Consumers to save 3¢/kwh on proposed Meralco-First Gas deal

The Manila Electric Co. (Meralco) said yesterday its customers stand to gain immediate savings of P7.8 billion or three centavos per kilowatt-hour (kwh) if its petition to amend a power purchase agreement (PPA) with an independent power producer (IPP) is approved by the Energy Regulatory Commission (ERC).

In a public hearing yesterday, Meralco said the amendments include a package of concessions worth up to P30 billion in savings over the life of its contract with First Gas Power Corp. (FGPC), an affiliate firm in the Lopez group of companies.

According to Meralco, the concessions with immediate value would hinge on FGPC agreeing to shoulder local business and community taxes.

The petition, Meralco said, also include other conditional concessions such as increasing discounts on electricity rates, paying higher penalties for non-performance, and until 2011, not charging Meralco for the excess kilowatt-hours delivered beyond the contracted amount.

"This is clearly beneficial to consumers. Meralco’s IPP review committee headed by Gary Teves, Land Bank of the Philippines president, and member of the Meralco board of directors, deserves much credit for securing the concessions," Meralco’s power supply committee representative Nestor Sarmiento said.

Meralco sources its power supply from the National Power Corp. (Napocor) and its three IPPs: Quezon Power and FGPC’s Sta. Rita and San Lorenzo natural gas-fired power plants.

Negotiations for the amendments were approved by Meralco’s independent review committee in December last year and were signed last January.

During the public hearing, FGPC officials said that the power off-take contract with Meralco was reasonable.

The FGPC negotiating team pointed out that the first public hearing was a positive step for consumers.

"It is a confirmation of the fact that our power purchase agreements are not only competitive, they are highly transparent as well. Meralco consumers will begin to receive the full benefits of the Meralco-First Gas IPP review upon the approval of ERC of the amendments pursuant to the mandate of Republic Act 9136 (The Electric Power Industry Reform Act)," the FGPC officials said.

"The amendments included a profit sharing mechanism for Meralco and its customers for any third party sales consummated by First Gas," FGPC officials said.