THE NATIONAL Irrigation Administration (NIA) and SN Aboitiz Power-Magat, Inc. (SNAP-MI) agreed to a P19.99-million settlement in relation to the use of irrigation water in power operations.

The NIA said in a statement Wednesday that the deal is structured as a compensation settlement.

The agreement was signed by NIA Administrator Ricardo R. Visaya and SNAP-MI President and Chief Executive Officer Joseph S. Yu on Aug. 3.

On Dec. 13, 2006, the NIA signed an operations and maintenance agreement with SNAP-MI for the non-power components of Magat Dam, owned and operated by NIA. The dam is primarily used for irrigation with a secondary role in power generation.

The agreement follows on from SNAP-MI’s acquisition of the 360-megawatt Magat Hydroelectric Power Plant (MHEPP) from the National Power Corp. in an auction conducted by the Power Sector Assets and Liabilities Management Corp.

“On June 18, 2008, in order to resolve the then pending issue on the pricing of water for the volume used in excess of the Irrigation Diversion Requirement (IDR) during times that the actual reservoir elevation is above the rule curve elevation, the MHEPP Oversight Committee issued Resolution No. 1, series of 2008 providing the unit of price of water to be adopted in computing the water service fee for MHEPP,” the NIA said.

During the November 2010-February 2011 period, NIA claimed P9.27 million from SNAP-MI, citing opportunity loss as a result of SNAP-MI’s non-use of the full IDR for electricity generation, while the latter is operating for ancillary services.

SNAP-MI argued that service fees should be computed based on the volume of water used for power generation as provided in the operations and maintenance agreement.

In the May-September 2009 period, the NIA claimed P10.72 million from SNAP-MI for the water consumed above the IDR during spilling conditions, per the rate of P0.062 as prescribed under the oversight committee resolution.

SNAP-MI argued that the regular rate of P0.031 should be applied in case of surplus flows that would be spilled if not used for power generation under exceptions that were provided in the operations and maintenance agreement.

The parties were also in dispute on the service fee adjustment under the operations and maintenance agreement, particularly on the frequency, rate, increase/decrease, and conditions.

Apart from the settlement, the NIA and SNAP-MI also decided to revise the operations and maintenance agreement in order for the service fee payable by SNAP-MI to NIA to be computed based on the allocated IDR, whether or not the IDR was utilized for electricity generation. — Revin Mikhael D. Ochave