The Freedom from Debt Coalition (FDC) is alarmed by the expose made by Sen. Sergio Osmeña last May 30, 2003 regarding payments made by the government to Binga Hydroelectric Plant, Inc. (BHEPI).

BHEPI is one of the five IPP contracts found “defective” by the Inter-Agency IPP Review Committee (IAC). There were several issues raised by IAC in its report last year that until now, the public doesn’t know anything about. According to the IAC report, there were unresolved claims and disputes involving delay in operation, differing interpretation of computation of energy fees, and alleged defective meters and labor and third party claims. Based on these findings, the IAC recommended that outstanding issues with BHEPI will have to be resolved before any future plans for BHEPI will be undertaken by NPC and that DOJ should look into the long standing issue of unresolved claims and disputes.

We have not heard from the IAC nor from the Action Panel created on what transpired since IAC came out with its findings. Now, almost a year later, we are told that the government will pay $3 million to BHEPI and $4 million to a sub-contractor. These payments will be passed on to us either as taxpayers or as electricity consumers or as both taxpayers and electricity consumers.

Another burden will be put upon the people’s shoulders for something that they do not fully understand about. Just like all other IPP contracts, the cost of these power projects are passed on to them without even a benefit of full disclosure of all documents and transactions that transpired on these projects.

The public has the right to know what these additional payments are for. We know that there had been discussions within the National Power Board even before the IAC review was completed. These discussions were not made known to the public and yet in the end, the public is made to bear the cost of the agreements forged between the NPC and the IPP.

There are several issues that need to be clarified and brought out to the public before the government even considers paying BHEPI. Among these issues are the following:

1) Full audit report on the operations, energy fee collected by BHEPI, and on the financial status and obligations of the company. We learned that on December 6, 2001, the NP Board instructed the Management to request the Commission on Audit to render special audit on the said plant.

2) Status and resolutions on the civil cases filed in court by contractors, suppliers and even the employees against BHEPI and NPC for failure of the SEC-ManCom to settle their obligation with them.

3) Validity and appropriateness of the energy fee per kWh stipulated in the Supplemental Agreement between NPC and BHEPI dated August 8, 1997. Based on the SA, the rate of energy fee per kWh increased by US$0.0012 per kWh. COA-NLRC found this provision disadvantageous to the government that it recommended the excess amount be collected or deducted from BHEPI’s claims.

Original Contract Rate (inclusive of VAT) = US$0.0449/kWh
Supplemental Agreement (exclusive of VAT) = US $0.0420/kwh
COA interpretation of Rightful SA Rate = US $0.0408/kwh

4) Since the project did not go through the ICC-NEDA Board review and approval*, all the more that a thorough review to determine the validity of and the justness and reasonableness of the rates stipulated in the mother contract and the Supplemental Agreeement should be conducted. The circumstances leading to the approval of the contracts must be taken into consideration in the review.

FDC reiterates its call that contracts that are grossly disadvantageous to the government must be cancelled. The cancellation of onerous IPP contracts will redound to significant reduction in the very high electricity rates.

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On July 13, 1993, NPC entered into a Rehabilitate-Operate-Leaseback (ROL) project with the China Chang Jiang Energy Corporation Group for the rehabilitation of the 100 MW Binga Hydroelectric Power Plant that lies along the Agno River in Northern Luzon. In 1995, the contractor was changed to China Chiang Jiang Energy Corp, (CCJEC Phil.) then it was renamed Binga Hydroelectric Plant. Inc. (BHEPI). The operation and maintenance of the plant was later on transferred to the Securities and Exchange Commission – Management Committee (SEC-MANCOM) now, Itogon Power Generation Corporation (IPGC).

*According to the IAC Review, “the project was implemented under the ROL scheme in compliance with RA 7648 (Electric Power Crisis Act of 1993); thus, it was exempted from ICC-NEDA Board review and approval.

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