By Francis Allan L. Angelo 

A NATIONAL Electrification Administration (NEA) fact-finding team found provisions in the power supply agreement (PSA) between Iloilo Electric Cooperative (Ileco 3) and an independent power producer (IPP) disadvantageous to the coop and its member-consumers.

The findings are included in the report of the fact-finding team headed by Atty. Omar Mayo, NEA legal department head.

The team was tasked to investigate the alleged bribery and disadvantageous provisions of the 25-year PSA between Ileco 3 and Applied Research Technologies Phils., Inc. (Artech).

For one, the team said that the 15-MVA substation that Artech pledged to donate to Ileco 3 after 25 years should not be considered a gift or deal sweetener. Artech made the promise as embodied in Sections 9.2, 15.1, 15.2 and 15.3 of the PSA. 

“Artech has to install and provide the 15 MVA substation, as this is necessary and indispensable in its operation to deliver electric power to Ileco 3 and not for the use of Ileco 3 itself. This will only be turned-over to Ileco 3 after 25 years free of charge but already fully depreciated by then,” the report said.

Artech also did not offer prompt payment discount (PPD) to Ileco 3, unlike the offer of renewable energy producer Asea One which signed a power supply contract with the cooperative.

“It is likewise worthy to note that all the other IPPs included the PPD in their respective offer sheets,” it said.


The report also noticed that the projections of the contract on Ileco 3’s power demand “is highly improbable, if not totally impossible.”

In the first three years of the PSA, the minimum energy off-take (MEOT), or quantity of electricity Ileco 3 will buy from Artech, is pegged at 55.750 million kilowatt-hour (kWh).

The quantity will then increase by 51% to 84.480 million kWh in the 4th year and 92.4 million (66%) in the 5th year of the contract.

There is also an over contract of demand, the NEA report said.

The report said the Ileco 3 board of directors failed to evaluate Section 5.8 of the PSA which provides that the cooperative will pay the MEOT as if such quantity has been consumed.  

“The Board Directors failed to evaluate the above provisions since these are very disadvantageous to the Ileco 3 which resulted to over-contract of demand. The Minimum Off-Take provided in the contract is much higher when compared to the forecasted kWh based on the ICPM (Integrated Computerized Planning Model) of Ileco 3,” the report added.

If the PSA takes effect, consumers will pay P55.663 million a year for 8.383 million kWh of electricity.

From 2015 until the contract ends, Ileco 3 consumers will pay P181,349,960 for 29.47 million kWh of excess power.

“Unless there shall be many industrial and commercial consumers who will apply in Ileco 3, the above contracted energy cannot be consumed by the coop. The coop will have to pay the contracted energy whether consumed or not and pass it on to the consumers. In the end, it will be the member-consumers who will suffer,” the NEA report said.

The fact-finding team’s report validated The Daily Guardian’s analysis of the PSA, particularly the over-contracted demand and other onerous provisions.

Mayo recommended that Ileco 3 rescind the PSA because of its disadvantageous provisions.

The fact-finding team also recommended a formal investigation on the complaints of two Ileco 3 consumers and possible preventive suspension of Ileco 3 directors who voted for the contract.