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LESSONS:

Electricity Market and Transmission Development Project

sector: Energy | country: Philippines

1. As the wholesale electricity spot market (WESM) is new in the Philippines, the market operator should have worked earlier to develop training programs to educate the market participants in the operation of WESM, as the success of the WESM depends on the readiness of all the market participants. The market operator should have taken proactive measures as to the training needs of the market participants – avoiding unnecessary delays in the launching of the WESM.

2. The protracted procurement process for the transmission line and substation components was one of the main reasons for the delay in the completion of this part. If there had been closer consultation between ADB and Transco, issues could have been addressed as early as possible to avoid delays. ADB could have regularly monitored with Transco the progress and issues encountered during the procurement stage. This would have triggered Transco’s actions, in a timely manner, on the issues encountered. Transco should have assigned dedicated full-time staff to handle bid evaluations and could have shortened its approval process.

3. The separate procurements for the supply (funded by Japan Bank for International Cooperation) and installation (funded by Transco) of the substation equipment for the Mindanao substation expansion delayed its implementation. Turnkey contracts could have reduced the implementation delays of this component, as there would have been only one procurement package.

4. Right-of-way (ROW) acquisition was another main cause of delay in the completion of Part B. The project’s ROW staff should have dedicatedly followed the project implementation schedule. Transco committed to ADB that the ROW for the transmission lines would be acquired and paid for prior to the commencement of works, but this did not fully happen. The works were stopped because of ROW issues and some project-affected families allege that they have yet to receive complete payment.

5. The social engineering group which undertook the meetings and consultations with the affected people should have conducted initial assessment of strategies used in improving affected people’s awareness on matters of compensation and resettlement. Improvements could have minimized the instances of claims on lack of knowledge of the process of property valuation. An affected person who understands what the impact of the project will be and knows the willingness of the project proponent to mitigate adverse impacts will result to increased level of his/her cooperation and acceptance.

6. While ADB policy as well as the LARP clearly outlined the steps to take in cases of complaints, actual setting up of the institutional arrangements was overlooked. Disputes on inventory and valuation of property lost indeed slowed down implementation of compensation and resettlement. A strong and working grievance redress committee results to quicker resolution of issues brought up by the affected people. The social engineering and right-of-way clearing units following due diligence in conflict resolution will be credited for the timely receipt of assistance of affected people.

7. Affected people knew that their property and livelihood will be affected because of transmission towers and lines that will be set-up. However, the broader project objective of propelling progress and development (through more energy supplied in the region) if communicated effectively can result to better appreciation of the project. The few affected people who have expressed apprehension, as well as those local government units which still refused to cooperate may in the end offer more positive attitude in doing their share to achieve the goals of the project.

8. While the project as stated in the land acquisition and resettlement plan recognizes the importance of active participation of the different local stakeholders, the municipal, and barangay local government units (LGUs) have largely been credited only on organizing consultation meetings between Transco and the affected people. LGUs could have been likewise tapped as information disseminators and the ?first line of troubleshooters? in instances of grievance. When Transco completed the project and left the project area, it is after all the LGU that is left and is expected to continually address the needs of affected people.

9. The external monitoring group may have to be on board early on the land acquisition and resettlement plan (LARP) implementation. This is to allow sufficient time for the group doing the electricity market to understand the project and the LARP. Due to the highly specialized task of external monitoring group, it is true that not many groups such as those in the academe or non-government organization have actual experience doing the task. The group would need more time to study the issues, and come up with recommendations that can still be incorporated in the on-going process of assisting affected people.

Lessons from Validation

Philippines: Electricity Market and Transmission Development Project

The project completion report (PCR) identified several lessons. First, it highlighted the need to train all market participants to ensure their readiness. On the transmission and substation component, the PCR suggested that ADB and the National Transmission Corporation (TRANSCO) should have closely collaborated to prevent implementation delays; implementation would have proceeded quicker had TRANSCO appointed full-time staff for bid evaluation. A single procurement of the substation equipment and resolution of right-of-way issues before project commencement would have hastened implementation.

The PCR noted that compensation and resettlement issues would have been resolved more quickly had the project made affected people better aware of the property valuation process and the impact of the project upon them, and established a mechanism for resolving disputes. Local government institutions would also have helped resolve disputes. The project should have activated the external monitoring group earlier to prepare it for the task of assisting affected people. This validation agrees with these lessons.

Lessons from Project Evaluation

Philippines: Electricity Market and Transmission Development Project

Time needed to deal with rights-of-way. Projects such as this one need to allow sufficient time to assess and address the issues in acquiring right-of-way. The project’s compensation and resettlement problems could have been resolved more quickly if those affected had been made better aware of the property valuation process and the impact the project would have on them. The project could have established a mechanism to deal with disputes, and local government institutions could have been engaged to help resolve them. The project could also have activated its external monitoring group earlier to give it enough time to prepare for assisting those affected.

Reassessment and careful choice of independent marker operator. The government should look carefully again at the need for an independent market operator. As far as the evaluation could ascertain, use of the Philippine Electricity Market Corporation, which is not an independent market operator, has had no obvious adverse repercussions to date. This finding suggests that it could be counterproductive to force the pace of change to establish the independent market operator that the Electric Power Industry Reform Act and project design called for, and the government undertook to create but did not.

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