Mindanao Power Corporation (MinPoCor) Policy Brief

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POLICY BRIEF

ISSN 2467-5571 (Online) Issue No. 2015 - 0001

SEPTEMBER 2015

POSITION PAPER ON THE ESTABLISHMENT OF A MINDANAO POWER CORPORATION INTRODUCTION

MINDANAO POWER SITUATIONER

According to the Electric Power Industry Reform Act or EPIRA, the Agus and Pulangui Hydroelectric Power Complexes (APHC) are to be privatized by 2011 upon the discretion of Power Sector Assets and Liabilities Management Corporation (PSALM), in consultation with Congress.

For the past five years, Mindanao has been plagued with acute power shortfalls that seriously impact on the region’s ability to fully realize its economic development potential. In early 2014 alone, the long hours of blackout resulted to PHP 2.315 billion in economic losses1.

However, Mindanao stakeholders are clamouring for continued state ownership of APHC for the following reasons: 1) need to ensure affordable or reasonable electricity rates; 2) need to have a stable supply of power; and, 3) need to have APHC serve as a regulatory tool to cushion the effects of spikes in prices of electricity resulting from market volatility of fuels and foreign exchange fluctuations. MinDA’s position is to transfer the ownership of APHC to a newly formed government owned and controlled corporation (GOCC) centered in Mindanao. The GOCC can then decide whether to: •

Operate and manage APHC;

Undertake Public-Private Partnership (PPP) to operate and manage the APHC; or

Undertake modified PublicPrivate Partnership where the GOCC owns the assets while the private sector operates and maintains but sales of energy are bid out in blocks

This shortage in capacity, coupled with drought, brought to the fore serious concerns on Mindanao’s long term reliance on what seems to be a relatively cheap energy resource – hydroelectric power - and how the full implementation of the privatization objective of the EPIRA can hold back targets for reliable, sustainable and affordable power supply to fuel its economic growth. Figure 1 shows the Mindano Grid including its committed, available capacity and peak demand. Figure 1. The Mindanao Grid

Source: DOE

Mindanao’s power sector is unique since it has a very different structure than the rest of the Philippines. Majority of power in Mindanao is being distributed by Electric Cooperatives (ECs), unlike other areas in the Philippines such as Metro Manila which have their electricity supply delivered by a private distribution utility (DU). ECs are distinct from private distribution utilities because they operate on the principle of non-profit and can therefore offer lower electricity distribution rates than private DUs. Profits are reinvested for infrastructure development. Unlike Luzon and Visayas, majority of distribution utilities in Mindanao still have existing transitional power supply agreements with PSALM Corporation and National Power Corporation (NPC). The situation relates to the fact that majority of power supply in Mindanao is currently being provided by NPC-controlled power plants. According to the National Grid Corporation of the Philippines (NGCP), the NPC-controlled power plants had an available capacity of 1,060MW which was 64.59% of the total available capacity of 1,641MW for the month of January 2015. 1 MinDA initiated study on Economic Impact of Power Outages in Mindanao.


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