Due to VECO-CPPC stand-off: Power lack to hit Cebu

Power outages are expected to hit Metro Cebu after the Cebu Private Power Corporation, which supplies 23 percent of VECO's power requirement, announced that it would stop supplying power to the utility firm beginning this Saturday.

CPPC general manager Rogelio Q. Lim informed the Cebu City government and the Cebu Chamber of Commerce and Industry (CCCI) about the company's plan in a letter.

He stated that because of VECO's refusal to negotiate an extension of their interim agreement for the supply of power, it would suspend its delivery of power and its operations at exactly 12:01 in the morning of November 26.

Lim however also stated in his letter that CPPC would remain available to serve VECO anytime a mutually beneficial agreement is signed or the dispute is resolved. CPPC, Lim said, can immediately resume its operations once this happens.

Areas to be affected would be Cebu City, Mandaue City, Talisay City, and the towns of Consolacion, Liloan, Minglanilla, Naga and San Fernando.

Moses Red, corporate staff specialist of the Napocor's Power Economic Department said that if and when CPPC would really cut off its supply of power to VECO, then chances are we will have power outages due to the lack of power supply.

VECO in their official press statement said that the company has never shut its doors to negotiation although they find CPPC's proposal unacceptable since it is grossly disadvantageous to the power consumers.

To recall, CPPC and VECO signed an interim agreement on June 3, 2004 stating that CPPC's pricing scheme should not be based on the rate of Napocor, which is lower than the actual cost of electricity. Such agreement was supposed to expire last June 2, but was extended until today.

VECO said that after the lapse of the extension period, CPPC is bound to abide under their contract signed in 1997 wherein the latter's power rate is two percent less than Napocor's power rate. Also under this contract, CPPC agreed to take the fuel, foreign exchange and operational risks.

"To change the terms is not only a violation of the original contract, but clearly shows an insensitivity to the needs of VECO's customers already saddled with economic burdens. It is in the spirit of this contract that VECO wants CPPC to honor its contractual obligations under the Power Supply Agreement," VECO said in its official statement.

Napocor, which also supplies about 180 megawatts of VECO's daily requirement, cannot also just supply additional power without entering into another contract for such.

But Red said, the so-called emergency agreement can be exercised between VECO and Napocor to cover what would lost if CPPC stops operations, but he added it would be expensive on the part of Napocor.

Red said, Napocor has a stand-by power of 55 megawatt from its Thermal Plant I in their Salcon Plant in Naga, Cebu. Power from this facility costs between P6 to P8 per kilowatt-hour. Napocor's current rate charged to VECO is only P3.28 per kilowatt-hour.

Jesus Alcordo, ERC commissioner said that once there would be massive brownouts in Cebu, they will take action, but in the meantime, he is urging both parties or any concerned citizen to petition the commission to settle this dispute.

On the other hand, Alcordo said the ERC can also stop CPPC from seizing its operation if the commission is convinced that such act would unjustly hurt the power consumers.

Cebu City councilor Nestor D. Archival, in his privilege speech during the regular session yesterday, said the importance of VECO's reassurance that it can cope with the power demand of the city could not be underscored because the city is scheduled to play host to several major events.

Some of these events are the 23rd SEA Games, Pasko sa Sugbo and the 26th anniversary of the Sinulog festival, and the ASEAN Summit.

In view of this urgency, the City Council in a resolution requested CPPC and VECO to consider the order of the ERC dated September 22, 2005 wherein both parties are enjoined to renegotiate their power purchase agreement.

But Crispin Lamayan, Transco assistant vice president for systems operation, said only less than 180 megawatts was added to the previous power supply of 150 megawatts of the CNP grid. The entire CNP grid is supposed to have a total capacity of 400 megawatts.

Lamayan said a brownout is still expected once CPPC shuts down because other power plants of Napocor are also not operational due to maintenance repairs.

CPPC supplies 62 megawatts of power or 23 percent of VECO's 300 megawatt daily need for its franchise areas.

CPPC is a joint venture of VECO and American company East Asia Utilities, which also supplies eight megawatts of power to VECO aside from supplying the power requirements of the Mactan Export Processing Zone.

Under this joint venture, 80 percent is owned by East Asia Utilities while VECO has 20 percent preferred shares. VECO's share comprises the use of land, structures, machinery and parts.

VECO, according to its spokesperson Ethel Natera, is not in charge or in control of CPPC's operation and management.

She also downplayed insinuations that this dispute is just a way for VECO to increase its power rate.