ON THE BUSECO-NORTH BUKIDNON POWER CORPORATION POWER SUPPLY AGREEMENT

Sep 2, 2017

by David A. Tauli

 

On January 19, 2017, the Bukidnon Second Electric Cooperative, Inc. (BUSECO) entered into a power supply agreement (PSA) with the North Bukidnon Power Corporation (NBPC), under which BUSECO will be supplied 5 MW of peaking power for a period of 15 years at a rate of around 12.00 pesos per kilowatt-hour.

David A. Tauli

David A. Tauli

 

On June 15, 2017, BUSECO) and NBPC jointly filed an application with the Energy Regulatory Commission for the approval of the PSA. The application was docketed by the ERC on August 10, 2017 as ERC Case No. 2017-060 RC, and was schedule for initial public hearing on September 6, 2017 at the Main Office of BUSECO in Manolo Fortich, Bukidnon.

Following are comments and suggestions of the Mindanao Coalition of Power Consumers (MCPC) concerning the Rate Case, which should be brought by BUSECO member-consumer-owners to the attention of the BUSECO management and to the ERC.

1. The application was submitted to the ERC by the former General Manager of BUSECO, Deiter Hoff P. Arellano, who was removed from office by the National Electrification Administration in July 2017 after finding him guilty of “grave misconduct, dishonesty and conduct prejudicial to the best interest of the electric cooperative and its member-consumer-owners” in connection with an anomalous power supply contract with the FDC Misamis coal plant in Villanueva, Misamis Oriental.

1.1 Considering that the misconduct of GM Arellano was in connection with power supply contracting, it is probable that the power supply contract between BUSECO and NBPC is also prejudicial to the interest of BUSECO and the member-consumer-owners of BUSECO. Therefore, we suggest that further hearings on the application should be cancelled by the ERC, and the application that was submitted to the ERC by BUSECO should be returned to BUSECO for scrutiny by the new general manager of BUSECO.

1.2 It may be appropriate on the part of the new general manager of BUSECO to write to the ERC a letter to withdraw the application for the approval of the PSA between BUSECO and the NBPC.

2. From the allegations of BUSECO in their application, it is apparent that BUSECO did not carry out a generally-accepted process of least-cost acquisition of power supply (as required by the EPIRA) prior to entering into the power supply agreement with the NBPC. For one thing, BUSECO did not make any advertisement in a newspaper of general circulation calling for proposals from power suppliers to supply its peak power requirement.

And BUSECO did not invite an adequate number of generating companies to submit proposals to supply the new power requirement of BUSECO. Only two generating companies were invited to submit proposals to supply peak power to BUSECO, and the two gencos that were invited to submit proposals had non-comparable power plants, one a diesel-fueled power plant and the other a solar photovoltaic power plant. The two power plants could not be logically compared with each other to determine the bid which would be more advantageous to BUSECO. In effect, the Competitive Selection Process carried out by BUSECO was designed to select the NBPC diesel-fueled power plant as the “winning” bidder.

2.1 We suggest that, after investigation to verify the foregoing allegations, the ERC should dismiss the application because: (a) BUSECO violated the EPIRA requirement for distribution utility companies to carry out a legitimate least-cost manner in obtaining power supply for their consumers; and (b) the Competitive Selection Process carried out by BUSECO was anomalous, and could not result in the determination of the proposal that is most advantageous to BUSECO from among more two or more proposals submitted by existing power generating companies who would be qualified to supply the peaking power requirement of BUSECO.

David A. Tauli is the President of the Mindanao Coalition of Power Consumers

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