Sen. Joker Arroyo, chairman of the Senate Blue Ribbon Committee, made this comment on the very first day of hearing on the status and operations of the multibillion-dollar Casecnan hydroelectric project.
An inter-agency review committee had previously identified the Casecnan project as one of 27 anomalous contracts entered into by the government with independent power producers. The contract involves the payment of about P6.8 billion a year or P137 billion over 20 years for power and water.
It was learned that the National Irrigation Administration (NIA) is obligated to pay the project proponent, CE Casecnan Water and Energy Co. more than $2 billion a year whether or not the contracted water volume is delivered.
The National Power Corp. (Napocor) will also be paying an equal amount to the same firm each year whether or not the contracted power wattage is produced.
Sen. Sergio Osmeña III said that what makes matter worse is that the power rate for Casecnan is more than P9 per kilowatt-hour.
"This is the highest rate in the country. This is twice the average rate!" Osmeña said.
NIA Administrator Jesus Emmanuel Paras told the committee that the Casecnan firm still has to deliver the 800 million cubic meters of water contracted per year, but the government has guaranteed to pay more than $2 billion a year for the 800 million just the same.
David Baldwin, president of CAL Energy international, a leading member of the Casecnan consortium, said that the company failed to deliver the required amount of water because the first six months of the year was punctuated by extremely dry season.
This lead Osmeña to cite a World Bank official who described the Casecnan scheme as "the lowest type of plant, a run-of-the-river- type."
"This means if there is no rain, there is no water. It is completely dependent on the weather. And yet, we pay whether or not there is no water," he said.
Sen. Rodolfo Biazon, whose privilege speech led to the committee investigation, said that the drying up of Pantabangan Dam could have been mitigated had the Casecnan firm delivered 800 million cubic meters of water to irrigate 85,000 hectares of agricultural land.
Osmeña said he would press for the filing of anti-graft charges against former government officials responsible for the signing of the "onerous contracts." He identified two of them as former Napocor general manager Guido Delgado and former NIA administrator Apolonio Bautista.
He claimed that Delgado even included in his computations for Casecnan power produced by two plants already paid for by the people, the Pantabangan and Masiway power plants.
Paras also told the committee that Casecnan has sought a reimbursement of the $51.5 million it has paid for value added tax, documentary stamp tax, withholding tax and registration fee.
He said that under the terms of the contract, the amount would be added to the water delivery fee if the government fails to reimburse it.
"We will be paying $870 million in added water delivery fee in 20 years," Paras said.
Biazon, Arroyo and Osmeña all expressed concern that a $51.5-million debt would balloon to $870 million in 20 years.
Osmeña also expressed indignation when Paras revealed that Finance Secretary Jose Isidro Camacho has agreed to pay the Casecnan firm a 17-percent annual interest if the $51.5 million is not reimbursed immediately.
Osmeña said that there is no government in the world willing to pay 17 percent for a dollar-denominated note, since the dollar is virtually free from inflation.
"Even for a peso denominated note, 17 percent is already high!" he added.
Baldwin said that his company is willing to settle for only half of the amount and interest rate.
The payment of NIA’s obligations to the Casecnan firm was formerly contained in the NIA budget, but was transferred to "debt servicing" in the general appropriations act so it could avoid scrutiny, according to Osmeña.