyday to a driver’s association he is part of and eats out during the day. He has six mouths to feed and several bills to pay.

The increasing prices of goods and services especially those of oil and electricity take away much of his meager income. He doesn’t have his own electric meter, but he pays around P350-P500 a month, just for two lights, a television set, electric fan, and a VCD player.

“Pataas ng pataas ang presyo, wala namang taas ng pamasahe. Baka darating ang araw na wala na talaga kaming makain (Prices are always increasing, but there is no increase in transport fare. The day will come that we will have nothing to eat anymore,” he says.

Blood out of stone

On April 22, the Energy Regulatory Commission (ERC) released its final order allowing the National Power Corporation (Napocor) to increase its rate by P0.0556 per kWh, on top of the previous provisional increase of P0.9798 per kWh.

On top of this, ERC granted Napocor’s P0.42 per kWh increase in Generation Rate Adjustment Mechanism (GRAM) and the P0.003 per kWh increase in Incremental Currency Exchange Rate Adjustment (ICERA). GRAM and ICERA padded Napocor’s rate hike by P0.42 without undergoing any public hearing.

Summing all these, Napocor’s rate increase is actually P1.46 per kWh – higher than the figures that ERC and Napocor claim.

The rate hike took effect last April 26.

A member of the progressive party-list bloc in the House, Bayan Muna’s Joel Virador, asks, “Where will the people get money to pay for the new round of increases in electricity rates? Is the national government asking the people to squeeze blood out of stone?”  

‘Onerous’ Contracts

Although Napocor said the new rate hike was “just, fair and reasonable as it allows the recovery of allowable fuel costs incurred,” progressive groups say these costs are rooted in the state-run firm’s onerous contracts with Independent Power Producers (IPPs).

According to Bayan Muna (BM or people first), Napocor incurs more than P100 billion in net losses from these onerous or burdensome IPP contracts. Its debt now stands at P1.4 trillion, P200 billion pesos of which will be shouldered by government, ­ an amount comprising more than half the debt appropriations for the approved 2005 budget, BM also says.

The reason for these huge losses is that Napocor pays for some of the expenditures of independent power producers, as agreed upon in the contracts.

The contracts included provisions that obligated Napocor to pay for most of the power produced by the IPPs, whether or not Napocor uses it; government taking over some of the IPPs responsibilities during project implementation, including providing the project site, right-of-way, and even tax refunds; and the fuel-cost guarantee, which requires Napocor to supply and pay for the fuel used in plant operations.

The last guarantee alone, which reportedly does not appear in IPP contracts in other countries, represents a huge drain in Napocor resources, an IBON Foundation policy paper said.

The Foundation said that the government gave these generous incentives to attract foreign investors to set up power plants in the country through the build-operate-transfer and other similar schemes. In the BOT scheme, an investor puts up a plant, which, after a certain period, is reverted to the ownership of the government.

These provisions ensured that IPPs would be able to reap liberal profits even without delivering the electricity that was agreed upon in the contract. Napocor has to shoulder these costs, which it passes on to consumers through cost-recovery mechanisms such as the Power Purchased Cost Adjustment (PPCA) and the Fuel Cost Adjustment (FCA) collected by distributors, the paper added.

An inter-agency committee chaired by the finance secretary, along with the justice secretary and the director general of the National Economic and Development Authority reviewed these contracts pursuant to Section 68 of the Energy Power Industry Reform Act.

Of the 35 IPP contracts reviewed, the committee found that only six were clean. The remaining 29 were onerous, five of which were declared “most onerous.” These are the Binga Hydro Power Plant in Itogo, Benguet, the Casecnan Hydro Electric Plant in Nueva Vizcaya, the Bataan EPZA Diesel Plant, the San Roque Multipurpose Project and the Coal-fired Thermal Power Station, both in Pangasinan.

The Casecnan project, for example, which had the most expensive power cost among the contracts, required Napocor to take-or-pay 19 million kWh at US$0.1650 or PhP8.91 (1995 figures) per kWh a month, whether or not electricity is generated. Napocor
records show that from December 2001 up to late 2002, Casecnan delivered only a monthly average of 65 percent of the contracted 19 million kWh.

As a result, Napocor income statements revealed that it has paid P150 billion for purchased power in 1995-2002. These IPP contracts caused Napocor liabilities to bloat from P122 billion in 1994 to almost P1.4 trillion in 2003.

Meanwhile, a study conducted by Credit Suisse First Boston-Arthur Andersen estimated that $9 billion of Napocor’s more than $15-billion total liabilities as of August 2000 were due to obligations with these IPPs.

‘Scrap onerous contracts!’

Power consumer groups have called for a scrapping of these contracts as it is unfair to pass on the burden to the people. Even those ineligible contracts – those not approved by the ERC on or before Dec. 31, 2000, were also included in the computation.

Section 32 of the Electric Power Industry Reform Act of 2001 or the EPIRA law had provided that only contracts approved by the Energy Regulatory Board by that date are to be included in the Napocor’s payments. The San Roque and Casecnan projects fall outside this legal requirement. 

IBON Foundation also urged the government to write off the debts that sprang from these onerous contracts, to stop the privatization of Napocor, and rescind the Electric Power Industry Reform Act of 2001 or the EPIRA law. .

Another BM representative, Teodoro Casiño, warned that “unless the onerous contracts with IPPs are repudiated, no amount of legislation can save the public from the catastrophic effect of lifting the VAT exemptions on power generation and oil products.”

EPIRA, or RA 9136, which was signed into law in 2001, pushed for the privatization of Napocor and the restructuring of the power sector. Among its aims, however, was “to protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power.” Bulatlat  

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