ERC decision to speed up Napocor sale

The National Power Corp. (Napocor) expects to accelerate its privatization program with the recent approval by the Energy Regulatory Commission (ERC) of its format for the mandatory transition supply contracts (TSCs) between the state-owned power firm and the distribution utilities (DUs) it supplies.

ERC in a recent resolution said the adoption of a "template" or standard format for the TSCs between Napocor and the DUs will facilitate the approval of the TSCs.

"The TSCs will improve the attractiveness of Napocor’s generation assets and will increase the market value of the power plants that are intended for sale and further operation," Napocor president Cyril del Callar said over the weekend.

"Also, it would be easier to sell a power plant if it comes with its own TSC, because this will guarantee the future owner of that asset a ready market for the power plant’s output," he added.

At the same time, del Callar said that the TSCs will also benefit ordinary electricity consumers by protecting them from frequent price fluctuations while the power generation sector is shifting from a highly-regulated to a fully-deregulated regime.

"We can expect electricity prices to be stable once the TSCs between Napocor and the DUs are in place," del Callar said.

Under Republic Act 9136 or the Electric Power Industry Reform Act, Napocor is mandated to negotiate a TSC with each of its power distributor-customers in preparation for retail competition and open access in the distribution sector.

Napocor data show that the state-owned power firm has 77 DU-customers with supplemental agreements (SA) that have to be converted to TSCs.

As of June 17, 2005, only 20 of these SAs have been filed with the ERC, while the other 57 are still under negotiation.

Another 50 customers are required to enter into new TSCs with Napocor. Of these, only 14 have so far signed new TSCs with Napocor, including the Visayas Electric Co., the Davao Light and Power Co., and the Cagayan de Oro Electric Power and Light Co. The TSCs with these DUs are now awaiting the approval of the ERC.

"With the template, we expect to have an easier time securing the ERC’s approval for the TSCs," del Callar said.

Prior to the approval of the template, the ERC conducted public consultations on the TSC issue last February and April.