Brownouts continue to haunt 9 Occidental Mindoro towns

by Lenie Lectura – November 17, 2015

from Business Mirror

POWER outages in nine towns of Occidental Mindoro would persist if the government fails to guarantee a power-supply contract between an electric cooperative and a power producer, Occidental Mindoro Electric Cooperative (Omeco) warned on Tuesday.

Rodolfo Plopinio, a member of the Omeco board of directors, said the province may never attain sufficient electricity supply if the power-supply agreement (PSA) guarantee is not approved at the soonest time.

In particular, Omeco wants the National Electrification Authority (NEA) to guarantee P69 million worth of power-supply deal it forged with Emerging Power Inc. (EPI). If NEA fails to do so, Omeco said the incidents of rotating brownouts would continue.

“We are appealing to NEA to release the guarantee for the PSA. This Christmas, there will be brownout incidents here for sure. We have been suffering from the brownout incidents. The guarantee is the solution to end our problem here,” Plopinio said.

A PSA was forged between Omeco and EPI in 2014. The latter assigned its rights under the PSA to two project companies: Mindoro Geothermal Power Corp. (MGPC) and Occidental Mindoro Consolidated Power Corp. (OMCPC).

One of the requirements in the PSA is that Omeco, the buyer of the power supply, should obtain a guaranty from the NEA.

Omeco said it has complied with all the conditions provided in the PSA. But until now, Omeco said NEA has yet to release the guarantee.

“The initial guarantee for 2016 is approximately P69 million. It should be in a form of cash deposit in an escrow account. The guarantee starts for the year 2016 because the construction of the power plant was delayed,” Plopinio explaned in a text message.

He added that aside from brownouts during the holidays, consumers have expressed fears that the lack of reliable electricity may be used to manipulate the conduct and results of the 2016 elections in the province.

Plopinio added that the lack of a PSA guarantee approval is the only impediment in putting an end to their electricity woes.

Occidental Mindoro’s capital town, San Jose, was once dubbed as the “Blackout Capital of the Philippines” owing to power outages that last between six and 12 hours a day.

The entire province has endured power outages over the past few years due to inadequate supply coupled with its disconnection from the main grid.

Omeco believes that the power shortage problem has not only affected the daily lives of its consumers, but has also suppressed local business activity thereby impairing economic growth in the province.

For its part, NEA has already drafted a contract of guarantee to secure the financial obligations of Omeco. However, it sought an opinion from the Office of the Government Corporate Counsel (OGCC) to determine the legal effects of waiving the benefit of excussion on its rights and obligations under the contract of guarantee.

The OGCC said that in a guarantee where the benefit of excussion is invoked, the obligation of the guarantor and the principal debtor to the creditor is not solidary.

In this case, NEA is the guarantor, while Omeco is the principal debtor.

The guarantee, added the OGCC, may only be enforced against the guarantor after the creditor, which in this case is EPI, has proceeded against, and exhausted all his legal remedies to collect from the principal debtor.

“In the present situation, NEA, by waiving the benefits of excussion has, in effect, bounded itself with Omeco to be liable for the entirety of its financial obligation so that MGPC may collect directly from NEA, regardless of whether it proceeded against Omeco at the first instance the obligation became due and demandable.

“NEA and Omeco will then be solidarily liable. Accordingly, the categorical waiver by NEA of the benefits of excussion has, in essence, resulted in the conversion of the contract of guarantee into one suretyship,” Deputy Government Corporate Counsel Elpidio Vega said in his five-page letter to NEA.

NEA said it awaits comment from EPI and OMECO on the matter.