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Power behind the thrown

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A five-year power crisis has thrown Mindanao into another cycle of problems, and it has something to do with the electric cooperatives there—those supposedly private but highly politicized ECs.

By 2016, which coincides with the end of the term of our leader Benigno Simeon (aka BS), Mindanao will have new power plants that will be able to supply the island with about 1,140 megawatts of electricity.

With another 200-MW plant expected to get going in 2017, the total generating capacity in Mindanao will be more than enough, even considering the expected rise in the usage of electricity in the entire island.

In other words, Mindanao is now looking at a power glut. It is also a bad thing, any which way you look at it.

Word goes around that, even a few years before the new power plants become operational, certain power companies are already wooing the buyers with all sorts of “incentives.”

Down here in my barangay,  “incentives” can also mean “under the table deals.”

Anyway, most of the electricity buyers are distributors and in Mindanao, most distributors are ECs—cooperatives supposedly owned by the consumers that local politicos nevertheless already control, simply because the politicos appoint the board members in those ECs as another form of political patronage.

One horror story goes that certain power companies offer about P1 million to each of the ECs as “incentive” for entering into forward contracts with the power producers. This early in the power glut game, it seems the power companies are trying to outdo each other in pushing their future production to the ECs.

From what I heard, companies such as Therma Marine, Conal (Alcantara group), Filinvest Development Corp., San Miguel Electric, GN Power and Aboitiz Power are all trying to rush their power generation projects.

Well, the powers that be, including some powerful groups behind the Palace throne, egged them no end to help solve the debilitating power shortage in Mindanao where business outfits and households would already thank the gods for  the shorter eight-hour brownouts, instead of the usual 12 hours.

For the sake of certain new senators, the island has been too dependent on hydroelectric plants for the longest time, thus suffering from power shortage in the summer months when the water levels in the rivers are down.

Now the government has been pushing for the island as a business haven, with cheap power rates courtesy of government-run National Power Corp. which, of course, have been subsidized by the government.

It is said that the crippling power shortage in Mindanao was the result of government inaction. Even as businesses relocated to the island, the government failed to promote the construction of new power plants there in the past five years.

And we all know how long it takes for a power plant to become operational—at least five years, if you are lucky!

As I said, with its dreadful social and political implications, the crisis created a big rush among business groups to put up power plants. All at the same time!

Based on projections, the island will have additional capacity of 158 MW next year at the latest. Another 325-MW power plant will become operational by 2015, and another one with a capacity of 657 MW, by 2016. The production of another plant will come into the grid by 2017, adding some 200 MW.

In just a few years from today, the power supply in Mindanao will finally start to outstrip the demand. At this point when hours upon hours of brownouts are still normal, the power business in Mindanao is already fast becoming a buyer’s market.

Believe me, the power plant proponents already see it. Certain groups are said to be offering the ECs “incentives” for future purchase contracts to the tune of P1 million per MW. It means that the bigger the EC are, the bigger are their incentives.

Based on my info, certain power plants are luring the ECs with low power rates, as a way to justify the future contracts to the end-users, who ultimately have to pay for everything, including the “incentives” that the EC board members get from the power plants.

As in any too-good-to-be-true deal, however, there is a catch. According to our sources in the industry, those low rates offered to ECs for the forward contracts will increase significantly after certain “adjustments.”

In effect, the deceiving “low” rates, plus the “incentives” to their board members, are luring the ECs to buy power now (and why not—there is still a shortage) for use in the future when there will definitely be an oversupply.

The point is the forward contracts do not make business sense for the ECs, period.

To think, those ECs are still a problem in the entire power sector, even with the billions of pesos of their debts already condoned under the law called Epira. In fact, a World Bank study done a few years ago, aiming to assess the progress of the ECs with the enactment of Epira, noted that ECs continued to incur huge losses, despite the fact that their so-called systems loss (the “missing electricity” from leakages, unexplained transmission loss, and such) dropped from 25 to 14 percent.

With such a huge drop in the systems loss, they should make a lot of money, but they did not. The World Bank in a way blamed one thing for the continuing mess among the ECs: “rent-seeking.”

Another term for it is corruption.

* * *

It seems that certain personnel of the Bureau of Customs found a new way to help rice smugglers: They simply drive the legitimate rice importers out of the way.

Last year, a group of farmer cooperatives arranged to import 94,000 bags of rice from Vietnam, through an NFA program that allowed farmer cooperatives and organizations to bid for NFA allocation for rice importation, which was the way of the Aquino (Part II) administration to extend financial help to the farmers, because they suffered from the rice importation.

Unfortunately, the shipping agent in Vietnam made a mistake in documents, putting wrong names as port of discharge and consignees. The actual importing cooperatives nevertheless noticed the mistakes and correct them. In what seemed to be a comedy of errors, the agent in Vietnam failed to inform the officials of the vessel carrying the importation. It was already out in the sea on the way to the Philippines.

True to form—the authorities seem to know about the technicality, as the Coast Guard boarded the vessel while it was in the water near Legazpi Port, forcing it to dock at the port, which was not really its destination.

At the same time, the BC put the entire shipment under “alert” pending verification of the documents, eventually declaring it under seizure.

The farmer cooperatives then worked on the documentation to show that it was a mere technicality, even soliciting the help of the NFA, which verified the authority of the cooperatives to import the rice. In fact, the other groups shown in the erroneous documents testified that they were not the consignees. The shipping agents also testified under oath to clear the misunderstanding.

Lo and behold, customs simply had to insist that the cooperatives were not the real consignees, in effect denying their appeal to lift the seizure order.

That was about a year ago. And as we all know, rice can rot. It is a perishable item. Since the cooperatives could not import the rice, others (i.e. smugglers) would have to do it for them. It was a simple modus operandi.


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Tags: Business , column , conrado banal , electric cooperatives , Mindanao , power crisis , power glut , rice smuggling



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