LANECO “fools?” member-consumers on power rates, KP raise concerns on anomalous contracts

Tubod, Lanao del Norte - Power supply in Mindanao is more than enough to supply electricity almost doubled the Mindanao capacity need.

The Lanao del Norte Electric Cooperative (LANECO) has a pending Energy Regulatory Commission (ERC) case No. 2016-108 RC, for a joint application for approval of the Power Supply Contract (PSC) entered into by and between the LANECO, Inc. and San Miguel Consolidated Power Corporation (SMCPC), with prayer for confidential treatment of information.

According to source, LANECO has a total power capacity at 12 megawatt (MW) to supply power to consumers but only an average of 8 MW is consumed in a month. The KP members in Lanao del Norte observed that in their power billing they paid was approximately increased to PhP15.00 per kWh started in December 2016 from PhP9.00 per kWh without prior notice.

Currently, the LANECO has a new power supply contract (PSC) with San Miguel Consolidated Power Corporation (SMCPC) and jointly applied to ERC for its approval

The members of the kilusang Pagbabago (KP) Lanao del Norte (LDN) chapter who are also power consumers questioned the contract application with prayer for confidentiality which already contradict to the transparent and accountable governance. The KP LDN also questioning the rationality of the power supply application because allegedly in 2016 the load capacity received from suppliers of LANECO is 12 MW but the load distributed to member-consumers is only 8 MW, therefore, there is an excess power of 4 MW. There is also an existing problem in LANECO of an excessive unpaid electricity in huge amounts uncollected that allegedly charge it to the system loss.

Engineer Norberto J. Oller, the Past President and Technical Analyst of the Lanao Power Consumers Federation (LAPOCOF) and the current Consultant of the Iligan City Government, said that the system loss can be measure the losses of energy connecting from the supplier substation to transmission then distribution to the consumers. He said in the RA 9136 or the Energy Power Industry Reform Act (EPIRA), the maximum allowed charges on system loss is only a maximum of 9 percent based on the actual usage of electricity.

The Mindanao Power Monitoring Committee (MPMC) held a meeting of Principals on 15 November 2016 at Diamond Hotel, Manila was hosted by the Department of Energy - Electric Power Industry Management Bureau (DOEEPIMB).

The summary of Mindanao power projects as of October 31, 2016 have two components, the COMMITTED power capacity and the INDICATIVE power capacity. The committed power capacity is the power usages actually consumed while the Indicative power capacity comprises the power actually consumed and the excess power also known as reserve power.

The Committed power has a total capacity to 1,687.9 megawatt (mw), with 17 proponents, comprising the coal-fired power source with 5 proponents or power plants have total capacity of 1,501 mw equivalent to 89.5 percent share contribution to the overall power capacity; oil-based have 4 proponents with total power capacity of 29.5 mw equivalent to 1.7 percent share; natural gas is zero percent share; renewable energy have 8 proponents with power capacity of 148.4 mw equivalent to 8.8 percent share; Under the Renewable energy, geothermal with zero percent share, hydro with 8 percent share composed of 5 proponents with a total capacity of 134.2 mw, Biomass have 3 proponents with total capacity of 14.2 mw with 0.8 percent share, solar and wind energy have zero percent share.

The Indicative power has a total capacity of 2,765.8 mw with 37 proponents, comprising the coal-fired power source with 6 proponents or power plants has a total capacity of 1,733 mw equivalent to 62.7 percent share contribution to the overall power capacity; oil-based has 3 proponents with total capacity of 30.9 mw equivalent to 1.1 percent share; natural gas has zero percent share; renewable energy has 28 proponents with total capacity of 1,001.9 mw equivalent to 36.2 percent share. Under the renewable energy, geothermal has 1 proponent with power capacity of 40 mw equivalent to 1.4 percent share, hydro has 17 proponents with total power capacity of 662.7 mw equivalent to 24 percent share, Biomass with 5 proponents has a total capacity of 61.2 mw equivalent to 2.2 percent share, solar power has 5 proponents with indicative power capacity of 238 mw equivalent to 8.6 percent share and wind energy have zero percent share.

The Challenges in Mindanao power sector generation identified the excess generation, Policy on embedded Generation, Transition to a Competitive Environment, Marketing of the Excess Capacity to Investors. The Challenges on the TRANSMISSION operations is the Security of Transmission Facilities, Timely Completion of Transmission Projects, DISTRIBUTION collection efficiency, Supply contracting Issues.

In a mindset, the excess power generation is the difference of the Indicative power capacity of 2,765.8 MW and Committed power capacity of 1,687.9 MW. Therefore the excess power in Mindanao for 2016 is estimated to 1,077.9 MW. 

A projection from the power sector for 2017 has total projected installed capacity of 3,577.67 MW while total projected demand is 1,704 MW only. For 2018 projection, the installed capacity is 4,282.67 MW with projected demand is only 1,832 MW. For 2019 projection, an installed capacity at 4,282.67 MW with total power demand at 1,950 MW. For 2020 projection, the total installed capacity is 4,282.67 MW and the total projected demand is 2,097 MW only. Therefore, on 2021 the projected power surplus is 2,165.67 MW. 

The National Grid Corporation of the Philippines (NGCP) keep mum on this matter as they were invited during the Media Summit for Northwestern Mindanao held in Iligan City on November 28-29, 2016, to shed light on the power issues and concerns but to no avail reasons they cannot be reached from a very short distance within the vicinity of Iligan City.

In the Power Supply Contract (PSC), the LANECO will serve as the Buyer and the SMCPC will be the Seller. The joint application was submitted to the Energy regulatory Commission on March 14, 2016 for approval. It was stated in its application that there was two separate biddings conducted by the LANECO bids and awards committee with two separate biddings and have had two bidders failed and only none bidder was qualified, the SMCPC.

In its application historical background, on March 1, 2016, LANECO Bids and Awards committee (BAC) issued a resolution no. 10 to have a direct negotiation with SMCPC for the procurement of 5 MW electric energy for the period of 2016 to 2026 equivalent for 10 years. On March 3, 2016, LANECO Acting General Manager, invited the SMCPC for a negotiation of its power supply.

On March 4, 2016 the LANECO technical working group issued a resolution No. 01 endorsing to LANECO Board of Directors through its management headed by Mr. Mañada to enter into a Power supply contract (PSC) to SMCPC.

On March 7, 2016, the LANECO Board of Directors issued a Resolution No. 26, authorizing its President, Mr. Emmanuel A. Mejorada, to sign the PSC with SMCPC for the supply of 5 MW electric energy to LANECO for the period of 2016 to 2026 equivalent to 10 years. On march 14, 2016 the LANECO and SMCPC executed the PSC subject to the joint application.

In the contract the buyer shall maintain a minimum hourly nomination at least 40 percent of the contract capacity for a duration of the PSC, as its share in the minimum stable load of the power plant. The generation source of the electric power supply of SMCPC is coming from its ongoing construction of a 2 x 150 MW circulating fluidized bed coal-fired power thermal power plant, located in Culaman, Malita, Davao del Sur, which was expected to be commercially operational in the first quarter of 2016.

The effectivity of the PSC shall take effect between the parties on the date of signing and shall remain effective for a period of ten (10) years from commercial operation date (COD). The supply of the electric power by the seller shall commence upon COD, and shall continue until the end of the contract term.

The KP in Lanao del Norte doubted the LANECO and SMCPC PSC is an anomalous contract cited the existing power capacity of LANECO is more than enough to supply the electric power requirement in the province of Lanao del Norte. The supply of 5 MW will be considered as an excess power. LANECO has an existing contract with electric power suppliers plus an additional contract of SMCPC in layman’s understanding and simple arithmetic is addition which already exceeded the power supply in the province of Lanao del Norte.

The LANECO management through its Acting General Manager, Sherwin Mañada, invited the Kilusang Pagbabago (KP), Lanao del Norte (LDN) chapter through John Gandi Y. Amores, Coordinator, to attend for the Jurisdictional requirements, Expository presentation, Pre-trial conference and presentation of evidence on March 16, 2017 at 9:00 O’clock in the morning at LANECO Energy center, Tubod, Lanao del Norte. The KP is championed by Cabinet Secretary Jun Evasco for the good governance for transparency and accountability especially against corruption.

During the public hearing, Atty. Rodulfo Louie V. Mabalot, Energy Regulatory Commission (ERC) Heading, presided the public hearing. The SMCPC were represented by Atty. Abeleno Cedo III, legal officer and Mr. Alberto Reyes, spokesperson and for LANECO was represented by the Acting General Manager, Mr. Sherwin Mañada.

Most of the consumers attended the public hearing were KP members. It was observed that the ERC did not acknowledge the KP members as interveners. The hearing was understood to be a compliance to the approval of the joint application of the power supply contract between the LANECO and SMCPC submitted to the ERC. However, most of the previous ERC public hearings were presided by the ERC Commissioner to legally appreciate the proceedings by the person in authority.

Most of the KP members concerns are the sky rocketed power rate increase in December 2016 as high as PhP15.00 per kWh from PhP9.00 per kWh without prior notice to consumers. It was allege that the LANECO management decrease power rate to PhP13.00 per kWh due to flooded complaints. Then currently allegedly the power rate was decrease to approximately PhP12.00 per kWh. The KP members also complained the rationality of the contract because LANECO have an existing contract with the current power suppliers to purchase 12 MW but only 8 MW will be consumed at any given time in a month. Then here comes the additional 5 MW from SMCPC to have a total of 17 MW. Therefore, the LANECO member-consumers will pay the excess power even it was not consumed. All these actions are injustice to the member-consumers that need to be attended.

The LANECO member-consumers are calling the attention of the LANECO officials to refrain the power rate to PhP9.00 per kWh because the power rate increased in December 2016 had no basis and illegal.

The power supply contract as jointly applied by and between the LANECO and SMCPC is believed to be anomalous. The KP members are planning to file a petition to the ERC to nullify and disapprove the joint application and other administrative and criminal liabilities will be filed also to deter corrupt practices in the power sector to protect the power consumers of LANECO. They will also report this matter to the Honorable Cabinet Secretary Jun Evasco. Reports and photo by Jun Enriquez.