PSALM set to complete renegotiations with Napocor IPPs

The Power Sector Assets and Liabilities Management Corp. (PSALM) said yesterday that renegotiations with independent power producers (IPPs) of the National Power Corp. (Napocor) are about to be completed.

PSALM president Edgardo del Fonso said of the 35 contracts that are being renegotiated, only 12 are left to be finalized. He said eight of these contracts are still being discussed with various government agencies.

Included in these eight contracts are the controversial ones such as the Caliraya-Botocan-Kalayaan (CBK) Hydro Power project and the Cal Energy. CBK contract is still being discussed while Cal Energy has ongoing arbitration with the government.

"There are eight of these IPPs with similar situations so that means of all the 35 IPP contracts, there are only four IPP contracts that are having active discussion. The others already have been agreed in principle. It is just that they need to get approval of the National Economic and Development Authority (NEDA) and the Department of Justice (DOJ) as the case maybe," he said.

Other contracts that are being worked out by PSALM are those with Aboitiz (Benguet, Bakun); Alsons/Tomen (Iligan City 1 & 2, Zamboanga, General Santos); Alstom (Limay Bataan A & B); Bauang Private Power Corp. (Bauang La Union); Covanta (Cavite EPZA, Bataan EPZA); Enron (Pinamucan, Subic Zambales); Kepco (Malaya, Ilijan Gas); Marubeni Sithe (San Roque); Mirant (Navotas I-III, IV, Pagbilao, Sual); Mitsui (Mindanao Barges); NIA (Casecnan); Ormat (Makban Binary); PNOC-EDC (Leyte A & B), Mt. Apo I and II; Salcon Power (Naga Complex); State Power (Mindanao Coal); Chevron-Texaco (San Pascual Co-generation); and BHEPI (Binga).

The review of the IPP contracts is one of the measures the government has instituted to reduce the stranded contract costs that will be absorbed by PSALM which will eventually pass the cost to the consumers through a universal charge.

PSALM has a pending proposal to charge 40 centavos per kilowatthour to recover stranded costs of Napocor amounting to a total of P900 billion for a period of 25 years.

If PSALM and the Department of Energy (DOE) will be able to renegotiate these contracts with IPPs which oftentimes result in savings, the proposed 40 centavos universal fee will likely go down.

So far, the National Government has realized some $850 million or P44-billion worth of savings as a result of renegotiations involving 16 contracts with Napocor’s fuel suppliers and IPPs.

In mid-2002, President Arroyo mandated the DOE and PSALM to conduct the second-phase review of the IPP contracts in relation to the financial issues. The first-phase review of Napocor’s IPP contracts was done by an Inter-Agency Review Committee composed of the Departments of Finance, Justice and the NEDA.

Section 68 of the Electric Power Industry Reform Act ordered the review of IPP contracts to help reduce the cost of electricity for consumers while respecting valid commercial contracts and honoring government obligations. – Donnabelle Gatdula