Power firms clam up on contracts’ penalty clause
posted 24-Jul-2019  ·  
1,861 views  ·   0 comments  ·  

Reacting to requests that the electricity supply agreements and its respective penalty clauses be made public, the two power suppliers as well as the local electric cooperative refused, citing confidentiality provisions.

In the multi-sectoral consultative meeting conducted by the Sangguniang Panlalawigan (SP) Committee on Energy headed by Provincial Board Member Edwin Tanael, the First Catanduanes Electric Cooperative, Inc. (FICELCO) management and a representative of Sunwest Water & Electric Co. (SUWECO) said they will have to consult their legal counsels as there is a confidentiality clause in the contracts.

Engr. Serafin Marcaida of the National Power Corporation (Napocor), however, sees no problem in allowing the public to look into its contract with FICELCO but he said clearance will have to be sought from higher-ups.

The three industry players were responding to an appeal from Alyansang Makabayan representative Rudy Suarez Jr. that they make public the power supply contracts, particularly the penalties to be imposed if one party does not deliver on its obligations.

Despite the SP committee’s request for participants to submit a position paper on the issue during the meeting, only two did: Immaculate Heart of Mary Hospital (IHMH) vice president for finance Edna Segismundo and the Viga Sangguniang Bayan represented by Vice Mayor Cesar _____.

Wondering why more than an hour into the meeting, the body had yet to identify the cause of the current crisis, Segismundo stressed that those in the health services need a stable supply of power.

On the other hand, the Viga municipal council called for a review of FICELCO’s existing contracts with its suppliers and, if the problem lies with the supplier, invite other interested suppliers to invest and provide better services or competition.

The other participants in the nearly two-hour long meeting likewise wondered why they were being asked for a position paper when they have yet to learn the cause of the recent power outages.

PBM Tanael had asked them not to resort to finger-pointing and instead find solutions together in aid of legislation for proper action by the provincial board.

Although the SP meeting was billed as “Power Services Update,” none of the officials representing FICELCO, SUWECO and Napocor initially reported on the actual power situation in the Catanduanes grid.

The cooperative appealed for a sober discussion of the issues and touted its “AA” categorization by the National Electrification Administration (NEA).

To the surprise of most attendees, SUWECO officials claimed they have sufficient, reserve power supply,

inciting a Viga resident to ask General Manager Raul Zafe to justify the cooperative’s high rating in the light of the present situation.

“Whenever there are brownouts, you always crucify FICELCO, it’s unfair to us,” the GM said, pointing to the two power suppliers.

Reciting the problems and issues that he faced when he came to the cooperative in June 2018, including the failure of SUWECO to fulfill its obligations, he disclosed that a power transformer of SUWECO’s Solong diesel power plant failed, taking out from the grid the production of four gensets.

Napocor’s Marcaida told the meeting that the state-owned company fulfills its supply agreement but admits fault in some brownouts as most of its gensets old and not reliable.

“The 69-KV transmission line now being constructed will provide system reliability and allow sectionalization of the grid in case of line faults,” he said.

Napocor is supposed to pull out from Catanduanes but cannot do so due to the critical power situation, Marcaida added, but still its supply contract with FICELCO at 4.7 megawatts is very small.

SUWECO, on the other hand, said the capacity of its two mini-hydroelectric power plants and two diesel plants total 14.6-mW, a figure that GM Zafe says is misleading since hydro power is not reliable and depends on rainfall.

The co-op manager also told PBM Giovanni Balmadrid that half of the 25 diesel gensets operating in the Catanduanes grid are old and could conk out anytime.

In one of the most interesting exchanges during the meeting, Eddie Rodulfo of the Kapisanan ng Mamimiling Katandunganon (KASAMA-KA) insisted that based on their opposition to SUWECO and FICELCO’s contract amendments before the Energy Regulatory Commission (ERC), SUWECO’s total contracted energy with the cooperative is 28.175-mW, more than twice the current peak demand.

This includes the still-to-be-constructed Capipian and Hitoma-2 hydro power plants, for which FICELCO consumers are paying for since the ESA’s approval, he claimed.

The supplier might have already recovered the cost of its two completed plants through the payments, Rodulfo stated, as he stressed that there is no more room for new power suppliers as the 140-million kilowatthour contracted energy of SUWECO is much greater than the cooperative’s annual sales of 40 million kWh.

“Wala pong nangyaring ganun,” the SUWECO spokesperson replied. “Wala po kayong binabayaran sa amin as far as I know.”

It likewise defended its failure to complete Capipian, saying that the Department of Environment and Natural Resources (DENR) issued an order in 2010 that the forested site in San Miguel town cannot be touched as it is inside a Strict Protection Zone.

With the approval of the law declaring the Catanduanes Natural Park last year, it added, the company is seeking the DENR’s consideration of its Special Use Agreement in Protected Areas (SAPA) application.

SUWECO claimed it has already spend P40 million in on-going pre-construction activities.

“Hindi namin tatalikuran yan,” it said. “We are working it out. We are just complying with our contracts and our lawyers can discuss it with you.”

It blamed the failure of its Solong transformer on a power surge caused by a line fault. According to sources on both sides, the line fault was in turn caused by the load dispatcher’s decision to restore power to part of Feeder 6 where a line repair was on-going. The dispatcher had failed to inform the repair crew, as well as the Solong operator, of the decision, it is claimed.

Rodulfo also asked FICELCO what happened with the resolution approved by the general assembly in 2013 that called on the cooperative to review supply contracts which are untenable.

GM Zafe did not directly answer the query but said the cooperative is already looking for another investor as Napocor’s contract will expire in 2020.

He likewise described as very costly SUWECO’s suggestion that the co-op use insulated wires in its distribution lines.

To address the lack of power supply and low voltage in northern towns, Zafe said the board of directors had already requested SUWECO to transfer two of its diesel gensets to Hitoma and Napocor to replace its old gensets with new ones. The undersized wires will be replaced through the proposed capital expenditure program to be submitted for approval during the forthcoming Annual General Membership Meeting, he added.

For its part, Napocor’s Marcaida recommended that FICELCO add a new power provider or request additional gensets from SUWECO.

He revealed that Catanduanes is no longer included in Napocor’s Missionary Development Plan, with NPC to concentrate on completing the 69-KV transmission line.


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