Panay Power to continue Iloilo plant operations

Panay Power Corp. (PPC) will continue the operations of its 72-megawatt facility in La Paz, Iloilo City as a result of the provisional authority granted by the   Energy Regulatory Commission (ERC) last Dec. 15.

"As a result of the ERC decision, which has provided  a strictly  "cash costs recovery formula" for us, PPC was able to  negotiate with Shell for the delivery of fuel enough to  avert the impending power crisis in Iloilo City.  Shell agreed to deliver fuel which will last for four days, pending our discussions on the settlement of PPC’s arrears with Shell," PPC vice president Arman Lapus said.  

Lapus said beyond the four days, "PPC is in discussions with Shell and other potential fuel sources to ensure the continuous operation of the plant up to the end of the year and through the first week of January 2006." 

PPC is jointly owned and operated by Mirant Philippines and Global Business of the Metrobank group.

Lapus said PPC has committed to take all necessary and immediate action to avoid closing down the plant, exhausting all available remedies to avert a potential massive blackout in the city.

"PPC commends the ERC for acting swiftly to avert a power crisis in Iloilo." Lapus said.

But Lapus pointed out that the provisional generation rate allowed by the ERC to be collected by PECO (Panay Electric Cooperative) from Iloilo City consumers will only cover PPC’s actual expenses in running the plant, which include fuel cost and operation and maintenance  expenses. 

"It does not allow PPC to recover its full costs, let alone generate any profit.  This only means that PPC will be able to continue to operate the plant without profit to ensure the availability of power supply to consumers," he said.

Thus, he warned that the ERC decision may not entirely prevent the possible shutdown of the power plant.

"Regrettably, this tariff is not sustainable and does not provide long term solution to allow the continuous operation of the plant," he said.

Lapus said the power firm is still on the verge of closing down its business. "If we are unable to collect our full generation cost soon, we may find ourselves at risk of not meeting our obligations and defaulting on our loans and being forced out of business," he said.    

He added that PPC has more than P364 million which it has been unable to collect from PECO since September this year. 

PPC is working together with PECO, the ERC, the Department of Energy (DOE) and local government officials of Iloilo to come up with a long term solution to ensure that the people and economy of the city will continue to flourish.

Last Dec. 14, the ERC issued a provisional authority (PA) to PECO in order to forestall any interruption in electrical services of all the consumers of the electric cooperative.  

The PA refers to PECO’s petition for approval of its amended purchased power agreement (PPA) with PPC.

"The ERC is aware of the detrimental effects of a massive blackout in Iloilo City, thus it resolved to issue a PA allowing PPC to recover the cash necessary to generate power. This order provides a temporary relief to PPC while the ERC is still evaluating its amended PPA with PECO," ERC chairman Rodolfo B. Albano Jr. said.

The PA will mean cash flow alleviation to PECO and PPC for it will address their fuel cost, cash component of operating and maintenance cost (O&M), and interest expense.