SALE OF NAPOCOR GENERATION ASSETS ORDERED WITHIN 18 MONTHS

CLARK FIELD, PAMPANGA
, July 3 , 2004
 (STAR)
By Ding Cervantes  Ė   President Arroyo has given the Department of Energy (DOE) 18 months to ensure that 70 percent of the power generation assets (gensets) of the National Power Corp. (Napocor) are sold to the private sector to avert impending power crises by 2006 in Mindanao and in 2008 in Luzon.

In an interview here, Energy Secretary Vincent Perez said there is a need to take "drastic measures" by attracting several investors to buy some 70 percent of the power generation assets of Napocor "particularly in southeast Mindanao, Cebu, and Panay. He noted that power demand in these areas has been growing at the rate of 12 to 14 percent annually.

"Having a (power) industry that can attract investments is something that we must lay out. Hopefully in the next 18 months, we will be able to privatize Napocor. That is the instruction of the President to her energy team," he said, as he expressed confidence that the deadline would be met "now that political uncertainty is gone."

"Itís a fighting target but that is the instruction from the President so the energy agencies are working on that timetable. If all goes well we can accomplish," he added.

Perez said the problems in the power sector "have been languishing for many decades," stressing that "this is the best time to do it." He said "the vision of the President is to have a competitive, healthy, deregulated power sector for the economy by the year 2010.

Perez explained that only 70 percent of the power generation plants of Napocor are to be sold, with the remaining 30 percent to stay with Napocor, including hydro-electric plants in Mindanao which the law forbids to be sold. The 30 percent, he added, also includes so-called "missionary areas" which private investors are likely to avoid, as well as islands such as Batanes, Catanduanes, Masbate, Siquijor and other isolated reefs.

Perez said the sale of Napocorís power generation plants will allow the entry of more players in the power industry and thus create competition that will eventually bring down the cost of electricity.

"Once all the plants are sold, it will be a deregulated market , for the government will no longer control the rates of generation, " he said, adding that this would lead to "a healthy power industry where the players are competing on who could sell the cheapest power."

But the Energy Regulatory Board (ERB) would retain its authority "to see to it that there will be no anti-competitive behavior, no market abuse" . Power transmission and distribution will also continue to be regulated by the ERC since these are monopolies "so no one can take advantage by charging rates without the oversight and review of the ERC".

"With the reelection of the President, we see a lot of renewed activity in the economy, and increased economic activity means increased power demand and definitely, unless we make additional investments in Mindanao, we are having a power challenge there by the year 2006, and by 2008 in Luzon," Perez said.

He also noted that "we are getting a lot of renewed interest from investors to invest in the power industry".

Meanwhile, however, Perez said that "the name of the game now is being bold and decisive and if that means power rates may have to go up temporarily before they go down then what is what we have to do".

"If Napocor needs a higher increase and the ERB feels it justified, we have to do it. But immediately the President wants the Cabinet to come out with a measure that will help bring down electricity and one of them is privatization of the assets of Napocor because by doing so we will have many competition. We will have many owners competing to sell the most efficient power," he said.


Reported by: Sol Jose Vanzi

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