IPPs push for privatization of Napocor power assets

MANILA, Philippines - The Philippine Independent Power Producers Association (PIPPA) is calling for the privatization of state-owned power generation assets to help solve the energy crisis in Mindanao.

“PIPPA believes that the government must pursue the privatization of its remaining assets to put in place the necessary industry environment to encourage investors to put much needed power facilities to resolve the lingering power problem in Mindanao,” the industry group said in a statement.

PIPPA said the privatization of National Power Corp.’s generating assets has resulted in a competitive power market in Luzon and the Visayas.

For instance, the Ayala Group, Meralco Powergen Corp., TeaM Energy Philippines Corp., the Aboitiz Group and San Miguel Group, among others, are expanding their portfolio in the two areas.

PIPPA said the power developers were encouraged to build new power plants with over 2000 megawatts (MW) in total capacity in the next two to four years because of competition.

“The momentum of privatization as envisioned in the Electric Power Industry Reform Act (EPIRA) should not be dampened or halted,” PIPPA said.

“Otherwise, power developers will not build plants in places where they are most needed, like Mindanao,” it added.

The EPIRA of 2001 mandated the Power Sector Assets and Liabilities Management Corp. to privatize Napocor’s power assets.

To date, Napocor still owns and operates the Agus and Pulangi hydropower complex in Lanao province. The two complex have a combined installed capacity of 982 MW but available capacity is only 641 MW.

Mindanao needs around 1,597 MW daily including reserves, but existing capacities can only produce 1,261 MW as of April, data from the Energy department show. The shortfall resulted in two to four hours of rotating brownouts in the area.

“Privatization will work if you really believe that competition will drive down the cost of power,” Aboitiz Power Corp. chief executive Erramon Aboitiz said.

In Luzon, power plants have become more efficient and reliable, allowing more available capacity in the grid, Aboitiz said.

Meanwhile, PIPPA said the government should set up Mindanao’s wholesale electricity spot market (WESM) and the Leyte-Mindanao Interconnection project to increase power supply in the island.

“PIPPA believes that the much-delayed Leyte-Mindanao interconnection must be put in place by the National Grid Corp. of the Philippines in order to allow sharing of reserves among Luzon and Visayas,” PIPPA said.

Resources could also be shared with other grids when there is drought in Mindanao and hydropower plants cannot operate at full capacity, PIPPA added.

Hydropower accounts for 53 percent of the total electricity supply in Mindanao. But these plants record declining output due to lack of rain in the summer season.

For the WESM, PIPPA said the program will allow Mindanao to purchase excess or uncontracted capacities in Luzon and Visayas.