By MYRNA M. VELASCO
The government, with the Power Sector Assets and Liabilities Management Corporation (PSALM) in the lead, is already very close to winding up its renegotiation with the independent power producers (IPPs) with one last contract about to pass the rigorous scrutiny.
It was gathered that the only remaining contract that remains to have issues yet to be settled in the negotiation process is that of Prisma Energy (formerly Enron Power) which is operating the 105-megawatt Subic oil-fired power facility.
The Subic power project has a 15-year energy conversion agreement (ECA), which is a variant of the Build-Operate-Transfer (BOT) scheme, with state-owned National Power Corporation due to lapse in 2009.
Enron’s contract for its first power project, the 110-MW Pinamucan diesel-fired facility already expired in 2003; and ownership was already transferred to NPC.
"The renegotiation process is already nearing its conclusion but before the generated savings could be passed on to electricity consumers, the agreements reached would still need to pass through approval of the government agencies involved in the process," a highly-placed source privy to the renegotiation exercise has disclosed.
It would be noted that an inter-agency committee (IAC) was earlier created to undertake review of the IPP contracts; with the end-goal of cornering some savings that would redound to cheaper rates for the electricity consumers.
The findings of the IAC chaired by the Department of Finance (DoF) have been coursed through PSALM which is carrying out extended negotiations with the IPP sponsors.
So far, PSALM already made public that out of the 20 contracts it already concluded a deal with, the generated savings was already placed at $1.03 billion.
There are at least 35 IPP contracts which are considered active to-date.
The NPC’s transfereecompany in several occasions stressed that it is keen on completing the IPP review process by the end of this year; so the consumers could already benefit from whatever savings were generated.
Last year, NPC reported that it was able to trim down its obligations with the IPPs by
P8.06 billion because of the completion of renegotiation of some contracts.
NPC president Cyril C. del Callar further noted that the savings would soon have a trickle-down effect on the electricity consumers, once the Energy Regulatory Commission (ERC) approves the universal charge that will account for the stranded costs due to the IPP contracts.
The amount of savings per year from these IPP obligations will vary, according to PSALM and NPC, noting that the reduction in the power firm’s IPP costs had been based on the net present value of the assets.
As earlier estimated, the total cost savings to be generated from the renegotiation of power supply agreements of state-owned NPC with its ontracted IPPs would hit a whopping $2.949 billion in nominal terms; translating to a rate reduction of average
P0.098 per kilowatt hour (kwh) to end-consumers and the government.
It has been indicated that the total reduction in universal charge (UC) from eligible NPC contracts to be billed to customers would be to the tune of
P0.026 per kwh.
On the other hand, total cost reduction from ineligible contracts would be at
P0.072 per kwh; thus, rounding to total cost savings of P0.098 per kwh.
From the IPP contracts where renegotiations have already been concluded, it was indicated that the expected nominal savings could be an equivalent of about three years worth of fixed payments to power producers.
