Mindanao Private Sector to Lead Resolution of Power Crisis

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Written by MinBC

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Mr. Vic Lao, Chairman of the Mindanao Business Council, announced today that the private sector in Mindanao will procure the required power generators to address the power crisis. “We can no longer wait for the government to address the crisis. The EPIRA anyway has sufficient provisions to allow us to solve the problem ourselves,” according to Mr. Lao. “ Our power situation is already becoming very serious. We did not expect the shortage of this magnitude to hit us this early. We thought the 484 MW shortage will still hit us by 2014 , but its already here. So we just have to move and try to solve our problem”

In a meeting in Davao he called among the different business organizations in mindanao last Friday, he identified what needs to be done immediately: a) the Mindanao Electric Power Alliance (MEPA) will have to be in the forefront of the resolution of the problem by filing a manifestation with the Energy Regulatory Commission (ERC) to accelerate the approval of the Electronic Ancillary Service Tendering ( EAST) market previously filed by the National Grid Corporation of the Philippines (NGCP). The MEPA is an association of different industry players and stakeholders like the Distribution Utilities, Chambers of Commerce, Industry Associations, The different Electric COOPs, Majors Users/Consumers; b) identify investors and business organizations who have the ability to procure the emergency gensets; c) arrange financing with local banks; d) initiate discussions with power utilities and local industries for the emergency power sales agreements (EPSAs); and e) start discussions with the Energy Regulatory Commission on getting a provisional authority (PA) for the EPSAs.

The EAST is expected to allow all major industries and households to bid to get off the grid to give the grid a relief on the supply pressure. By getting off the grid, the grid can reduce the deficit that it is currently experience of around 700 MW. It is not yet known how much capacity can actually get off the grid and how much it will cost the consumers of Mindanao. Mr. Pete Ilagan, President of NASECORE and who was also present in the meeting assured the Mindanao businessmen of his organization’s support in filing for this manifestation. Should the ERC give its nod to the mechanism, Mindanao can expect some relief within the month of March.

With the emergency powers of the President doomed, Mr. Lao said he has no choice but ask his fellow businessmen in Mindanao to invest in the emergency power generating sets that have to be procured on Lease Basis. “There are not many suppliers in the world who can give us power within the next 30-60 days, but we will try our best to procure them,” Lao said. Some members of the Mindanao business community have started discussions with the Development Bank of the Philippines and the Land Bank of the Philippines. “Both insitutions can, together, provide Mindanao at least US$100 Million for the immediate procurement of the gensets,” reported Lao.

Through the MEPA, initial dsicussions will start this week so that the terms of the EPSAs can be worked out fast. It is expected that the cost of emergency power will be high. But Lao was assured by experts that when “blended” with the current tariff of Mindanao, the jump in cost will not be that high. He admitted, though, that it was a bitter pill to swallow. It was estimated that for a 10-MW emergency power plant the following will be required:

Capital or Lease Cost (approximately) US$7 Million;

Credit line for fuel required is P7.01/kWh, or US$2 Million for a 60-day cycle;

Working capital for O&M is P0.78/kWh, or US$0.2 Million for a 60-day cycle;

TOTAL US$9.2 Million

“A 100 MW deficit therefore will be around US$100M but a 700 MW deficit will be a lot more,” laments Lao. We will be sitting down with NGCP to determine in detail the required capacities within the next 12 months. It is expected that the emergency power will cost as much as P18-P19/kwh given today’s prices of fuel. The blended cost may be around P12/kwh according to some estimates.

“We will try to meet with Secretary Reyes to relay to him our plans. And we will report this in the forthcoming Congressional Hearing to be held in Davao this Thursday by the Energy Committee headed by Cong. Mikey Arroyo,” according to Lao. Lao said that allowing the government through NPC to procure the gensets will not only take a longer time but is also fraught with various legal technicalities. “At the end of the day, only Mindanaoans can solve our power problem in Mindanao,” Lao concluded.