QUEZON CITY --  The National Irrigation Administration (NIA), represented by Administrator Ricardo R. Visaya, and SN Aboitiz Power-Magat, Inc. (SNAP-MI), represented by President and Chief Executive Officer (CEO) Joseph S. Yu, signed the Settlement and Release Agreement amounting to P19,986,308.78 on August 3, 2021 at the Administrator’s Conference Room, 2nd Floor, Building B.

The amount serves as a payment of SNAP-MI to NIA for the utilization of excess irrigation water for power generation.

SNAP-MI acquired the 360-megawatt Magat Hydroelectric Power Plant (MHEPP) from the National Power Corporation (NPC) in a competitive bidding conducted by Power Sector Assets and Liabilities Management Corporation (PSALM).

As part of the acquisition, NIA entered into an Operations and Maintenance (O&M) Agreement with SNAP-MI on December 13, 2006 for the non-power components of the Magat Dam owned and operated by NIA primarily for irrigation purposes and secondarily for power generation.

In the course of the implementation of the O&M Agreement, some issues have arisen in relation to the interpretation and application of certain provisions thereof.

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 (OC) 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.

For the period of November 2010 to February 2011, NIA is claiming from SNAP-MI the amount of P9,267,898.79 as income opportunity loss due to non-use by SNAP-MI of the full IDR for generation of electricity while the latter is operating for ancillary services. SNAP-MI has disputed on the basis that the service fees shall be computed based on the volume of water used for power generation as provided under the Section 3.1 of the O&M Agreement (Issue No. 1).

For the period of May 2009 to September 2009, NIA is claiming from SNAP-MI the amount of P10,718,409.99 for water consumed above the IDR during spilling conditions following the rate P0.062 as prescribed under the OC Resolution, but which SNAP-MI has disputed on the basis that the regular rate of P0.031 shall be applied in case of surplus flows that would otherwise be spilled if not used for power generation pursuant to the exception in Section 3.6 of the O&M Agreement (Issue No. 2). The two parties have different positions on the service fee adjustment provided in Section 3.1.1 of the O&M Agreement, particularly on the frequency, rate, increase/decrease, and conditions applicable thereto (Issue No. 3).

In consideration of the mutual covenants and agreements established, the Parties agreed that SNAP-MI shall pay a sum of P19,986,308.78 in full and final settlements of Issue Nos. 1 and 2, receipt of which is acknowledged by NIA. The Parties also agreed to modify the O&M Agreement, such that the Service Fee payable by SNAP-MI to NIA shall be computed based on the allocated IDR, whether or not such IDR was utilized by SNAP-MI for the generation of electricity. The Parties also agreed to exert commercially reasonable efforts to reach a mutually beneficial agreement to resolve Issue No. 3 and the prospective application of provisions relevant to Issue No. 2 in an expeditious manner.

All discussions and negotiations with a view to establish an agreement on the foregoing issues became possible and successful through the persistent efforts of NIA Investment Committee on Renewable Energy and Development (NIA-ICRED) through Atty. Mary Annabelle F. Cruz-Domingo.

NIA Deputy Administrator for Administrative and Finance Sector Romeo G. Gan, NIA Financial Management Department Manager Editha D. Morales, and some executives of SNAP-MI witnessed the Settlement and Release Agreement.

NIA Top Management Officials, headed by Administrator Visaya, assure that the management continues to explore every option for maximizing the use of its dams and reservoirs nationwide with the goal of increasing the NIA’s income that may add up to the operating expenses of the Agency in serving our farmer-irrigators. Hence, it has only proven that NIA is more than just irrigation. (NIA)