Napocor, Meralco near agreement on customer choice program

The Philippine Star 07/22/2006

State-owned National Power Corp. (Napocor) expects to come up with an agreement soon with the Manila Electric Co. (Meralco) for the implementation of what it calls customer choice program (CCP).

Napocor corporate communications officer-in-charge (OIC) Alma P. Hermosura said they are holding a series of meetings with Meralco to pursue this program.

"We have been conducting continuous discussions with Meralco. Although there are still some issues that have to be resolved, there are already some agreements reached," she said.

Early this year, Meralco wrote a letter to President Arroyo to express its willingness to allow its customers with a monthly electricity demand of at least one megawatt (MW) the right to choose their own suppliers, with the option of availing of the time-of-use (TOU) rates of the Napocor.

Deemed "unconditional", the "Power of Choice" offer by Meralco elicited positive reactions from various business and industry sectors, as well as from key government agencies.

Energy Secretary Raphael P. M. Lotilla, in a joint statement with Economic Planning Secretary Romulo L. Neri, commended this move by Meralco, saying "it will help reduce the costs of doing business in the Meralco franchise area, help promote investments in the creation of additional jobs, and help push privatization forward".

In a letter dated April 7, 2006, Meralco informed its customers with at least one MW monthly consumption, including the head office of the National Power Corp., that the proposed program is not yet the start of retail competition and open access as defined by the EPIRA.

Meralco said the offer is a gesture of cooperation, and is being made to provide our large customers the option of availing the present time-of-use (TOU) rates of the Napocor."

"Those who will not be qualified and benefit from the NPC TOU rates can opt for Meralco’s average mixed generation charges which are computed monthly based on the actual blend of energy sourced from Napocor and Meralco IPPs.

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ERC approves retail license for GNPower

The Philippine Star 07/22/2006

The Energy Regulatory Commission (ERC) has approved the application of GNPower Ltd. Co. for a retail electricity supplier’s license.

GNPower is the first electricity supplier to comply with the ERC’s directive to secure a supplier’s license prior to marketing electricity.

"The awarding ceremony marks the dawn of the ultimate goal of the EPIRA, that is competition at the retail level," ERC chairman Rodolfo B. Albano Jr. said.

The awarding was held last July 19 at the ERC office in Ortigas Center, Pasig City.

With the ERC’s issuance of a supplier’s license to GNPower, the power firm can now legally engage in marketing activities for its retail electricity supply business and secure supply contracts with prospective end-users.

The Electric Power Industry Reform Act (EPIRA), mandates the ERC to issue licenses to electricity suppliers that will operate in the contestable market, which comprises end-users who will soon have a choice of an electricity supplier.

GNPower is a limited partnership registered with the Securities and Exchange Commission on Oct. 1, 1997.

The partnership was formed by Power Partners Ltd. Co. and PMR Holding Corp. as general and limited partners, respectively.

It has a 600MW clean-coal fired power plant currently being developed near the town of Mariveles, Bataan. The construction of said power plant is expected to commence in mid-2007 with planned commercial operation by the third quarter of 2010.

"This is another milestone in the emerging restructured electric power industry. Rest assured that the ERC will always adhere to its mandate and encourage the full participation of the stakeholders in the industry towards achieving the goals envisioned in the EPIRA,"Albano said.

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Napocor to hike power rate for Luzon customers

The Philippine Star 07/21/2006

The Energy Regulatory Commission (ERC) has approved a P.0110 per kilowatthour additional recovery for the National Power Corp.’s generation rate adjustment mechanism (GRAM) and another P0.3687 per kwh for incremental currency exchange rate adjustment (ICERA) from Luzon customers.

The ERC said the total P0.3797 per kwh increase supercedes an earlier order for the recovery of costs to be collected from customers through deferred accounting adjustments (DAA).

The new GRAM for Luzon will be recovered for a period of nine months while the ICERA will be two-fold: the debt service and operating expenses component will be for eight months while the capacity and infrastructure fee component will be for 24 months.

The new rates will remain in effect unless the ERC subsequently approves the recovery of the deferred charges of Napocor.

GRAM is a pass-on, revenue-neutral charge allowed by the ERC for Napocor to recover from end-consumers the costs it incurred to produce electricity. The costs include fuel and power purchases from independent power producers.

ICERA, on the other hand, represents the recoveries that must be made by Napocor from customers for money it advanced to defray the cost of foreign currency exchanges adjustments resulting from fluctuations in the exchange rate.

ERC chairman Rodolfo Albano said the existing policy of the ERC only allows the recovery of GRAM and ICERA charges after thorough review.

Early last month, the ERC, instead of granting automatic implementation, extended for another 45 days the resolution of Napocor’s GRAM and ICERA for the period covering April 26 to Oct. 25, 2005.

In separate rulings, the ERC argued that the 45-day resolution deadline set by the implementing rules should not apply since the same rules provide only for a three-month recovery period.

Napocor had filed for a seven-month recovery, which the ERC said would need more time to resolve.

Under the Electric Power Industry Reform Act (EPIRA) of 2001, Napocor is allowed to recover its costs incurred from operations and fluctuating currency from its customers. Before, Napocor and distribution utilities were allowed to automatically recover these costs and the ERC would just review it after.

Based on the current set-up, the power generators and distributors should apply quarterly for the recovery of GRAM and ICERA.

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TransCo sale attracts 12 bidders

The Philippine Star 07/20/2006

A dozen foreign and local investor groups have expressed interest to bid for the 25-year concession contract for the National Transmission Corp. (TransCo), the Power Sector Assets and Liabilities Management Corp. (PSALM) said.

PSALM vice-president Nonito R. Bernardo, Jr. said they have received 12 expressions of interest (EOI) to participate in the forthcoming public bidding for TransCo in September this year. PSALM gave interested parties until July 18 to send their respective EOI.

The government expects to raise between $2.5 billion to $3 billion from the bidding of TransCo’s operations and management contract.

Based on the bidding procedures, interested bidders are required to sign a confidentiality agreement before they are given their copies of the transaction documents and access to the TransCo data room and facilities so they can start due diligence efforts.

Bernardo declined to reveal the identities of the prospective bidders, saying most of them are represented by their lawyers and investment bankers.

The interested bidders can now submit the documents required by PSALM for the pre-qualification stage. Bernardo said the schedule of the first pre-bid conference will be announced soon.

Prospective bidders are required to have a member or affiliate with sufficient experience in operating and maintaining electricity transmission systems comparable to that of the Philippines, with at least 6,000 circuit kilometers and a minimum of 6,000 megawatts peak demand, and a voltage level of 115 kilovolts to 230 kV.

A foreign investor for TransCo must have a net asset value or market capitalization of $175 million. Its Filipino partner, on the other hand, must have $300 million.

A pre-bid conference is scheduled on Sept. 6, 2006 and the deadline for the receipts of bids is on Sept. 27 this year.

Following the notice of award, PSALM estimates a closing period of 12 months inclusive of the application for a congressional franchise.

The bidding procedures will be done in a two-envelope final bid. Under the technical proposal, the bidders should post a $30 million bid bond through an irrevocable standby letter of credit, issued by a qualified bank and set at a fixed amount.

The winning group, by the time of the award, must not have ownership of generating, distribution or supply assets in the Philippines.

Big local conglomerates controlled by the Cojuangcos (San Miguel Corp.), Ayalas (BPI Capital) and Gokongweis (JG Summit Holdings) were reportedly eyeing to participate in the TransCo privatization because of the 60-40 foreign ownership ceiling.

Since these big firms have the financial strength to invest in this capital-intensive exercise, they are likely seen to participate by forging partnership with foreign power firms.

A group of local financial investors led by Concepcion Industries Inc. is reportedly also planning to form a consortium to bid for TransCo.

In late 2002 when Transco’s supposed privatization was announced, several foreign power firms have expressed interest to bid. These power companies are based in Hong Kong, Thailand, Singapore and New Zealand.

Singapore Power was the lone bidder in the two previous biddings for TransCo, both of which were declared a failure.

Electricity Generating Authority of Thailand (EGAT), Hydro Quebéc and the Delgado group, and Australia’s Trans-Grid have also joined the bandwagon of firms eyeing TransCo.

Other groups that have reportedly signified interest for TransCo are Japan’s Tokyo Electric Corp. and US-based Trans-Electric, as well as First Pacific Co. Ltd. (financial) and Trans-Grid of Australia.

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First Gen junks bid for Masinloc

The Philippine Star 07/20/2006

Publicly-listed First Gen Corp. said yesterday it is no longer interested in bidding for the Masinloc coal-fired power plant in Zambales.

"To dispel any and all further notions that First Gen remains an interested party in Masinloc, First Gen would like to categorically state that it has absolutely no intentions now, or in the future, to take part in the privatization of the Masinloc power plant," First Gen vice chairman and CEO Peter Garrucho said in a press statement.

Garrucho made this statement to counter Economic Planning Secretary Romulo Neri’s pronouncement alluding that First Gen and its affiliate firm Manila Electric Co. (Meralco)’s apparent vested interest in the Masinloc power plant resulted in the failure of the plant’s privatization.

According to Garrucho, First Gen has participated actively and in good faith in the privatization process conducted by the Power Sector Assets and Liabilities Management Corp. (PSALM).

First Gen, he said, has also invested millions of pesos in preparing for bids and conducting due diligence in the interest of participating in the PSALM bidding processes.

"Rather than criticizing First Gen, we should be credited for our role in helping PSALM’s bid processes succeed," Garrucho said.

"In fact, in the case of Masinloc, were it not for the First Gen participation, the entire bid would have been a failure. The $14 million collected from the winning bidder of Masinloc represents the largest proceeds collected by government from all its power privatization efforts in three years and this would not have been possible without the legitimizing bid of First Gen," he said.

Garrucho also pointed out that First Gen bid below the government’s reserve or minimum price and therefore it does not stand to gain from a failed bidding of Masinloc.

"As a bidder that did not meet the reserve price, First Gen is not automatically in line to win the Masinloc plant at its bid price," he said.

In defending their bid, Garrucho said they believe that their bid price must allow them to offer cost-competitive power to end-consumers.

"First Gen’s bid price reflected the market risks associated with a merchant or non-contracted power plant."

Garrucho also urged the government to properly implement the Electric Power Industry Reform Act (EPIRA).

"First Gen believes that the way forward for the industry is to uphold and implement the EPIRA that stipulates that utilities enter into transition supply contracts (TSC) with Napocor prior to being bid out," he said.

Under the EPIRA, these TSCs, he said, are meant to underpin the privatization of PSALM’s assets in order to encourage more bidders and maximize privatization proceeds.

"Implementing the EPIRA in line with its original intent will result in a vital balance being struck between maximizing the proceeds of privatization and minimizing power costs to the end-consumer," he added.

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Osmeña hits Palace for ‘favoring’ YNN group in Masinloc bidding

The Philippine Star 07/19/2006

Sen. Sergio Osmeña III accused some Palace officials yesterday of pushing their way to favor the YNN Pacific consortium and its new partner, Malaysia’s Ranhill Bernard, in cornering the operations of the Masinloc power plant in Zambales.

Osmeña told reporters that Malacañang is also "pressuring" Manila Electric Co. (Meralco) to sign a guaranteed supply contract with YNN and Ranhill Berhad to salvage the Masinloc privatization fiasco.

This came even after government, through the Power Sector Assets and Liabilities Management Corp. (PSALM), forfeited YNN’s performance bond after failing to meet the final deadline to put up the $227-million downpayment for the coal-fired power plant last June 30. PSALM has extended for another month the YNN to comply with its commitment.

"The (Palace) dummies claimed that although the security deposit has been forfeited, YNN still has 30 days to execute the contract by paying the $227-million downpayment. That is designed to give YNN time to sign a power supply contact with Meralco. With the assistance of the Palace, of course," Osmeña said.

On the other hand, Meralco said it should not be blamed for the botched sale of the 600-megawatt facility.

"We took exception to a statement made last week by Economic Planning Secretary and NEDA director general Romulo Neri, which apparently puts the blame on Meralco for PSALM’s difficulties in selling the Masinloc power plant," Meralco vice president and corporate communication head Elpi Cuna said.

"Mr. Neri seems to be suggesting that Meralco is deliberately making it difficult for the winning bidder of Masinloc to obtain a power sales contract from us with the end of strengthening our so-called monopoly," Cuna said.

"Far from wanting to establish a monopoly, we have even given our consumers who use at least one megawatt the freedom to choose their own electricity suppliers. By doing this, we have even actually initiated the groundwork for the implementation of open access," he added.

Cuna said it would not be advisable for any party to pressure Meralco into signing any contract just for the sake of convenience.

"We are not trying to avoid or delay anything here. We are merely making a careful study of the possible implications of a possible deal, especially on the customers. You can be rest assured that any supply agreement that Meralco enters into will be done with the intent of bringing down the generation component in the customers’ electricity bill," he said.

Meralco, in an earlier disclosure to the Philippine Stock Exchange (PSE), confirmed previous meetings with YNN but stressed that nothing has been agreed upon. YNN won in the bidding for the Masinloc power facility in December 2004.

For its part, PSALM said its board did not receive a "P10-million bonus" in 2004 out of the Masinloc sale.

PSALM president Nieves L. Osorio said the asset management firm did grant a performance incentive to PSALM officials and employees for accomplishments made in that year, but the sale of the Masinloc coal-fired power plant was not the sole basis for the grant.

Osorio made this statement to debunk reports that the proceeds from the sale of the Masinloc facility were used to fund the Corporate Variable Incentive Award (CVIA).

The PSALM chief said the CVIA amounted to around P6.4 million and not P10 million as erroneously reported.

"The money used for the CVIA was taken from corporate funds budgeted for incentives under the 2004 PSALM corporate operating budget approved by the Department of Budget and Management. It did not come from privatization proceeds," she said, adding that it was not only the Masinloc sale that was used as gauge in giving the CVIA.

"Masinloc was not the only key result area for 2004. It was bid out in December 2004 and while it was the largest plant to be bid out, it was only one of six plants that were bid out that year. PSALM had made other significant achievements, which the PSALM board rightfully recognized," Osorio added.

According to Osorio, five other power plants were sold before Masinloc which can also be used in justifying the CVIA.

"Privatization has various stages, each composed of sets of activities that require significant amounts of time and effort, regardless of the size of the plant. Hard work has been put in before an asset can be placed in the auction block," she noted.

She noted that before the privatization program can go full swing, PSALM had to facilitate the transfer of the P200-billion debt of National Power Corp. (Napocor) to the National Government.

The debt transfer, she said, was key to getting the consent of the World Bank (WB), Asian Development Bank (ADB) and the Japan Bank for International Cooperation (JBIC) which, in turn, is a requirement before PSALM can sell the assets.

PSALM had to secure individual consents for the plants, including Masinloc, which were bid out in 2004.

Furthermore, PSALM also conducted activities to implement the assumption of loans owed by rural electric cooperatives to the National Electrification Administration (NEA) totaling P18 billion and renegotiated remaining IPP (independent power producers) contracts with an estimated additional net present value savings of $6.5 million, or P364 million.

PSALM also generated additional P973 million in savings resulting from cost-cutting measures implemented in 2004.

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Northwind Power to double capacity of Ilocos power plant

The Philippine Star 07/18/2006

Northwind Power Development Corp. is planning to double the existing capacity of its wind power facility in Ilocos by another 25 megawatts (MW) over the next five years.

Department of Energy (DOE) director Mario Marasigan said Northwind is currently evaluating the feasibility of the additional five turbines totaling eight MW.

Marasigan said this will form part of the second phase of Northwind’s five-year expansion program.

He said, the expansion will help address the projected growth in demand in the Luzon area in the next five years.

"Northwind targets to put up the 50-megawatt wind power plant in the next five years, as there is a need to be attuned to the demand," he said.

In August last year, the Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), approved the $12.5 million loan application of Northwind.

Specifically, the MB approved the mixed-credit facility of the Danish-Filipino consortium that would put up a 25-MW wind power facility in Bangui Bay, Ilocos Norte.

The 10-year loan would be guaranteed by Tidcorp and will be based on commercial interest rates or a margin of 20 basis points.

The Northwind project, which started construction last April 24, will make the Philippines the first producer of wind power in Southeast Asia.

The wind project, which is expected to be ready by the end of the year, will augment the supply of power in Ilocos Norte.

The construction of the first 25-MW wind farm in Southeast Asia will involve the installation of modern and sophisticated wind technologies that will be placed in a single row stretching nine kilometers along the shoreline of Bangui Bay.

It will harvest breezes from the South China Sea using 15 giant wind turbines, each standing 70 meters in height with rotor blades spanning 40 meters.

The Northwind project will become the pioneering model for future wind power projects in the Philippines and a magnet to attract at least 417 MW of wind-based power projects within the next 10 years.

With wind speeds reaching an average of at least seven meters per second or an equivalent of 26 km per hour, the Bangui Bay shoreline was one of the recommended sites by the US National Renewable Energy Laboratory (USNREL) as the most ideal place for wind power generation.

The government plans to increase the harnessing of wind power for the electrification for off-grid rural areas.

To date, several similar projects are already in the pipeline including the 40-MW Pagudpod wind project of PNOC-EDC, 10-MW Abra de Ilog wind project in Mindoro, 15-MW wind project in Camiguin, Siargao and Diangat Islands and the 30-MW Smith Bell Negros wind farm.

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No plans to scrap 1-day power sales

The Philippine Star 07/18/2006

The National Power Corp. (Napocor) has no plans of scrapping its one-day power sales (ODPS) program, the company’s top official said.

Napocor president Cyril del Callar said the company is currently even undertaking improvements in its ODPS program to bring more benefits to its regular bidders.

"We wish to allay any apprehensions that the ODPS will be scrapped, and apologize for whatever inconvenience the temporary cancellation of the ODPS transactions may have caused," Del Callar said.

Del Callar has assured customers that Napocor will not terminate the ODPS scheme amid concerns raised by the Philippine Chamber of Commerce and Industry and by the Federation of Philippine Industries following the brief suspension of the ODPS trading in May and June.

At the same time, the Napocor chief said revisions are now being made on the ODPS, including "a commitment to guarantee a firm three-day price for (the electricity) quantities that will be bid out through the ODPS".

"Through this three-day firm price guarantee, Napocor will thereby assume the generator’s risk, which will hopefully prevent any recurrence of sudden suspensions of the ODPS program in the future," he added.

Under the ODPS, Napocor sells its excess capacity through an on-line, daily public bidding. The program is open to its customers, in particular those that have self-generation capacity of at least one megawatt.

Del Callar clarified that the program was only suspended on two occasions (on May 23-27 and on June 5-11) and only because there were not enough power reserves to bid out on the said dates.

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DOE hints of another 1% tariff cut on crude imports

The Philippine Star 07/18/2006

The Department of Energy (DOE) hinted yesterday the possibility of implementing another one-percent tariff reduction on imported crude products to soften the impact on consumers of the continued rise in global oil prices.

"A one-percent tariff reduction is expected to be implemented immediately this week and further tariff reductions up to three percent maybe expected depending on the movements of prices in the world market," Energy Undersecretary and officer-in-charge Guillermo R. Balce said.

Balce said they are currently working out a scheme that would enable them to implement this short-term mitigating measure without necessarily sacrificing government revenues.

Every one percent cut in tariff on imported fuel products results in about P2.5 billion in foregone revenues for the government a month. The revenue impact would also depend on the volume of oil that the oil firms will import.

Balce said the DOE is closely monitoring developments in the global oil market.

He said they have been trying all efforts to cushion consumers from the impact of the prevailing volatility in international oil prices.

According to Balce, they are particularly zeroing in on the possible effect rising oil prices will have on the country’s inflation rate.

"The government will not cease its efforts to mitigate the impact of rising oil prices on the lives of our people as the DOE pursues its long term goal of accelerating the use of alternative sources of energy," he said.

In view of this, Balce has assured the public that prices of oil in the domestic market are expected to remain stable for the rest of July.

World oil prices hit peak levels anew, reaching almost $72 per barrel in Dubai in the past few days following continued geopolitical tensions in the Middle East.

DOE monitoring showed that Dubai crude rose to $71.99 per barrel last July 14, bringing the July average to $69.24 per barrel or up by $4.02 against the June average.

MOPS-based unleaded gasoline jumped by $2.55 to $85.31 per barrel this month compared to June average of $82.76 per barrel while MOPS-based diesel soared to $88.03 per barrel from $87.57 per barrel in June or up by $0.47.

Israel’s attack on Lebanon in response to the kidnapping of two soldiers and the firing of more than 100 rockets into northern Israel by Hezbollah guerrillas have heightened the tension in the Middle East and sent the world oil market in frenzy. Lingering tensions over Iran’s nuclear program continue to expose the world’s vulnerability to supply disruptions in the Middle East.

Consistent with the Executive Order 527 signed by President Arroyo last month, trigger prices were set as part of the guidelines for the implementation of the new EO.

Based on the guidelines, one percent tariff rates shall be imposed on crude and petroleum products should the average price of both Dubai crude and Mean of Platts Singapore (MOPS) — based diesel in the last two weeks reach $75 per barrel and $88 per barrel, respectively.

On the other hand, the two percent tariff rates shall be imposed on crude and petroleum products should the average price of both Dubai crude and MOPS — based diesel in the last two weeks reach $66 per barrel and $88 per barrel, respectively.

Zero percent tariff rates, meanwhile, shall be levied on crude and petroleum products should the average price for both Dubai crude and Mean of Platts Singapore (MOPS) — based diesel in the last two weeks reached $85.00 per barrel and $88.00 barrel respectively.

The tariff adjustments will only be implemented upon certification issued by DOE to the Department of Finance and the Bureau of Customs that the trigger prices for both crude and diesel have been met.

The guidelines, the DOE said, also impose on oil companies to reflect the corresponding reduction in pump prices of diesel fuel sold to the public transport sector.

Oil companies have been asked to provide sufficient number of gasoline stations offering the appropriate tariff-reduced diesel prices to the public transport sector.

"The government will not cease its efforts to mitigate the impact of rising oil prices on the lives of our people as the DOE pursues its long term goal of accelerating the use of alternative sources of energy," he said.

In view of this, Balce has assured the public that prices of oil in the domestic market are expected to remain stable for the rest of July.

World oil prices hit peak levels anew, reaching almost $72 per barrel in Dubai in the past few days following continued geopolitical tensions in the Middle East.

DOE monitoring showed that Dubai crude rose to $71.99 per barrel last July 14, bringing the July average to $69.24 per barrel or up by $4.02 against the June average.

MOPS-based unleaded gasoline jumped by $2.55 to $85.31 per barrel this month compared to June average of $82.76 per barrel while MOPS-based diesel soared to $88.03 per barrel from $87.57 per barrel in June or up by $0.47.

Israel’s attack on Lebanon in response to the kidnapping of two soldiers and the firing of more than 100 rockets into northern Israel by Hezbollah guerrillas have heightened the tension in the Middle East and sent the world oil market in frenzy. Lingering tensions over Iran’s nuclear program continue to expose the world’s vulnerability to supply disruptions in the Middle East.

Consistent with the Executive Order 527 signed by President Arroyo last month, trigger prices were set as part of the guidelines for the implementation of the new EO.

Based on the guidelines, one percent tariff rates shall be imposed on crude and petroleum products should the average price of both Dubai crude and Mean of Platts Singapore (MOPS)-based diesel in the last two weeks reach $75 per barrel and $88 per barrel, respectively.

On the other hand, the two percent tariff rates shall be imposed on crude and petroleum products should the average price of both Dubai crude and MOPS-based diesel in the last two weeks reach $66 per barrel and $88 per barrel, respectively.

Zero percent tariff rates, meanwhile, shall be levied on crude and petroleum products should the average price for both Dubai crude and MOPS-based diesel in the last two weeks reached $85 per barrel and $88 barrel, respectively.

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Oil companies’ concerns on coco-diesel

The Philippine Star 07/17/2006

The Philippine Institute of Petroleum (PIP), which represents mostly the interest of the country’s three giant oil companies, is in full gear as debates rage on the proposed government policy on the development and usage of alternative fuels.

In February 2004, the government mandated the use of one percent coconut methyl ester (CME) for its diesel-powered vehicles. In March last year, the Department of Energy (DOE) issued a circular enjoining oil companies to sell coco-biodiesel as additive mix in service stations, but with a very clear view of pursuing the implementation of a national coco-biodiesel program.

Pip position

I recently had lunch with the amiable spokesperson of Pilipinas Shell, Bobby Kanapi, at Tsumura (at 88 Corporate Center, corner Sedeno and Valero Streets, Makati), the authentic Japanese restaurant owned by the well-known restaurateur Jimmy Go. Although we seldom discuss oil industry issues during our regular golf and lunch sessions, our conversation drifted to the issue of bio-diesel.

Bobby had ready answers to the questions raised. After enthusiastically presenting his case, I promised to print the gist of PIP’s position (there is no free lunch, nowadays!) with the caveat that I may have a differing view. Being a true professional, Bobby Kanapi understood.

I am reprinting below excerpts of PIP position, specifically on the oil companies concerns on product quality, supply security, product liability and supply. Here goes:

"While CME, which is a very old technology, my be incorporated as a diesel blend, there is a need for a more extensive and comprehensive technical evaluation based on internationally accepted tests and procedures, including assessment on product stability; product handling, transportation and storage; long-term suitability, solvency and corrosiveness; and long-term effects on the diesel engine in the Philippine setting.

"Likewise, CME which was given a permit as a fuel additive by the Environmental Management Bureau (EMB) must be able to demonstrate on a sustained usage that it will not contribute to the increase in exhaust gas emissions of the transport vehicles

"There were concerns raised during discussions at the technical level of the proposed testing protocols on whether the handling of CME can be undertaken using the current facilities of the industry players. To date, no conclusions have been formulated so far to address this concern.

Only lab tests results

"The United States National Renewable Energy Laboratory (NREL) representatives presented the results on laboratory tests only and not the performance tests. What it showed was that the properties of the CME blended samples (one percent to five percent blended to diesel) fall within the specifications of the current Philippine diesel standards.

"However, the actual performance of the blending component or additive can only be assessed through comprehensive engine testing based on internationally accepted trials and standards. Positive laboratory test data is not a guarantee that CME will perform the same as diesel fuel. The completion of comprehensive engine tests as well as the durability tests are mandatory.

"It will be recalled that the previous coco-diesel program of the government was halted since the product’s moisture content led to bacterial and algae growth in the storage tanks. This contamination, in turn, led to clogging of fuel filters and breakdown of vehicles.

Concern on customer complaints

"To guarantee the quality and performance of products sold at the retail station level, our member companies endorse only products that are of high quality standards. These products undergo strict adherence to safety, environment and quality standards.

"To date, there have been limited study results and available empirical data on CME. We wish to reiterate our collective concern that the sale of CME in retail stations may subject individual oil companies or retailers to customer complaints and possible legal action.

"Recent tests show that five percent FAME (fatty acid methyl esters where CME is categorized/classified) in diesel has negative effects on engine parts. Engine tests on FAME-diesel blends conducted by the Ministry of Economy, Trade, and Industry (METI) of Japan, which was commissioned by the Fuels and Lubricants Sub-Committee of the Japan Automobile Manufacturers Association (JAMA), indicate negative effects on engine parts.

"Using five percent blend of FAME in diesel fuel resulted in the abrasive wear in fuel injector equipment for both Bosch and Denso, fuel flow reduction which means that the engine may suffer power reduction for insufficient supply of fuel. It also found heavy corrosion in fuel tanks, and leakage in fuel filters.

"Similarly, Cummins and Caterpillar neither approves or prohibits use of biodiesel fuel, but failures caused by the use of biodiesel are not defects of workmanship and/or material as supplied by the two manufacturers would not be covered nor compensated under the warranty.

"Thus, long term effects of CME on diesel should be considered as it would greatly affect the motoring public in terms of engine performance, its compliance to emission regulatory requirements, and the subsequently heavy toll on maintenance.

More expensive

"We likewise wish to raise our concerns on the volatile price of CME in the country. It is important to note that on a per liter basis, CME is more expensive than diesel. Given its budget constraint, the government may find it not advisable to sustain with subsidy the proposed CME to make such a product as "affordable" as conventional diesel fuel.

"Even if money can be made available to provide such a subsidy, there is the potential danger of encouraging a shift from manufacturing coconut oil to CME rather than to household cooking oil. As such, the price of cooking oil may thus rise to such levels that will be beyond the reach of common housewives."

In view of space limitations, I will present the comments and suggestions that I discussed with Bobby in succeeding columns.

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Flying V launches its ‘Biodiesel Premium’ product in Ilocos

The Philippine Star 07/17/2006

Biodiesel pioneer Flying V recently announced the general roll-out of its "Biodiesel Premium," its brand of pre-blended coco bio-Diesel in all of its stations in Ilocandia area.

Flying V spokesman Macky Lopez said this move is in response to government’s call encouraging the greater usage of alternative fuels in the face of spiralling prices of imported fuels.

From July 24-30, all Flying V stations in Ilocos Norte, Ilocos Sur, La Union, Baguio, and Pangasinan shall successively commence dispensing pre-blended BioDiesel at station pumps.

Lopez said the Ilocandia Biodiesel roll-out is pursuant to the company’s ongoing nationwide Biodiesel program.

Lopez said this will coincide with the intensified information campaign being undertaken by the Department of Energy in North Luzon on the consumer benefits and importance to the economy of Alternative Fuels.

Part of the DOE agenda during its various meetings with leaders of LGUs, and regional government agencies in the North is the stricter enforcement of Memorandum Circular 55 mandating the use of Biodiesel in all government-owned vehicles running on diesel.

Flying V is generally acknowledged as the Biodiesel Distribution pioneer, having received two Awards as a Pioneering Partner by the Department of Energy in the field of Alternative Fuels at ceremonies held and presided over by President Arroyo.

Flying V managing director Vicente de Jesus, meanwhile, announced that construction on Flying V’s Bio-Fuels Center at Philcoa’s Elliptical Circle Compound shall commence shortly.

Upon its opening, the center shall serve as the company’s flagship for alternative fuels, dispensing pre-blended Bio-Diesel, Fuel E-10 Ethanol, and auto gas, direct from the station pumps, and shall be home to year-round presentations, exhibits, and fora to accelerate general public acceptance of this revolutionary alternative fuel.

In a related development, USAID-Sustainable Energy Development Program (SEDP), during the grand launch of its clean cities program in Marikina City, announced that the Cinema Ad on Coco biodiesel shall be released before the end of the month.

The ad will be shown in theaters nationwide by USAID-SEDP pursuant to its advocacy for the use of biodiesel in promoting clean air and healthy environment.

The coco biodiesel brochures currently are also off the press and are being distributed in its Clean Cities pilot areas by USAID-SEDP.

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PSALM to sell 25 Napocor gensets over next 2 years

The Philippine Star 07/17/2006

The Power Sector Assets and Liabilities Management Corp. (PSALM) is expecting to sell 25 generating assets of the National Power Corp. (Napocor) this year and the next two years.

Based on the updated sale sequence, PSALM will sell 10 power plants, organized into eight asset packages that include the decommissioned and retired power plants this year.

These plants form part of the 25 remaining power facilities lined up for privatization until 2008.

Under the new genco sale line-up, PSALM will have to sell from January to June 2006: 600-MW Calaca; 275-MW Tiwi/410-MW Makban; and 100-MW Pantabangan/12 MW Masiway.

For the second half of 2006 or for July to December 2006, PSALM expects to auction off the 200-MW Manila Thermal bunker; 360-MW Magat Hydro; 620-MW Limay CC diesel; 114-MW Iligan I and II diesel/bunker; and 225-MW Bataan thermal bunker.

For the period January to June 2007, the government asset disposal firm is scheduled to sell the 22-MW Bohol diesel plant; 246-MW Angat hydro; 54-MW Cebu II diesel; and 192.5-MW Palinpinon geothermal.

From July 2007 to December 2007, PSALM will bid out the 112. 5-MW Tongonan geothermal; 22.3-MW Gen. Santos diesel; 75-MW Ambuklao/100 MW Binga hydro; 850-MW Sucat Thermal bunker; 0.8-MW Amlan hydro; and 210 MW Navotas I/ 100-MW Navotas II diesel.

For the first half of 2008, the genco assets that would be sold by PSALM include: 150-MW Bacman geothermal; 108- MW Aplaya diesel; and 146.5-MW Dingle (36.5 MW Panay I/110-MW Panay III) diesel/bunker.

This latest sale schedule will push back anew the earlier target of PSALM to sell 70 percent of Napocor generating assets in the first half of 2007.

Among the major causes of delay in the privatization of the gencos, PSALM said, are: creditors‚ consent; land titles; asset inventory; plant specific issues; inter-agency issues and transition supply contracts.

Republic Act 9136 or Electric Power Industry Reform Act (EPIRA) of 2001 mandates the sale of 70 percent of Napocor generating assets before the Open Access and Retail competition could be implemented.

PSALM had earlier targeted to sell 70 percent of the total Napocor’s generating assets in Luzon and Visayas by middle of 2006.

But based on original plan, PSALM should have sold the 70 percent by the end of 2005.

At present, PSALM, entity created under the EPIRA to handle the finances and the privatization of Napocor assets, has sold only 14 percent of the state-owned power firm’s generating assets.

PSALM has so far privatized six plants with total combined proceeds of $567 million or $0.932 per MW of capacity.

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ERC okays new rates for Napocor

The Philippine Star 07/17/2006

The Energy Regulatory Commission (ERC) has approved new rates for the National Power Corp. (Napocor) to reflect the power firm’s application for generation rate adjustment mechanism (GRAM) and incremental currency exchange rate adjustment (ICERA) for the period April 2005 to October 2005.

Based on the ERC approval, Napocor could recover from its customers new GRAM rate of P0.4170 centavos per kilowatthour (kWh), lower by five centavos from P0.4175 centavos applied by the state-run power company. This new GRAM rate in Luzon will be recouped by Napocor within nine months.

In the Visayas, ERC approved a lower rate of P0.3203 centavos GRAM recovery. Napocor applied for P0.3597 per kWh increase in this region. The ERC allowed Napocor to recover this rate in the Visayas for five months.

For the Mindanao grid, ERC allowed Napocor to recover under GRAM of P0.5048 per kWh for a recoup period of 16 months. This is lower than the P0.52.17 per kWh applied for by Napocor.

For the ICERA, the ERC approved Napocor’s deferred accounting adjustment (DAA) for debt service and operational expenses of P0.5719 per kWh in Luzon, P0.1784 per kWh in Visayas and negative P0.0155 in Mindanao. The ICERA will be recovered within eight to 24 months.

Early last month, the ERC, instead of granting automatic implementation, extended for another 45 days the resolution of Napocor’s GRAM and ICERA for the period covering April 26 to October 25 2005.

In separate rulings, however, the ERC argued that the 45-day resolution deadline set by the implementing rules should not apply since section 11 of the same rules provide only for a three-month recovery period.

But Napocor had filed for a seven-month recovery, which the ERC said would need more time to resolve. Thus, ERC extended the deadline of June 2, 2006.

Under the Electric Power Industry Reform Act (EPIRA) of 2001, the Napocor is allowed to recover its costs incurred from operations and fluctuating currency from its customers. Before Napocor and DUs were allowed to automatically recover these costs and the ERC would just review it after.

Based on the current set-up, the power generators and distributors should apply quarterly for the recovery of GRAM and ICERA.

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