Suez Energy urges government to consider Napocor rate hike bid

Suez Energy Asia, the winning bidder of the 600-megawatt Calaca coal-fired power plant, is urging the government to consider the current rate hike petition of the National Power Corp. (Napocor).

Suez officials formally sounded off their concern through a letter to the Energy Regulatory Commission (ERC).

Officials of ERC said they are looking at Suez’s request as they vowed to balance the interests of both the investors and electricity consumers.

ERC chairperson Zenaida Ducut said she will put in her priority list all pending rate adjustment petitions, including that of the Napocor’s 36.85-centavo basic rate increase.

Napocor power plants that are being sold come with  transition supply contracts (TSC) that are pegged with  Napocor’s time-of-use (TOU) rate.

Napocor has not been increasing its basic rate for the past three years. The last rate increase was approved by the ERC in June 2005 amounting to about P1 per kilowatthour.

Sources in the industry said the Calaca winning bidder believes that there is a need to raise the rates of Napocor to make the assets that would be privatized more attractive and palatable to investors. The investors also see the current rate of Napocor as “not the true cost of electricity,” thus making it less competitive.

Suez apparently wants the rate increase of Napocor before closing the deal with the Power Sector Assets and Liabilities Management Corp. (PSALM), an entity created under the Electric Power Industry Reform Act (EPIRA) to handle the privatization of Napocor assets.

PSALM has reportedly asked Suez to close the deal by Aug. 4 this year.  But the loans being secured by Suez are apparently not being released pending these rate hike approvals.

ERC executive director Francis Saturnino Juan said the commission would need to conduct a series of public consultations and hearings before they could come up with the decision on rate adjustments.

“The reality is, when there are a lot of oppositions, there might be some extended hearings because we need to hear all the parties concerned,” Juan said.

Juan said the ERC “will seriously weigh and balance the need of investors to be financially afloat and the consumers’ concern for affordable power rates.”

The ERC official acknowledged the receipt of a letter expressing “concerns raised by the Calaca bidder on the low rates of Napocor.”

So far, it is only the sale of the Calaca power plant that has not been closed by PSALM pending payment of Suez.

Sold on Oct. 16, 2007, PSALM hopes to close the deal nine months after.

Suez, sources said, had also echoed the same dilemma that they might be able to close the deal if the rate increases of Napocor will not be approved.