DOE may defer auction of Mindanao coal plant

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THE Department of Energy (DOE) has proposed anew to hold off the November auction for the selection and appointment of the Independent Power-Producer Administrator (IPPA) for the bulk energy of the 200-megawatt (MW) Mindanao Coal-Fired Thermal Power Plant (Mindanao Coal).

DOE Officer in Charge Zenaida Monsada said this came up following the power situation in Mindanao, where water levels continue to drop at the Agus and Pulangi hydroelectric complexes due to a prolonged El Niño phenomenon.

“For the sake of the people in Mindanao. If we privatize it now the tendency is there would be high power rates because there is a shortage in capacity now,” she said after the Senate budget hearing last Thursday.

Taking the side of former Energy Secretary Carlos Jericho L. Petilla, Monsada explained that an early auction could cause price shocks.

Petilla had explained that, while there is still a power supply shortage in Mindanao, the IPPA’s winning bidder could dictate electricity rates, which, in turn, could translate to higher electricity rates for the consumers.

“There’s a shortage in Mindanao, so if there’s a shortage and you privatize that, cooperatives will get that for any price. So what I am saying is to hold off the privatization until such time that there are at least two plants that are running,” Petilla had said, adding that the coal power plants of San Miguel Corp., Therma South  Inc., and from the Alsons group are expected to come on line next year.

Petilla’s concern was taken into consideration by the Power Sector Assets and Liabilities Management Corp. (PSALM), the agency tasked to privatize the assets of the National Power Corp. Later on, the DOE and PSALM arrived at a mutual understanding to proceed with the privatization this year albeit inserting a three-year lock-in period in the power rates.

During the lock-in period, the winning bidder would have no choice but to adopt the existing power rate sold by current plant operator, Steag State Power Inc. (SPI). In this way, electricity rates will not go up because the rates that will be used are the rates currently imposed based on the contract with Steag.

Thereafter, PSALM scheduled the auction on November 25.

But Monsada said last week that it is better off not to bid out yet the IPPA contract of the Mindanao coal plant.

“So, the direction now is that it would be best if the privatization would take place when supply is stable. So probably by next year,” Monsada said when asked for a new timetable for the auction.

However, PSALM, which will conduct the bidding, has yet to decide on this.

PSALM President Lourdes Alzona said the PSALM Board would still have to deliberate on this. “We are still waiting for the DOE data on Mindanao power supply and rate assumptions. After that, we will take it up with the Board,” she said, adding that the Board would likely meet in the first week of October.

The DOE is a member of the PSALM Board, which is chaired by Finance Secretary Cesar V. Purisima. Other board members include the secretaries of the Department of Budget and Management, the Department of Justice, and the Department of Trade and Industry.

“The DOE is only one in the board. Congress is also insisting on a deferment until supply is stable,” Monsada said.

Located in Misamis Oriental, the Mindanao Coal plant was constructed in 2006 for a 25-year Power Purchase Agreement under a build-operate-transfer scheme that ends in 2031 with Steag SPI.

The power plant, which supplies about a fifth of Mindanao’s power requirements, is 51-percent owned by Steag;  34 percent, Aboitiz Power; and 15 percent, La Filipina.

PSALM earlier met with the 12 prospective bidders for the Mindanao Coal, namely; Conal Holdings Corp.; FDC Davao del Norte Power Corp.; FirstGen Northern Power Corp.; GDF Suez Energy Philippines Inc.; Masinloc Power Partners Co. Ltd.; Meralco Powergen Corp.; Nexif Pte Ltd.; SMC Global Power Holdings Corp.; SPC Power Corp.; Team (Philippines) Energy Corp.; Therma Southern Mindanao Inc. (TSMI); and Vivant Energy Corp.