11 Mar 2010
Allow us the opportunity to clarify statements made by Mr. Erick San Juan in his letter titled "Oppose privatization of the 'last dam standing" (Philippine Daily Inquirer, 22 February 2010) that discussed the privatization of the 246-megawatt Angat hydroelectric power plant (HEPP).
Mr. San Juan's statement that the sale of the Angat Dam "in effect, would turn over the lifeblood of the country's strategic region to a private corporation" is a misconception.
First, the Angat Dam and appurtenant structures such as the Flood Forecasting and Warning System will not be privatized and will continue to be owned by the government.
In all its privatization activities, the Power Sector Assets and Liabilities Management (PSALM) Corporation ensures that proper safeguards are in place as stipulated in Republic Act No. 9136, the Electric Power Industry Reform Act (EPIRA). The privatization of the hydroelectric generation plants, including the Angat HEPP, is no exception.
Rule 23 of the EPIRA Implementing Rules and Regulations (IRR) specifically states:
"Section 6. Privatization of Hydroelectric Generation Plants.
"(a) Consistent with Section 47(e) of the Act and Section 4(f) of this Rule, the Privatization of hydro facilities of National Power Corporation (NPC) shall cover the power component including assignable long-term water rights agreements for the use of water, which shall be passed onto and respected by the buyers of the hydroelectric power plants."
PSALM again stresses that only the power component of the Angat hydro facility will be privatized. The dam will remain the property of the government. The title of Section 6 is specific: "Privatization of Hydroelectric Generation Plants." Further, Section 6(a) of the same rule refers to "buyers of the hydroelectric power plants," not the Angat Dam.
The EPIRA also clearly states that "In cases of transfer of possession, control, operation or privatization of multipurpose hydro facilities, safeguards shall be prescribed to ensure that the national government may direct water usage in cases of shortage to protect potable water, irrigation and all other requirements imbued with public interest."
The EPIRA, thus, ensures the security of supply of water for drinking purposes and for irrigation.
Rule 23 of the EPIRA IRR further states:
"(b) The National Water Resources Board (NWRB) shall ensure that allocation for irrigation, as indicated by the (National Irrigation Administration (NIA) and requirements for domestic water supply as provided for by the appropriate Local Water District(s) are recognized and provided for in the water rights agreements. NPC or PSALM may also impose additional conditions in the shareholding agreement with the winning bidders to ensure national security, including, but not limited to, the use of water during drought or calamity."
In the privatization of hydroelectric power plants such as Pantabangan-Masiway HEPP Complex (2006), Magat HEPP (2007), and Ambuklao-Binga HEPP Complex (2008), PSALM comprehensively addressed similar issues imbued with public interest.
In fact, PSALM successfully formulated, negotiated, and executed the Operations and Maintenance Agreements (O&M) for the non-power components of these hydropower facilities between the buyer and the government agencies involved in the operation of these power plants. This was accomplished in close coordination with the NWRB for water use and allocation and the PAGASA for flood forecasting and warning system.
The successful turnover of these hydropower facilities to private investors proved the viability and legal soundness of the privatization structure adopted by PSALM and the contractual arrangements entered into by the parties in compliance with the cited provisions of the EPIRA and its IRR.
The use of water at Angat Dam is regulated by the NWRB. The winning bidder for the Angat HEPP will be bound by whatever rules the NWRB imposes on the use of water at Angat Dam.
With these safeguards in place as provided by law and our faithful compliance with them, we find no reason for PSALM not to pursue the mandate vested upon it by the EPIRA - to proceed with the privatization of the Angat HEPP.
Finally, we wish to dispel Mr. San Juan's baseless speculation that with the sale of the Angat HEPP, "again, a source of potable water will be given to another private firm which is already a water sector concessionaire."
As clarified above, the "source of potable water" is not up for privatization. Additionally, representatives of the concessionaires of MWSS have stated that they are not participating in the bidding for the Angat HEPP.
In any event, there will be no giving away of a government asset. PSALM stringently adheres to transparency in and strict compliance with all of its bidding activities. All parties who have witnessed and participated in these exercises can readily attest to this fact. The sale of the Angat HEPP has attracted at least 12 investor groups who are currently undertaking their respective Due Diligence on the plant. They, too, will undergo the bidding procedures that PSALM has implemented in its privatization program.
Corporate Communications Division