MIRIAM HITS FOREIGN CHAMBERS ON IPPs

Sen. Miriam Defensor Santiago, chair of the Senate energy committee, said that the Joint Foreign Chambers of the Philippines (JFC) oppose amending Epira because they do not want a review of the IPP contracts.

Epira is the Electric Power Industry Reform Act, while IPP is an industry power producer.

“The foreign chambers have a conflict of interest. They want to preserve Epira, but at the same time they do not want a review of the IPP contracts, apparently because they want to protect their economic interests and investment returns,” Santiago said.

Santiago said that under the IPP law, any proposed electric generating facility should prove that it can generate electric energy cheaper than can be generated by Napocor (NPC), by accessing lower cost of capital, cheaper plant investment, and locally manufactured equipment.

She said that according to a study, in all types of power plants, the IPP costs are higher than NPC generation costs.

“Napocor IPP contracts are like the BOT contracts. They are not standard PPAs which take some levels of business risks,” Santiago said.

BOT stands for build-operate-transfer, while PPA stands for purchase power agreement.

“The IPPs make windfall profits at the expense of consumers. The IPP contracts are unconscionable because the IPPs are already paid for capacity, and for operation and maintenance. Yet at the same time they have a take-over-pay level for variable energy conversion fees. The take-or-pay provisions are excessive,” the senator said.

Santiago said that IPPs follow a fee structure of dollars per kilowatt hour, where the standard procedure is based on pesos per kilowatt hour.

Santiago listed the alleged inconsistencies in the JFC letter to Pres. Arroyo, as follows:

• JFC objects to Epira amendment, but does not particularly explain why.
• JFC contradicts itself because it rejects Epira amendment, but at the same time supports earlier open access. To achieve earlier open access, Epira has to be amended.
  
• JPC contradicts itself by calling for transparent and competitive electricity industry market and yet it rejects at the same time a review of IPP contracts. This is also conflict of interest on the part of JFC.
  
• JFC makes a bare statement that amending Epira will negatively impact the power industry market, without specifying the ways in which negative impact would result.

Santiago said that JFC issued the statement on the presumption that by the end of 2008, NPC will complete 70% privatization.

“What is the basis for this presumption? Will JFC members participate in bids for the JPC assets? At present, no foreign companies are involved in bidding for NPC assets. The only active bidders are local investors,” the senator said.

Santiago said virtually the entire Senate rose to criticize the recent JPC letter to Pres. Arroyo opposing Epira amendment, because the letter should have been addressed to the Congress.

“Lawmaking is the sole prerogative of Congress,” Santiago said.

Santiago said that the senators did not like the letter, because it appears to be an attempt by foreigners to meddle in Philippine policy making.