Brownout Looms in Albay as NPC Rehab Contract Ends

Sunday, March 28th, 2010

LEGAZPI CITY, March 24  -- Residents and the business sector here are anticipating frequent power brownouts following the recent termination of the Albay Electric Cooperative (ALECO) operation and management (O&M) contract of the National Power Corporation (NPC).

The ALECO Board passed a resolution recently terminating the operation and management contract of the NPC after it claimed that it would be more advantageous for the electric cooperative to be managed by the members of the Board of Directors (BOD).

Aleco signed an O & M contract with NPC in July 2008 which expired in July 2009 and was recently terminated by the BOD last month for reasons that the cooperative stands to lose P148 million wiping out its entire full year gains in 2009 of P167 million due to its 100 percent reliance on Wholesale Electricity Spot market (WESM).

The Aleco board claimed that the lowly electric cooperative which purchases 100 percent of its supply from WESM now has to incur losses of P149 million in February alone since its average purchased power jacked up to P13.60 against the previous P4.40.

But residents and businessmen here claim that the NPC contract termination would aggravate the situation by posing a threat of power disconnection, frequent brownout due to the failure by the electric cooperative to settle their outstanding power bill with the NPC amounting to P1.6 billion arrears.

At the NPC-ALECO Rehabilitation Program Exit conference on Tuesday, German Silva, NPC-ALECO Rehabilitation acting manager said the termination of the contract would mean that the NPC would start collecting the 12.5 percent yearly interest on the cooperative outstanding account of P1.6 billion.

Silva said this would be equivalent to P108 million in yearly interest or P9 million monthly interest.

The operation management contract entered into by the cooperative and NPC in 2008 gave the ALECO a moratorium on the payment of interest, and service charges, but with the termination of the contract it automatically phases out the moratorium agreement, Silva said.

Silva said the electric cooperative was on its way to recovery when it was manage by NPC-Aleco rehabilitation team, "we were moving towards a positive and productive cooperative."

Silva cited various improvements achieved during the almost two years that it managed the debt-ridden Aleco.

The rehabilitation team for the past one year and eight months and first time in five years, the cooperative posted a net income of P153.47 million, he said.

"This after Aleco suffered losses of almost P181 million in 2005, more than P312 million in 2006, P401 million in 2007 and P242 million in 2008," he said.

With the entry of the NPC management, reforms implemented resulted in better operational efficiency (less brownouts), better voltage condition, service, increased reliability and a more stable power system.

He also cited significant improvements such as reduction on system losses, likewise technical and financial management system were put up to further enhance management and financial service of the cooperative.

Silva said "the system loss problem is deeply rooted problem since 1996 up to July 2008."

He said they were able to reduce system losses seven percentage point from 27.64 percent, the highest so far, to 20.80 percent to date. A one percent system loss is equivalent to P2 million losses in revenue, Silva added.

Supply procurement system was instituted making it more transparent by adopting the government procurement law that resulted in saving of about P18.4 million, Silva said.

The NPC took over the management of Aleco in July 2008, the firm would extend its technical and financial expertise to the ailing electric cooperative to enable it to recover from its huge indebtedness and high systems losses.

Among the problems that are to be addressed by the rehab plan are Aleco's outstanding P1.6 billion obligation to NPC and the National Transmission Corp. (Transco) and its runaway systems losses which have been placed at 23 percent during the period. (PNA)