MISREADINGS

Ted Aldwin Ong

Privatizing Leyte Geothermal

Although it is considered as a national wealth being a power supply jewel in the Visayas region – the Unified Leyte Geothermal Power Plant, will soon succumb to the pressures of privatization exerted by the players both from the government and the private sector, in the country's electricity industry.

Last October, the state-run Power Sector Assets and Liabilities Management Corp. (PSALM) opened the bidding process for the 640-MW geothermal plant located in Tongonan, Leyte. The geothermal plant is responsible for providing clean energy and cheap electricity to Visayas region consumers.

The geothermal plant is responsible for supplying a portion of the electricity demand of rural electric cooperatives, including those serving Panay Island. The power supply contract from the geothermal plant is instrumental in neutralizing the increasing cost of electricity generated by coal plants. The power supply profile for Visayas illustrates that electricity from Leyte's geothermal plant continue to dominate the supply of electricity compared to coal, although the latter is rapidly becoming a dominant player with the Global Business Power Corp. of Metrobank group at the command.

The continuing dominant role of the geothermal plant in the energy mix is the reason why electricity consumers outside the franchise area of Panay Electric Co. (PECO) in Iloilo City continue to enjoy lower generation charges. But all these will soon change once the Unified Leyte Geothermal Plant will be privatized.

Moreover, the sale of Unified Leyte serves as an experiment for the future privatization of similar plants. If the arrangement is effective, it will be a precedent for the privatization of the Agus-Pulanggi plant in Mindanao, which is contested by the Mindanao stakeholders and the Bangsa Moro.

Privation will have an immediate impact on the rates and the first to go up will be the generation charge, which is the biggest item in the over-all cost of monthly electricity. In its entirety, the generation rate increase will result into consumers paying higher effective rate.

It is highly anticipated that whoever will acquire control of the Unified Leyte will right away design and implement improvements in the guise of optimizing the capacity of the geothermal plant. The justification can also come in the form of harnessing the geothermal source to its full potential. All of these will fall in the lap of consumers because private owners will perpetually bind consumers into paying capital recover fee.

Its privatization will also defeat the neutralizing effect of the geothermal energy as a source of clean and cheap electricity compared to coal. With the anticipated pass-on capital recovery fee and other factors that bring up electricity cost, it is likely that the cost of electricity from geothermal will equal that of coal.

It is a fact that every single expense of power players is passed on to consumers. From the gasoline used for its vehicles, juicy bonuses for executives and employees, environmental protection initiatives under its corporate social responsibility projects, donations from solicitations for barangay fiestas and festivities, support for electoral candidates, legal team, or pubic relations and advertisements to media. All of these are included in the operations expense of companies that control generation, transmission and distribution of electricity and are all passed on to consumers in the form of generation charge.

Whoever will corner the sale of Unified Leyte – Aboitizes, San Miguel Corp. or Global Business Power; will exactly make milking cows out of the consumers. The claim is not founded on assumptions, but concretely illustrated from experience. In Iloilo City alone, we are experiencing this from PECO and Panay Energy Development Corp. (PEDC).

The influence peddler in the privatization of the Unified Leyte Geothermal Plant has been successful in influencing PSALM to undertake the bidding process into two separate bids. The experiment outlines a 60-40 arrangement. The 60-percent or the 385-MW will be open for private players while the 40-percent or the 255-MW will be offered to electric cooperatives with good financial standing.

The electric cooperatives in Region 8 or Eastern Visayas have been at the forefront against the privatization of the geothermal plants yet the mechanism set by PSALM somehow provides a semblance of equal opportunity for would-be players including electric cooperatives. The pressure, however, is upon electric cooperatives for most because not all possess good financial standing in order to join the bidding. It will cost P5-million per megawatt for electric cooperatives covering 40-percent.

Aware of the limitations of the electric cooperatives, World Bank is said to have offered electric cooperatives in Eastern Visayas the financial facility in order for them to bid out the 40-percent with a low interest rate. With all the requirements for bidding in place and the financial backing at hand, the bidding for the Unified Leyte Geothermal Plant will have the green light.

The projected impact of the privatization of the Unified Leyte to consumers in the Visayas is certain. What remains uncertain, however, are the intervention from the end of the stakeholders; without the stakeholders joining hands to stop the privatization process, the wheels of privatization will roll out.*