ERC extends deadline for acquisition of sub-transmission assets to Dec 31

MANILA, Philippines - The Energy Regulatory Commission (ERC) has extended the deadline for the acquisition of sub-transmission assets (STAs) to Dec. 31, 2011.

“Cognizant of the difficulty in forming a consortium, the ERC deems it appropriate to grant the request of Meralco, Batangas Electric Cooperative II and First Bay Power Corp. (FBC) and extend the deadline until Dec. 31, 2011 to afford them ample time to acquire the residual STAs,” the ERC said.

Residual STAs are assets shared by and between two or more connected distribution utilities (DUs).

According to the ERC, the extension of the deadline is within the mandate of the Electric Power Industry Reform Act (EPIRA).

Manila Electric Co. and its two partners earlier asked the ERC for a six-month extension of the original Dec. 31, 2010 deadline to June 30, 2011. But in its resolution, the ERC gave Meralco a longer time to complete the acquisition of the assets.

“We believe that the ERC is aware that there are still STAs which have not been disposed to qualified DUs as of this time despite negotiations and diligent efforts of the different DUs to acquire the same,” the firms said.

The three DUs said they have “clear intentions” to acquire several STAs from the National Transmission Co. (TransCo) which previously operated the country’s power transmission network before it was privatized. 

According to the power utilities, there are several issues that need to be threshed out with regard to the acquisition of the STAs. One major concern that would have to be addressed is the requirement that the consortium, which would acquire the assets, be a juridical entity.

“We believe that such an extension of the deadline is in the spirit of the EPIRA’s mandate to sell and transfer the STAs to qualified distribution utilities,” the group said.

Under Republic Act 9136 or EPIRA, TransCo is mandated to sell its STAs or assets with a capacity of 69 kilovolts and below, to qualified distribution utilities and electric cooperatives. Only DUs where the STAs are located could buy these particular STAs but most of the ailing electric cooperatives could not afford to buy them and would need financially capable DUs like Meralco to help them.

TransCo expects to sell over P1 billion more STAs soon. It has been able to divest P3.42 billion (67 sale packages) worth of STAs including 325 transformers to 56 DUs. Included in the sale packages are 40 lease purchase agreements with 32 ECs under concessional terms amounting to about P2.46 billion.

The balance of over P960 million represents sales to private DUs. Some 31 sale contracts have been approved by the ERC amounting to P1.49 billion.

The sale of TransCo’s STAs involves some 131 sale packages covering some 107 interested DUs, mostly electric cooperatives (ECs). In cases where more than one DU is connected to a transmission line, there is a need for the connected and qualified DUs to form a consortium to buy and thereafter operate the asset.

The STAs involved a total of about 6,200 circuit-kilometers comprising mostly of 69kV transmission lines and 1,600 MVA of substation capacity.

Estimated cost of these assets is placed at about P7.6 billion based on Dec. 31, 2007 net book values.

Privatizing the STAs will, in the long run, be beneficial to power customers. By purchasing these assets, distributors will be able to improve their operations and expand their franchise area, thereby serving more customers.