A new player in the power sector has expressed interest in taking over the Palawan Electric Cooperative (PALECO) franchise, with a promise to significantly improve the electricity distribution service and bring down the electric bills of consumers.
MORE Power, a private player that operates Iloilo’s electric distribution franchise, floated the idea of a joint venture in a meet-and-greet with PALECO officials last week, with MORE taking on the majority control of the franchise in a 70-30 arrangement.
READ RELATED STORY HERE: Razon group mulls majority control of PALECO via joint venture
No formal proposal or concept was presented during the meeting, except for a vow that the venture will solve the current power woes of the province and bring down electricity rates similar to that of Iloilo where it operates.
The idea is also being pushed by the provincial government, as Palawan’s congressional representatives previously filed a bill in the House of Representatives granting MORE its franchise in Palawan.
Taking over PALECO, with its perceived warts and faults evidenced by the constant blackouts, is easier said than done. It requires meticulous due diligence and feasibility assessment, which MORE evidently had not yet even started. Even its franchise bill in congress sponsored by Palawan legislators had been done in a whim, with no compelling staff work research to support it.
Right or wrong, PALECO has been a convenient target of rage by consumers at the receiving end of constant power interruptions, no matter whose fault they are.
The power set up in Palawan, which is off the Luzon main grid is a complex mix. The cost of electricity is not determined by the fundamental supply-demand dynamics like it is in the mainland where electricity is auctioned in the government run spot market.
We have independent power producers with guaranteed contracts supplying electricity separate to PALECO whose only business is to distribute it to consumers. We have the National Power Corporation (NPC) which owns the backbone grid and is responsible for maintaining it.
Because the cost of electricity in an island environment like Palawan is so high, the rest of the country’s consumers had to subsidize a hefty part of it, like for every P12 per kwh (on the average) that PALECO subscribers had to pay, the rest of the country are charged an additional amount. It is in our electric bills, that one called “missionary” charges or UCME.
Without this arrangement, the island’s power rates will be so high no one can afford it and no investor will want to put up a business, and the province will go broke. There is no one power overlord in Palawan that controls everything, like sometimes we wish maybe we should have if only to make things simpler.
It will be interesting to eavesdrop on the board room of MORE to understand how they intend to run this behemoth and make promises of reduced electricity rate, or how it will recover its investment and make a reasonable profit of it.
Promising it can deliver to Palawan the same reduced rate currently being enjoyed by Iloilo is easier said than done. To begin with, the Iloilo power rates are influenced not by how MORE performs on the distribution side of it, but simply because cheaper electricity was available in the spot market serving the mainland grid where it is connected. Palawan is not connected to the Luzon grid, and unless it finds a way that its policy makers can make this happen, the province will perpetually need its subsidy.
How MORE also plans to influence the supply side, which currently belongs to three independent power producers, remains a major legal hurdle. Their contracts are sealed and guaranteed and cannot simply be revoked, and it will be expensive to buy them out and pass on the cost to Palawan consumers.
The PALECO franchise has 10 more years before it lapses. A private company wants to step in and take over, making promises that aren’t even backed by studies and assumptions that can be vetted by the public. PALECO owes it to its member subscribers to demand transparency with this transaction. For at the end of the day, it is every Palaweno end user of electricity who will pay for it.