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Republic of the Philippines ENERGY REGULATORY COMMISSION SAN MIGUEL AVENUE, PASIG CITY

IN THE MATTER OF THE APPLICATION FOR APPROVAL OF POWER SALES AGREEMENT BETWEEN ILIGAN LIGHT AND POWER, INC. (ILPI) AND MAPALAD POWER CORPORATION (MPC) WITH PRAYER FOR PROVISIONAL AUTHORITY

ERC CASE NO. 2013-049 RC

ILIGAN LIGHT AND POWER INC. (ILPI) AND MAPALAD POWER CORPORATION, APPLICANTS x -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

MANIFESTATION / DISCUSSION / POSITION / PRAYER


(June 4, 2013)

MANIFESTATION LANAO POWER CONSUMERS FEDERATION (LAPOCOF) respectfully manifests its participation to the ERC as INTERVENOR to ILPI and MPCs Joint Application for a Power Sales Asgreement (PSA) with Prayer for Provisional Authority. We sent our formal manifestation by the courier LBC dated May 31, 2013. Receipt of which is herein attached. LAPOCOF represents the consumers specifically the residential end users of Iligan City with an office at the Medical Centrum, Villaverde, Iligan City and is represented by its Chair Emerita, Dr. Melchora J. Ambalong.

DISCUSSION In the STATEMENT OF FACTS numbered 7 to 24 of the of the Joint Application submitted by ILPI and MPC to the ERC, they presented the reasons why there are 3 to 4 hours power outages in Mindanao based on the premise that, The generating capacity in the Grid is no longer sufficient to meet the power requirements of Mindanao. LAPOCOFs Rebuttal Mindanao Power Supply Situation. LAPOCOF presents its common sense analysis with regards to the Mindanao power demand and supply. There is 1,157mw demand (data from the Phil Daily Inquirer, April 2, 2013 issue) plus a Contingency Reserve of 100mw totaling 1,257mw need for Mindanao. Yes indeed, there is only 832mw available from PSALM/NPC. This is from AgusPulangui and Mt. Apo Renewable Energy (RE) plants at 629mw and from its coal plant which is at 203mw. To compound the problem, NGCP sources its Contingency Reserve from PSALM, instead of other sources, such as Therma Marine, drastically lowering PSALMs available

supply from 832 to 732mw. Thus it could not meet the CSEEs it has with the DUs such as ILPI which has no other supplier and is wholly dependent on NPC / PSALM. But outside of NPC /PSALM with its BOT contracts having expired, the diesel / coal plants of the IPPs, (WMPC, SPPC, PB104) is available for Mindanao at 349mw or a total of 832mw + 349mw = 1,181mw. (Mar 6, 2013 data from the daily operation report of NGCP). There is also the Iligan Diesel Power Plants (now Mapalad Power Corp.) producing 97mw. (1,181mw + 97mw = 1,278mw). If only these were made to run in whatever management / ownership was arranged in the years 2011, 2012 and 2013. There would have been no brownout for Mindanao especially Iligan City in those years. There is another source. The 200mw from Therma Marine Inc. (TMI) ).(1,278mw + 200mw = 1,478mw). ILPI should have entered into a PSA with TMI for Emergency Supply of Energy for a period of three or more years. There is no Minimum Energy Off Take (MEOT). The cost of electricity is to be paid only once utilized. We need not pay for electricity that has never been produced and never been used. As inserted in this joint application, ILPI has a PSA with Mapalad Energy Generating Corp. (MEGC) which has a MEOT provision, under which ILPI will purchase from MEGC a fixed monthly amount of energy (4.27 million kWh), for the entire period of 15 years of the cooperation period, even if cheaper energy is available from other sources. Also if the PSA is with TMI, we need not shoulder the capex of the cost of constructing another generating plant which we consumers will be burdened with by the MEGC. This Joint Application did not present that this deficiency is only for those Distribution Utilities (DUs) that are wholly dependent on PSALM to include ILPI. Because this deficiency has been projected and known way way back, franchise areas of DUs such as Davao Light, CEPALCO, COLIGHT and FIBECO which had the foresight to put up their own generators are not suffering shortages now with an electricity rate which is the average for Mindanao. ILPI did not have that foresight and business acumen to set up Generating Sets way way ahead. PSA with MEGC as inserted in this Joint Application has a rate impact which is exorbitantly expensive and if imposed will make Iligan the highest in Mindanao. RA 7638 (DOE ACT of 1992), Implementing Rules and Regulations (IRR) of Section 5(i), specifically Section 6(b) on Prioritization of Load Dispatch, in line with the objectives of the Act of devising ways and means of giving direct benefits to the local government unit (LGU), especially the community which hosts the energy generating facility. It states, In times of energy shortage, the energy generating facility shall prioritize up to 25 % of each contracted or available capacity to be delivered to the appropriate electric utility for distribution to the official resettlement/relocation sites of the community and people affected, and thereafter, to the relevant host LGU or host region... Based on that Community Host Benefit of RA 7638, the Sangguniang Panglunsud of Iligan City passed Resolution No. 12-135 dated March 26, 2012, which is attached herein. In summary it states that the City of Iligan is to obtain priority of load dispatch of 25 % of the contracted or available capacity of the Hydro Electric Plants Agus 5, 6 and 7 all located in the City of Iligan. Agus 6 and 7 hydro plants have an actual operating capacity of 180mw. At 25%,we have 45mw priority supply from NPC which is more than enough to answer our need which is at 37 to 38mw. Since copy of this Resolution was furnished ILPI, it should have explored this opportunity. In No. 16 of the Joint Application, NPC supplies 15.7mw to ILPI. That is 11,241,214 kw/hour. In Annex N of the attached documents of this application, This allocated supply by NPC /PSALM to ILPI is not wholly availed of by ILPI. It does not maximize its allocation from NPC and instead reduced this to 9,367,945kwhour or only 13.01mw.

There is a reduction of 1, 959,095 kwhour or 2.72mw from NPC. Subsequently there is increase of supply from MEGC. We demand that ILPI maximize its allotment of Power Supply from NPC / PSALM and reduced power supply from other sources. In the ABSTRACT of the PSA with MPC. We do not question the need for a PSA with MPC. Our confusion stems from the fact that why ILPI did not enter into a Contract with MPC earlier so that our suffering from the brownout would have been shortened. Since April, 2013, MPC has been supplying 26mw to SOCOTECO, ZAMCELCO and other DUS. What is the hidden reason why ILPI did not secure any supply from MPC earlier? We demand that the supply from MPC be increased to 15mw instead of 10mw. MPC s term of supply and purchase under this Joint Application, shall be for three(3)years from the commencement of commercial operations, unless otherwise renewed by mutual agreement of the parties in writing. On each anniversary of the Effective Date, ILPI shall have the option to terminate the PSA or to decrease the Contract Capacity, subject only to a sixty-day prior written notice. In addition, the parties can agree to increase the Contracted Capacity and Dispatchable Energy, subject to the same rates and to the availability of power supply. When cheaper and more environmentally friendly Power Supply comes in 3 or 4 years hence then we consumers can prod ILPI to shift. Although the rate impact of MPC is still subject to Public Hearings, the rate impact of the ERC approved PA is much more lower than the PA rate of MEGC as inserted here. The PROJECT COST Attached is the Inspection Report of LAPOCOF based on its actual field survey of the plants. We want to know what is this Construction Insurance of 14,685-million. What are being developed with the 35,063-million? Based on our inspection, the plants are all set up ready to operate, quite well maintained and not dilapidated. May we know what other structures are to be added which needs this much expenditures and insurances for that matter? May we be furnished the details of the rehabilitation costs of 546,130-million. Wartzilla brand has a plant in Canlubang, Laguna. We want to have the details of the purchases. The reason why there was difficulty in getting other interested bidders to acquire the IDPP was because the land where the IDPP is located is owned by the incorporators of MPC. The irony is that we are now going to be charged the price of the land. How many square meters and what is the price per square meter? In the Insertion of the Provisional Authority granted by the ERC of the ILPI/Mapalad Energy Generating Corp. (MEGC) PSA and its price impact in this Joint Application of ILPI and MPC. In ERC Case No. 2011-029, regarding the PSA of ILPI and MEGC, the chronology of events are as follows: Feb 28, 2011 = ILPI applied to the ERC for a Provisional Authority (PA) to enter into a PSA with an entity called Mapalad Energy Generating Corp. (MEGC) which was still being planned and not yet constructed, March 18, 2011 = ERC conducted a Public Hearing in Iligan City, March 21, 2011 = The Iligan LGU and LAPOCOF submitted its comments,

May 9, 2011 = ERC granted a PA of the PSA of ILPI and MEGC, April 10, 2012 = The Iligan LGU and LAPOCOF filed for a Motion to Recall the PA, July 6, 2012 = ERC conducted a Public Hearing in Iligan City for the Motion to Recall, July 13, 2012 = Iligan LGU and LAPOCOF submitted its Rejoinder, Aug 9, 2011 = ILPI asked for an extension in replying to our Rejoinder, Aug 17, 2012= ILPI submitted their reply to the ERC, Sept 12, 2011= LAPOCOF submitted its rebuttal to the response of ILPI.

As of today, we have not received any information of any action from the ERC with regards to our Motion to Recall the PA. But the price impact of the PA at Php 2.25/kwh is inserted here.

POSITION Section 23 of the EPIRA: Functions of Distribution Utilities, it states, A distribution utility shall have the obligation to supply electricity in the least cost manner to its captive market... To achieve economics of scale in utility operations, distribution utilities may, after due notice and public hearing, pursue structural and operational reforms such as, but not limited to, joint actions between or among the distribution utilities ... Such joint actions shall result in improved efficiencies, reliability of service, reduction of costs Our foregoing submission shows ILPIs lack of due diligence in its power development planning. Options are available which they could have explored, so that ILPI need not enter into any contract that will unduly burden us consumers for quite a long time. For instance, we believe that ILPI should maximize its allotment from NPC/PSALM. ILPI knows that this will substantially be a reducing factor in the price of electricity. It has been our pride that Iligan City has the cheapest electricity rate which is our Citys a dvantage in securing direct investments to create jobs and improve the economic climate. But with the looming 10.31/kwh application that ILPI submitted to the ERC, Iligan will have the highest electricity rate in Mindanao. We question the insertion of the rate impact of MEGC in this application. The anomaly in that application is the insertion of the approval of a 15-year PSA for base-load power supply of ILPI and MEGC when the need is for Emergency or Short term Supply of Energy. This will unduly burden for 15 years the customers of ILPI with high rates in the generation component. This should not have been approved by the ERC to meet the prime interests of consumers which is the cost of electricity

PRAYER

LAPOCOF respectfully pray to the Honorable Commission that there should be no Provisional Authority granted to the PSA of ILPI and MPC till the Project Cost and other relevant technical details have been thoroughly studied so as not to unduly add to the burdens of the our already high electricity rates. We also pray to the Honorable Commission that the Provisional Authority granted for the ILPI/ MEGC PSA should not be included in this application till the issue of our Motion to Recall of such approval is settled.

We invoke Sec. 41 of the EPIRA which states that, aside from its regulatory function, the ERC is to ensure the adequate promotion of consumer interests. Part of which is the principle of promoting the long term interests of consumers.

Submitted to the ERC in Iligan City June 4, 2013 By: LANAO POWER CONSUMERS FEDERATION

Represented by:

Dr. Melchora J. Ambalong Chair Emerita