Government policy is fiercely questioned after state-run National Power Corporation (NPC) had been authorized to award a contract to Philippine National Oil Company-Exploration Corporation (PNOC-EC) for it to supply four lots of steaming coal for the Pagbilao coal-fired power facility without going through a competitive bidding process.

Energy Secretary Angelo T. Reyes defended that it was a government-to-government deal, hence, there is no need for the award to go through an auction process.

“It’s a government-to-government deal and we would want to encourage it, it is good because it saves the government money,” the energy chief noted; hinging such premise on the fact that the cost of shipment will be cheaper.

Three major questions on the terms of the coal supply award surfaced though: one, the reported selling price of $87.50 per metric ton was allegedly higher than the approved budget cost of $77/MT; two, the Pagbilao power plant is not designed to use local coal; and three, that the coal to be supplied by PNOC-EC is not coming solely from its own production but also shared by other suppliers through a consortium. Pricing-wise, industry sources indicated that spot market ranges were at over $70 per MT for the coal with specifications fit for the Pagbilao plant when the award was made.

Four lots of coal supply totaled 260,000 metric tons (one lot is equivalent to 65,000 MT), and the award was confirmed by government sources to have been made early this month.

When these same questions were asked from the energy chief, he simply indicated that he does not have the details, but the government entities involved would be the one to make such information
public. “I don’t know the exact price, you better check with PNOC-EC,” Reyes said.

It was gathered that when the Pagbilao facility experimented on using locally-produced coal, the outcome was dismal, especially on the level of emissions spewed out by the plant.

When contacted, PNOC-EC said the general manager in-the-know on the transaction has been on an out-of-town trip and that they will just send the requested data once available.

Being the chairman of the NPC board, it was noted that Reyes had prior knowledge as to the award of the coal supply deal. “We do not tolerate transaction that is higher, we only tolerate transactions that will be beneficial to the government,” the energy chief stressed.

As the Pagbilao facility is also due for transfer to its selected Independent Power Producer Administration (IPPA), it was raised that it will be a disadvantage if coal supply in the plant piles up prior to turnover.

Under the terms of the IPP contracts’ privatization, fuel procurement responsibility has already been tossed to the IPPA; and it will be up to them to strategize on cornering their fuel contracts.

The modest fuel supply buffer expected before turnover to the IPPA would just be for three months; so they can be given the leeway to ascertain their own future needs.