SUPPLY CONTRACTS IN MASINLOC SALE MAY HIKE ELECTRICITY BILLS FURTHER

The Arroyo government’s recent low-profile sale of the National Power Corporation’s (Napocor) 600-megawatt Masinloc coal-fired plant may result in higher electricity bills, according to independent think-tank IBON Foundation.

The plant was sold to AES Transpower Ltd of Singapore, a unit of US-based global power corporation AES with a bid price of US$930.83 billion.

The plant was able to fetch such a rich price because the Power Sector Assets and Liabilities Management (PSALM) Corporation, in conjunction with Napocor, packaged the plant with an aggregate 264.514 MW of power supply contracts, which will be the required volume of power to be supplied. Such contracts may result in higher rates through cost recovery mechanisms such as the controversial Purchased Power Adjustment (PPA).

This is particularly since the bid price is especially high, given that the winning bid in the last failed auction of Masinloc was US$561 million, reportedly enough to buy a brand-new 600MW power plant.

In the earlier sale, it was estimated that for the winning bidder, YNN Corp., to recover its bid, Masinloc’s production cost at the time of the bidding would have to increase by some 144 to 154 percent.

As shown by the country’s past experience with deregulation of the oil industry and privatization of water services in Metro Manila, private corporations would use all means available to them to jack up profits given that they have a captive market.

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