By Carmelito Q. Francisco, Correspondent

Power plant delays mean co-ops must have Plan B

Posted on June 12, 2015

DAVAO CITY -- The Mindanao Development Authority (MinDA) said it will look into the contingency plans of electric cooperatives in the event of delays in power projects they plan to buy electricity from.

BW File Photo
MinDA has noted that some cooperatives signed up with projects that have not made progress, putting their service areas at risk of outages even when there is enough supply within the grid.

“(Cooperatives) must be flexible in securing contracts,” said Romeo M. Montenegro, investment and public affairs head of the agency, although he did not name the projects or the cooperatives that are in this situation.

The agency plans to meet with officials of the Association of Mindanao Rural Electric Cooperatives to discuss alternatives if deliveries on their supply contracts are delayed unexpectedly.

One option, he said, is for cooperatives to embed modular generating sets to supply them until the delayed projects get back on track. “But this is very expensive option because running a modular set is very costly,” he said.

The other option, which may involve the cooperation of the project developer, is amending contracts to permit supply deals with other providers with excess capacity.

“But this second option is tricky,” he said, adding that only one of the 20 or so cooperatives have taken both steps -- the Davao del Sur Electric Cooperative.

Most contracts between power generators and distributors run for 25 years, locking in the distributors to the timetables of their suppliers.

Mr. Montenegro said cooperatives must exercise due diligence in signing supply contracts by looking at the development phase of the projects of companies that they sign up with. “This is important because this will assure them of an accurate projection for their requirement,” he told BusinessWorld.

In Mindanao, most of the power distributors are cooperatives, while only the distributors in this city and the cities of Cotabato and Cagayan de Oro are corporations.

At present, Mindanao sources about half of its power requirements from the government-run Agus and Pulangi hydroelectric power complexes.

However, based on projections, the balance will be tilted in favor coal-fired power plants within the next three years because much of the new generating capacity uses that fuel.