Napocor okays transition supply deal with Meralco

The board of the National Power Corp. (Napocor) has approved the terms for its transition supply contract (TSC) with the Manila Electric Co. (Meralco).

"We heard that the Napocor board already approved the terms of contract for the TSC," Meralco treasurer Rafael Andrada said.

Andrada said the two firms have agreed to file a joint application with the Energy Regulatory Commission (ERC) for the approval of the new supply contract. "The firms might have a joint filing," he said.

Meralco earlier said it may consider filing separately its application for TSC with the ERC because Napocor is taking "too long" in coming up with its own TSC terms.

Under Republic Act 9136 or Electric Industry Reform Act of 2001, Napocor should enter into TSC with distribution utilities (DUs).

But in the case of Meralco, it has an existing long-term supply contract with Napocor which will expire on 2004.

Under the contract, Meralco should source not less than 85 percent of 3,600 MW power from Napocor. As of end-December 2002, however, Meralco has not been meeting the required minimum power prompting Napocor to slap penalties amounting to more than P12 billion.

Meralco refused to pay the fine arguing that the long-term contract with Napocor should be void pending its entry into new TSC with the state-owned power firm under the new power bill.

Napocor, however, did not want to recognize Meralco’s argument. Hence, a team of mediators was formed to come up with a settlement.

As a result of the settlement, Meralco agreed to pay a settlement of P20 billion which will result to a net savings of 12 centavos per kilowatthour (kWh) to its consumers.

"I sincerely think this agreement will lead to customers paying less. It will be a reduction in power rates," Meralco president Jesus Francisco said, in an earlier interview.

Based on the agreement, Meralco will compensate Napocor P27.515-billion for the electricity it contracted but failed to purchase from the government-owned power corporation.

On the other hand, Napocor will pay Meralco P7.465-billion for its failure to provide transmission services to Meralco’s independent power producers. The net settlement amounted to P20.05-billion.

The agreement, which will have to be approved by the ERC, will allow Meralco to pay this net settlement amount within five years.