Napocor warns of 10-hour blackouts if PPA is suspended

The country might suffer over 10 hours of blackouts a day nationwide if collections of the purchased power adjustment (PPA) is suspended, the National Power Corp. warned yesterday.

Ed Orencia, manager of Napocor’s tariff division, said Napocor uses part of the PPA to pay independent power producers.

Under its contract obligations with the IPPs, Napocor has to buy all the power produced by these IPPs whether it uses the excess power or not. Napocor uses the PPA to pay for the power purchases.

The IPPs supply 50 percent of the country’s power needs, Orencia said.

"The PPA collection could not be suspended unless there is an alternative source of payment for the IPPs. Because if Napocor would not be able to pay the IPPs, 50 percent of the power supply could no longer be provided. If so, a massive and longer brownout is highly possible," Orencia explained.

Every month, Napocor pays more than P4 billion to active IPPs. At present, Napocor buys power from 35 IPPs after terminating the services of eight others.

Orencia said the government could be sued by the IPPs for breach of contract if the PPA collections are suspended.

Reducing the PPA charges from the current P1.50 per kilowatt hour to P0.40 per kilowatt hour, he said, in lieu of suspending PPA collections was more workable.

The inclusion of the PPA charges in the monthly electric bills was a result of the tapping of the IPPs’ services in the early 1990s by the Ramos administration in its effort to solve a crippling power crisis in which the country suffered eight hours of blackouts daily.

President Arroyo had asked Congress to pass a measure that would reduce the PPA charges. Mrs. Arroyo had already approved a draft administration bill that would enable the Power Sector Asset and Liability Management Corp. to absorb the PPA.

But early this week, Sen. Vicente Sotto III filed a resolution seeking the suspension of PPA collections which, he said, would bring down consumers’ electric bills by 50 percent.

Sen. Blas Ople yesterday said the opposition in the Senate and the House of Representatives will file a resolution seeking a temporary suspension of the PPA collections.

"This levy is onerous and illegal on its face and should therefore be abrogated," he said.

The Senate minority will file the resolution on Monday while the Laban ng Demokratikong Pilipino will do its part in the House.

Ople said Congress should intervene in the issue to help the public because, according to him, the government failed to review the PPA.

Fellow opposition lawmaker Sen. John Osmeña said the amount being collected from consumers could be lessened by amending the Electric Power Industry Reform Act.

"Instead of collecting P1.40 over eight years, collect 40 centavos over 25 years. That’s the simple arithmetic to that," he said.

Sen. Teresa Aquino-Oreta said the government’s plan for the Power Sector Asset and Liability Management Corp. to bankroll the PPA would not solve the issue.

"In other words, the Arroyo administration is merely postponing the problem," Oreta said in a statement. "Under its refinancing strategy, electricity consumers will still end up the ultimate losers because they will have to bear the burden of paying for the refinanced PPA at a later time."

Senate President Franklin Drilon doubted the PPA collections could be suspended because these are contractual obligations entered into by the government.

"The scrapping of the PPA was debated upon during the deliberations on the privatization bill of Napocor. This will mean that the national government will absorb all the standard costs under the independent power contracts of Napocor," Drilon said. "Can the government afford to do this? Ultimately this will be passed on to taxpayers."

‘IPPs can help cut power bills’

Meralco, on the other hand, said not all IPP contracts are onerous and IPPs can even help reduce power rates if only Napocor would allow them to operate at a higher capacity.

Meralco vice president Rafael Andrada said current electricity rates could go down by as much as 60 centavos per kilowatthour if IPPs Quezon Power and First Gas are allowed to operate at 85 percent capacity.

The two IPPs are only operating at 60 percent capacity because, the Napocor said, current facilities cannot accommodate the two plants’ production because the plants were finished ahead of schedule.

But Andrada said the two plants were completed according to schedule and in line with the government’s five-year power development program.

Andrada explained Meralco buys electricity from Quezon Power at P3.80 per kilowatthour and P3.40 per kilowatthour from First Gas. Napocor, on the other hand, charges P4.20 per kilowatthour.

Moreover, First Gas generates power from natural gas, the cleanest and most environment-friendly source of energy, from the Malampaya gas field off Palawan. — With reports from Aurea Calica, Sheila Crisostomo, Romel Bagares