No lasting power supply solution in sight for Mindanao's residents - Business World Article

DAVAO CITY -- Mindanao's power deficit seems to be getting worse by the day,
and with no new generation project in sight, the situation is expected to
deteriorate further next year at the very least.

Central business districts in the cities of Davao and Cagayan de Oro, which
were hardly affected by rotating brownouts in recent weeks, were powerless
for less than an hour late Wednesday morning.

While the Web site of the National Grid Corp. of the Philippines (NGCP) --
the private operator of the country's transmission network -- showed that
Mindanao had a 357-megawatt shortage yesterday, a check with the regional
branch here of the NGCP showed that the entire grid's deficiency had neared
500 MW by mid-afternoon.

The situation may not be short-lived, as NGCP estimates that Mindanao will
need an additional 484 MW in four years, assuming a 5.76% annual average
growth rate in demand.

But aside from the 200-MW coal-fired plant in Maasim, Sarangani by the Conal
Holdings Corp., which now has to contend with protest actions from religious
and environmentalist groups; the 42-MW project of Hedcor Corp. in Sta. Cruz,
Davao del Sur; and the 8 MW hydro-power plant of the Cagayan Electric Power
and Light Co., there are no new investments in the power sector.

And since it takes about three years to build a power plant, the current
situation is expected to get worse. Already, the NGCP expects Mindanao's
power deficit to average 308 MW by next year.

Among the reasons given by NGCP for the currently grim situation are low
output from hydroelectric facilities, with the Agus's six plants in Lanao
provinces running at only 120 MW out of the total 727-MW capacity, and
Pulangi plant in Bukidnon running at 100 MW of its 255-MW rated capacity.

Ironically, rains have fallen in southern Mindanao in recent days, including
more than an hour of heavy downpour in Davao City on Tuesday night.

Nevertheless, the Davao Light and Power Co. said it has implemented rotating
hour-long power interruptions in its entire franchise.

Rossano C. Luga, Davao Light corporate communications officer, said the
brownout schedule has to be implemented in the city since the NGCP has
imposed a 93-megawatt curtailment for the Davao Region as of Wednesday
morning.

Mr. Luga called on consumers to save on electricity in order to help the
company rationalize power supply.

The 30-minute brownout before noon in Davao City is the first since the
start of the year. The city had been largely spared from the rotating
brownouts experienced in most parts of Mindanao since two weeks ago, due to
Davao Light's 58-megawatt Bajada backup plant.

Cagayan de Oro's situation is worse, with power utility officials forced to
schedule four-hour daily rotating brownouts starting yesterday.

"Even with [backup power generating plants] and the voluntary load shedding
of the big industries in the city, we could not accommodate the high load
curtailment," said Marilyn A. Chavez, senior manager and customer relations
head of the Cagayan Electric Power and Light Co.

In Zamboanga City, NGCP corporate communications officer Ma. Rosette
Martinez said the power condition in the region, and in Mindanao as a whole,
can be immediately alleviated only with sustained heavy rainfall in the
coming days.

Edgardo S. Calabio, regional corporate executive of Davao Light's Revenue
and Regulatory Affairs, in a dialogue earlier this week that was organized
by the Trade department cited immediate "doable measures" like fast-tracking
Agus 5 repairs, resuming operations of the 100-MW Iligan Diesel Power Plant
that shut down last month due to a row with the local government, and for
companies to invest in embedded generators.

In the longer term, however, only additional plants will narrow the gap
between supply and growing demand on the entire island.

The problem, Mr. Calabio said, is that attracting investments in the sector
might not be easy since power rates here are cheaper than those in the
Visayas and Luzon.

In Davao City, for example, the local power utility collects P6.58 per
kilowatt hour against P7.22/kWh in Cebu and P9.32/kWh in Metro Manila. "What
we [users] pay does not reflect the true cost of power; we should be paying
more," Mr. Calabio said, explaining that grid rates are based on the value
of the power plants and other assets, which are quite old. "Adjust the
rates, if you would like to entice investors to come in; reflect the true
cost of power." -- CQF, LGD, DTW and JBE