Napocor signs transition supply deal with 8 co-ops

The National Power Corp. (Napocor) will sign transition supply contracts (TSCs) with eight electric cooperatives in Northeastern Luzon today which should boost efforts to stabilize power rates in the region.

Napocor president Cyril del Callar will sign the TSCs with the general managers and board presidents of eight cooperatives from Region II, namely: Nueva Vizcaya Electric Cooperative Inc.; Ifugao Electric Cooperative Inc.; Quirino Electric Cooperative Inc.; Kalinga Electric Cooperative Inc.; Isabela I Electric Cooperative, Inc.; Isabela II Electric Cooperative Inc.; Cagayan I Electric Cooperative Inc.; and Cagayan II Electric Cooperative Inc.

These cooperatives will be the first group to sign TSCs with Napocor following the Energy Regulatory Commission’s (ERC) approval last July of a TSC template for the state-owned power firm and the different distribution utilities (DUs) it supplies.

The template or standard format for the TSCs is expected to facilitate the approval of the contracts when these are filed with the ERC eventually.

Del Callar said the signing of the TSCs is expected to benefit ordinary electricity consumers through more stable power rates.

"We can expect electricity prices to be stable once the TSCs between Napocor and the DUs are firmly in place. The TSCs will, in effect, protect end-users from frequent price volatility while the power generation sector is moving towards full deregulation," he 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.

Official data show that Napocor has 79 DU-customers with supplemental agreements (SA) that have to be converted to TSCs.

As of Sept. 6, 2005, only 21 of these SAs have been filed with the ERC, while the other 56 are still under negotiation. Similarly, Napocor has 48 utility-customers awaiting new TSCs.

Of this figure, only 13 have been signed and filed before the ERC, while 33 are still being negotiated. Del Callar said Napocor will aggressively pursue the conclusion of the ongoing TSC negotiations and other bilateral contracts with its DU-customers by October. For its industrial customers, Napocor is eyeing to wrap up the TSC negotiations by December this year.

Earlier, Napocor said it expects to accelerate its privatization program with the recent approval by the ERC of its format for the mandatory TSCs with the DUs. 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," said Del Callar. "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."

At the same time, Del Callar said 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.