FICELCO did not study SUWECO amendment

Catanduanes Tribune – February 20, 2018

The board of directors and management of the First Catanduanes Electric Cooperative, Inc. (FICELCO) have been asked to explain why they should not be held accountable for immediately signing a key amendment to the Electricity Supply Agreement (ESA) with Sunwest Water & Electric Co. (SUWECO) in 2014 without any study.

In its Financial and Management Audit Report covering the cooperative for the period Jan. 1, 2013 to Sept. 1, 2016, the National Electrification Administration (NEA) particularly cited the circumstances leading to the approval on June 14, 2014 of the 1st Amendment regarding the change in the priority ranking of power plants to be constructed by SUWECO and the installation and commissioning of 5-megawatts of diesel power generators.

While the original ESA stated that the Solong mini-hydro power plant in San Miguel, Hitoma-1 MHPP and Hitoma-2 MHPP in Caramoran were supposed to be operational by 2010 and the Capipian MHP in 2013, the 1st Amendment provided that only the first two plants were to be completed by 2010, with the Capipian delivery moved back to 2018 and Hitoma 2 four years from the latter’s completion date.

“There was no explanation or justification observed regarding the failure of SUWECO to implement what is in the original ESA for the operational year of the 2 remaining MHP site(s),” the NEA report disclosed.

“The Board immediately signed the amendment without conducting study of the coop annual kwh requirements and the provision of the 1st amended ESA,” it pointed out, adding that as a result, FICELCO was billed nearly P26 million in foregone energy by the Catanduanes Power Generation, Inc. (CPGI).

This foregone energy cost paid to CPGI, due to its being asked not to run in favor of SUWECO power plants, were passed on to consumers as part of the generation cost, it said.

The NEA auditors highlighted the fact that the 1st Amendment included the provision that all power generated from the diesel gensets shall be purchased by FICELCO at an annual contracted energy of 31,536,000 kilowatthours.

In order not to be charged by CPGI with foregone energy, the report stated, the coop has to utilize all 22.6 million kWh of CPGI, the 31.6 million kWh of SUWECO’s diesel gensets, as well as the power generated by Solong and Hitoma 1 MHPPs, with the total power exceeding the power requirements of FICELCO.

Only two months later, the same Board again approved the 2nd Amendment to the ESA, providing for the installation and commissioning of additional diesel generators with a capacity of 6.6 megawatts and an estimated annual energy output of 40,471,200 kWh, it said.

The new change, however, did not required FICELCO to purchase electricity from this new set of diesel gensets in excess of its requirement. However, it obliged FICELCO to “primarily inform” SUWECO should there be additional demand of electricity in the province and SUWECO is “obliged to provide the same.”

“It is good for FICELCO not to be required to purchase electricity in excess of its requirement for this 2nd diesel-fueled power generators unlike the 1st Amendment,” the NEA stated. “However, it may be possible that it cannot get other power provider in the future since in case of additional demand of electricity, it is obliged to primarily inform SUWECO of said need in writing and the same shall be provided by the latter.”

In March 2015, the 1st Amendment was submitted for approval to the Energy Regulatory Commission and in June that year the latter authorized the cooperative to draw power from SUWECO’s diesel genset plant but at the higher True-Cost Generation Rate in the absence of compliance with the Competitive Selection Process (CSP), which is a condition for entitlement to the subsidy from the Universal Charge Missionary Electrification (UCME).