"Why would this cooperative choose an astronomically more expensive option?"
Last week, we witnessed throngs of people filing for their candidacies in the upcoming 2022 elections. In the coming months, what will dominate the news on Philippine politics will be about the candidates.
Unfortunately, politicians solely focusing on their campaigns will take away attention from issues that need to be resolved. One of them is Northern Davao Electric Cooperative Inc’s P1-billion project to build a 25-kilometer submarine cable to build a submarine cable from Pantukan in Davao del Oro.
Before we start listing down the reasons why this P1-billion project deserves scrutiny from the government, here is a brief background related to the issue:
An area that Nordeco serves is Samal, a city located in Davao del Norte. While it is known for its potential as a tourist attraction, a major obstacle the island faces is frequent power outages. Resorts have to incur additional costs to spend on individual generation sets to keep the power and operations going.
Other businesses have to buy these individual generation sets, too. Unfortunately, it has become a requirement for them, especially MSMEs, to spend big amounts of money so that their operations will not be disrupted by power outages.
Industry experts have said the existing 1-kilometer submarine cable that Nordeco has, which is connected to Davao City, needs to be upgraded to resolve power supply issues. There are two options according to the experts: upgrading the existing submarine cable which will cost P75 million or riding on the 4-kilometer Davao-Samal Bridge that is currently under development, which will cost P200 million.
For some unexplained reason, Nordeco decided to spend P1 billion on this specific 25-kilometer submarine cable from Davao del Oro. The cooperative has even taken out loans and awarded the contract to start the project.
One may ask himself: Why would Nordeco choose an astronomically more expensive option? How likely is it that there is a whiff of corruption in this deal? These are some questions Congress can probe into.
This will also be a golden opportunity for Congress to dive into Nordeco’s performance, given its effort to upgrade the 1-kilometer submarine cable is tied to its history of reported inefficiency and failures throughout the five decades it has held its franchise.
For example, according to its annual report for 2018, Nordeco tallied a system loss rate of 18.92 percent. This is significantly above the cap set by the Energy Regulatory Commission, which is at 12 percent for that year.
According to the ERC, “[Electric Cooperatives] shall charge within the range of 12.00 percent to 8.25 percent [Distribution System Loss] cap until 2022 onwards, based on the cluster grouping that they were assigned in.”
The data also shows Nordeco only has a rural electrification rate of 63.56 percent and capital expenditures of P180 million. On average, the best electric cooperatives in the country have a rural electrification rate of 99 percent and spend more than P1 billion in capex.
With that being said, it is clear that Nordeco is trying to resolve its multi-decade record of failures with such an expensive project even if there are more affordable options. This is something that should alarm the ERC too.
The ERC has made it clear it has not approved Nordeco’s P1 billion project. Instead, it approved P100 million in capex for Nordeco to spend on upgrading the existing cable. Nordeco rejected this, saying it would prefer buying new vehicles with this budget.
While politicians are gearing up for their election campaigns, the fact remains there are important issues that need to be resolved. One of these is Nordeco’s unrealistic and impractical project, and the ERC and Congress must look deeper to search for the truth.
This is also a good time to ask why Nordeco has been so inefficient throughout the years. Can it even do its job properly? Well, it looks like this will be unlikely given where things are heading to. Congress should even explore the idea of terminating Nordeco’s franchise as a solution to the problem.