Government may share with Meralco its experience on IPP renegotiations

The government is willing to share with the Manila Electric Co. (Meralco) its experience on how to negotiate for a lower purchased power adjustment from independent power producers (IPP).

"We’ve shared our approach with them. And we have shared our experience with them. They have an oversight committee and we had a meeting with them to share insights," Power Sector Assets and Liabilities Management Corp. (PSALM) president Edgardo del Fonso said.

Del Fonso said the government can only share so much to Meralco since they are facing a different scenario. "It is a private company and we are government. So their benchmark is different from their review. Our IPP review is focused mainly on policy and legal issues. They do not have to do that because they are a private firm," Del Fonso said.

The PSALM chief said Meralco can focus mainly on financial matters. "The issue for them is how to go about it," he said.

According to Del Fonso, the government, through PSALM and the Department of Energy (DOE), had met with the members of the oversight committee of Meralco last Wednesday. The three-man committee is composed of Margarito Teves, Sonny Dominguez and Emilio Vizens.

As a result of negotiations involving 16 contracts with eight IPPs of the National Power Corp. (Napocor), the government has realized some $850 million in savings that will translate to a lowering of the proposed universal charge of 40 centavos per kilowatthour (kWh) to be imposed on electricity end-users within the next 25 years.

Del Fonso said the savings could also bring down the duration of the imposition of the universal fee from 25 years to only 18 years.

There are at least 32 contracts that are being worked out by PSALM with 18 firms/consortia. These include: Aboitiz (Benguet, Bakun); Alsons/Tomen (Iligan City 1 & 2, Zamboanga, General Santos); Alstom (Limay Bataan A & B); Bauang Private Power Corp. (Bauang La Union); Covanta (Cavite EPZA, Bataan EPZA); Enron (Pinamucan, Subic Zambales); IMPSA (CBK); Kepco (Malaya, Ilijan Gas); Marubeni Sithe (San Roque); Mirant (Navotas I-III, IV, Pagbilao, Sual); Mitsui (Mindanao Barges); NIA (Casecnan); Ormat (Makban Binary); PNOC-EDC (Leyte A & B), Mt. Apo I and II; Salcon Power (Naga Complex); State Power (Mindanao Coal); Chevron-Texaco (San Pascual Co-generation); and BHEPI (Binga).

Of these contracts, the government has been able to negotiate 16 contracts with eight IPPs. Del Fonso said they expect more savings that could reach $2 billion from the renegotiations of the remaining IPP contracts.

The Meralco IPPs include: Quezon Power Philippines Ltd., First Gas Power Corp. (Sta. Rita and San Lorenzo gas-fired power plants); and Duracom Power.