Dan Dan Bantugan has an excellent article in the Bohol Chronicle about power costs on Bohol. I think he fairly clearly lays out the concept that Napocor’s selling rate to Bohol utilities is below its cost of generation at the Dampas Deisel Plant on the island, and that Napocor can sell at a lower rate because it “subsidizes” (in a way) it’s selling rate in Bohol by averaging in the costs of much lower-cost plants elsewhere in the Visayas. (It’s the large geothermal plants, though Dan, not large coal plants, that enable it to do this.)
But – contrary to Dan’s conclusion – it’s not the pending sale of the Bohol Diesel Plant that means the Bohol consumers will lose the benefit of the existing low Napocor rate. In fact, I suggest it has nothing to do with it.
Go check with your utility – whether its Boheco I, or II or BLCI. They have a supply contract with Napocor to receive power priced at the ERC regulated rate. And that supply contract has an expiration date (I’m guessing probably December 2010). It’s the expiration of that supply contract that means Bohol consumers will no longer have the benefit of the “ERC regulated rate.”
The sale of the Dampas plant won’t impact that contract at all – whether the sale goes through or not. That contract ends when it ends. In fact, the existing Napocor sales contract with your Bohol utility (or a portion of it) will probably be transferred to the new buyer. But the new buyer will be constrained to delivering power at the very same ERC-regulated Napocor rate until its expiration.
In this respect, as good as Dan Dan’s article is, it’s a little misleading.
So is the Napocor privatization dooming the consumers in Bohol? Well, not exactly. The reality is that even if Napocor remained in place (as if EPIRA had never happened), their rates to Bohol would be going up drastically by 2011 and the ERC would be in no position other than to pass those increases along. Secondly, even though Napocor’s rates are currently attractive, Napocor doesn’t guarantee supply. In fact, Napocor, in the Visayas, has been famously unable to meet demand on many many occasions. One definite upside for Bohol is that under EPIRA, the utilities on Bohol can control their own destiny by procuring their own supply from suppliers they deem to be reliable.
Bohol utilities certainly are not constrained to taking power from Dampas. To the extent they can import power, they have the ability to access lower cost supply elsewhere in the Visayas. And they have the ability to procure power from new plants, perhaps biomass or hydro, on Bohol at costs that may very well be lower than the diesel.
The folks on Panay are in a similar position, by the way, with the pending sale of the Dingle Plant. The Panay ECs realized their position with the expiring Napocor contracts. Earlier this year they went out for public bids to replace the bulk of those contracts with supply from independent power producers starting in 2011 through a Request for Offers. They received six responses and are in the midst of evaluating those.
Bohol, because its a small island, is definitely going to face some challenges – but the future doesn’t have to be dire. Bohol’s future options, also, can certainly be enhanced with greater transmission interconnection to the main Visayan grid and that might should be a focus. Better start lobbying Transco … err National Grid.