UNLESS new power plants are built in Mindanao, the island-region could face a power shortage of 57 megawatts by 2009, which is enough to black out two of its provinces, Saidamen B. Pangarungan, chairman of Lanao Hydropower Development Corp. (LanaoHydro), told reporters Wednesday.

In a press conference, Pangarungan said an additional shortage of 116 megawatts is expected each in 2010 and 2011 or a total shortfall of 289 megawatts in three years.

Pangarungan added that LanaoHydro signed a joint sales agreement (JSA) with the National Power Corp. (Napocor) primarily to address this urgent problem aside from providing Napocor with flexibility that will enable it to avoid operating its expensive power barges and diesel plants in the future.

He disputed earlier claims that the agreement violated the Epira law and will result in a 100-percent increase in power rates in Mindanao.

“Under the JSA, Napocor will sell the electricity to be generated by Agus 3 to its customers in Mindanao, particularly the distribution utilities, electric cooperatives, bulk power customers in 2011. Hence, Napocor is not an off-taker and the JSA is not a take-or-pay contract,” explained Pangarungan.

He added that Napocor or the government is not at a disadvantage because on the contrary, it benefits from it. This is because under the JSA, Napocor will earn additional revenue of P0.12 a kilowatt-hour as a market fee for its marketing services and administrative costs in providing back-up to Agus 3’s plant shutdowns during periodic maintenance and the use by Agus 3 of Napocor’s transmission and metering services.

Pangarungan, a former governor of Lanao del Sur, also disputed the claim that the JSA will increase power rates in Mindanao by 100 percent.

Under the JSA, LanaoHydro will sign power sales contracts with the distribution utilities and bulk customers at prices that will be subject to the approval of the Energy Regulatory Commission (ERC).

He said the prices, which will be subject to the ERC’s scrutiny and approval, will be based on the long-run avoided cost of the best new entrant plant’ in Mindanao—a pricing structure earlier approved in 2003 by ERC in  Luzon and the Visayas grid—but this will be at an average of P4.32 a kilowatt-hour in 2011.

“The price of P4.32 a kilowatt-hour in the JSA is much cheaper than the projected pricing of P5.70 a kilowatt-hour in 2011, which is based on annual growth rate of 16.8 percent reckoned from the 2002 price of P1.20 a kilowatt-hour and the P2.62 a kilowatt-hour in 2006,” Pangarungan said.

He added that the current price of P2.62 a kilowatt-hour in Mindanao does not reflect the actual cost of power because the fuel cost alone of running a diesel-fired plant is now at P4.80 a kilowatt-hour and this is projected to cost  P10 a kilowatt-hour in 2011.

This means, according to Pangarungan, that the government is subsidizing the generation cost of power in Mindanao, and that by 2011, the price of P4.32 a kilowatt-hour offered by LanaoHydro in the JSA will be definitely beneficial to Mindanao end-users.

With the privately owned Filipino company LanaoHydro as developer, Pangarungan said, the JSA on Agus 3 is in line with State policies decreed in the Electric Power Industry Reform Act (Epira) “to enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors” and “to promote indigenous and renewable energy resources to reduce dependence on expensive imported energy.”

“With the clean, water-sourced Agus 3 plant, we do not drain our country’s foreign currency reserves and at the same time we contribute to the worldwide campaign against global warming caused mostly by carbon emissions from coal and diesel-fired plants,” he added.

Those who opposed to the JSA, according to Pangarungan, should wait when the power sales contract between LanaoHydro and its customers are filed with the ERC, where the proposed price of P4.32 a kilowatt-hour will be scrutinized in public hearings before they are approved.

Pangarungan added that the JSA was completely patterned after the JSA earlier signed months ago between Napocor and Korea Electric Power Corp. Salcon Power Corp. on the 200-megawatt coal-fired power plant.

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UNLESS new power plants are built in Mindanao, the island-region could face a power shortage of 57 megawatts by 2009, which is enough to black out two of its provinces, Saidamen B. Pangarungan, chairman of Lanao Hydropower Development Corp. (LanaoHydro), told reporters Wednesday.

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