A document distributed among the Palawan media last week noted that the Palawan Electric Cooperative (PALECO) is being sued by one of its independent power producers, the DMCI Power Corp (DPC), for breach of contract.
DPC is claiming that PALECO violated its existing supply agreement with the cooperative by failing to dispatch its power supply according to the offtake agreement they signed in 2012.
DPC claims that PALECO has been under-dispatching its generated power since 2018 since the cooperative entered into a new supply agreement with Delta P. After that new PSA was signed, PALECO apparently revised its power generation dispatch schedule to accommodate Delta P, at the objection of DPC.
The complaint is up for adjudication by the Energy Regulatory Commission. It is set to hold a pre-trial conference on the DPC complaint in November. Meanwhile, DPC is demanding penalty charges from PALECO in the amount of P162.3 million. If PALECO loses this case, such penalty charges promise to exact heavily on its financial position.
It would seem that this dispute between PALECO and DPC emerged when PALECO, anticipating growth in power demand, opened a Swiss challenge to the offer of Delta P for a new 25 MW contract after its previous contract had expired.
These are the essential underpinnings of the case. It is worth noting however that its escalation occurred at a time when PALECO was already under the de facto caretakership of the National Electrification Administration (NEA), following its takeover of the general manager position of the cooperative in late 2018.
PALECO had been criticized in the past for its apparent accommodation of DPC as the latter struggled through the years since signing its PSA to put up a 15-MW coal-fired power generation facility. Ironically, it is now DPC that is hard balling PALECO over its management decisions.
Another irony to the sad narrative of PALECO is the pressure it is receiving from both the provincial and city governments, which seems to be leaning towards the demise of the cooperative itself. The provincial government had been lobbying Congress for the granting of a new distribution franchise in Palawan to a company called MORE Power Corporation.
Last week, the City Council passed a strange resolution asking its own city government to “open” a new distribution franchise that will compete with PALECO. The suggestion is patently legally benign, as it is only Congress that can grant a franchise. But the City Council’s action amplified the noise against the embattled PALECO which is receiving the brunt of criticisms from its own member-consumers for every power-tripping incident that occurs.
It may be high time for PALECO to bare its truthful situation to its member-consumers, including the local government units with their specific agenda. If the cooperative tanks either due to financial losses or sheer political pressures, it is the member-consumers that will be affected first and foremost.