DOE mulls uniform contract with IPPs

The Department of Energy (DOE) is looking at the possibility of forging a uniform contract with the independent power producers (IPPs).

"We are thinking of coming up with a certain contract that would conform to all," Energy Secretary Vincent S. Perez said in an interview over the weekend.

But Perez said they have to consult with the IPPs if such idea would be acceptable or not. "We need them to commit if we will carry out such scheme," he said.

Perez said the DOE, along with the Power Sector Assets and Liabilities Management (PSALM), is consulting with the IPPs "one by one".

"We are presenting to them the result of the review of the inter-agency review committee. So, we will be able to know if we will need more information on each IPP for us to better appreciate a particular contract before going into actual re-negotiation with an IPP," he said.

An official from a power generation company, on the other hand, said the DOE has met with them in the SGV Building in Makati.

The power firm official said though they are willing to undergo a "settlement" process, they are discounting the possibility of re-negotiating with the government since their creditors may not allow such scheme.

An executive from a US-based IPP, meanwhile, said there are certain possible solutions to address the current over-capacity of 2,000 MW in the system which is causing the high purchased power adjustment (PPA) being shouldered by the electricity end-users at present.

Included in these solutions, the executive said, is the possibility of pre-terminating fast-track projects which were contracted during the power crisis in the early 90s. These particular projects have low investment but high-operating costs.

Another proposed solution is for the government to push for the utilization of baseload power facilities, which basically are power plants that are always on a switch on-mode or always available to the National Power Corp. (Napocor) if needed.

But Perez said they have yet to sort out the contracts based on context. "We need to inform the IPPs of the issues before we can push through with the actual talks on a possible re-negotiation," he said.

Among the issues being looked at based on the initial result of the review of the IPP contracts, Perez said, include: the increase in fees (the formula for the escalation of fees for a certain period of time); the termination of contracts that are set to expire; and the extension of the take-or-pay agreement or the cooperation period between the Napocor and the IPPs.

The energy chief said there are certain economic issues that should be cleared out with the IPPs such as the use of consumer price index in pricing their contract. "We have to clarify what formula was used in calculating the price of the contract. In a way, we will know if the IPP or a power company is still profitable or not," he said.

In a related development, Mirant Philippines Corp., the biggest privately-owned independent power producer in the country, is still discussing with the National Power Corp. (Napocor) the possible pre-termination of its contract for the Navotas I project.

Mirant corporate and external affairs vice president Allan Paul Flake told reporters over the weekend, that talks on the proposed pre-termination of the said contract, which apparently started a year ago, is still ongoing.

"We have been in discussion with Napocor for the pre-termination of Navotas I which will expire in March 2003," he said.