Napocor Rate is “Cheap” But it’s putting the Philippines in More Debt

The high cost of electricity in the Philippines, particularly in MERALCO franchise Area, has been a long running issue in the past years. For some time and just recently, many politicians and some “cause-oriented groups” blamed the Lopez Group’s MERALCO and its IPPs for the so called “sweet heart deal” as the root of this high price of electricity. This triggered politicians and regulators to pressure MERALCO to source more chunk of its energy requirement from NPC because they, -the politicians, think that the cost of electricity from NPC is cheaper than from MERALCO IPPs.

The price of electricity from NPC might sound cheap not because it is naturally and truly has the least cost to produce but because the rate is very much politicized and the government are essentially putting the company to loss financially and to deteriorate its power plant assets. In short, NPC’s cost of electricity in the past until now is not the true cost; NPC plants can’t even run its power plants within a good engineering standard and practice due to constrained maintenance and operations expenses budget. The artificially low cost of electricity resulted to the company’s profit loss, which in-turn, forcing the company into borrowings that are guaranteed by the government. This is just to maintain the operation of the Plants. What is unjust here is that these borrowings will then be paid by all Filipino people. Worse, because of these borrowings, the people have to pay also the interest rate and unjust terms and conditions of the lenders while the politicians had gained the popularity that they desperately needed.

Remember that the National Government had once partially rescued NPC by absorbing its Php200 Billion debt through the Electric Power Industry Reform Act (EPIRA) in 2001. This is a big chunk of the government’s budget from the tax-payers money.

Just an excerpt from the news today;

Napocor plans new borrowings

By MYRNA M. VELASCO, Manila Bulletin (Jan. 22, 2009), mb .com .ph/BSNS20090122146288.html

As its bid for basic rate adjustments are still pending for approval, state-run National Power Corporation (Napocor) indicated plans of resorting to new round of borrowings to sustain its operations.

NPC president Froilan A. Tampinco categorically admitted to media that the P0.74 per kilowatt hour (kWh) it implemented last year impacted on its bottom-line adversely.

“In the meantime, we would really have to look at possible outside financing in order to meet our obligations to support our continued operations,” he said.

Continuation…

Just recently, NPC filed a new application seeking an increase on its basic tariff by P0.8332 per kilowatt hour (kWh) for Luzon; P1.3815 per kWh for Visayas; and P1.0686 per kWh for Mindanao.While its rate hike bid has yet to go through deliberations and public hearing, Tampinco can just hope for now that “the new filing would help out in our bottomline finances.”

On its refund mandate due to foreign exchange gains last year, the NPC president emphasized that “it definitely has an impact on our bottom-line…and it is a negative impact.”

Apart from adjusting its basic tariffs closer to a level that would reflect its ‘true cost’, NPC is also pursuing parallel efforts on seeking regulatory policy that shall allow it to have automatic recoveries for cost factors, like generation charges and foreign exchange fluctuations.

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