Napocor, Meralco sign supply contract

After years on the negotiating table, the state-owned National Power Corp. (Napocor) and the Lopez-managed Manila Electric Co. (Meralco) finally signed a transition supply contract (TSC) good for five years which is expected to ensure Meralco customers of a continuous reliable supply of electricity.

Under the agreement signed last Nov. 16, the five-year term of the TSC will be automatically terminated one year after the introduction of the open access scheme, which could be adopted by 2007.

The Electric Power Industry Reform Act (EPIRA) states that open access should commence only after several requirements are accomplished. Among these preconditions are: Establishment of the WESM; approval of unbundled transmission and distribution wheeling charges; initial implementation of the cross subsidy removal; privatization of at least 70 percent of the total capacity of generating assets of Napocor in Luzon and Visayas; and transfer of the management and control of at least 70 percent of the total energy output of power plants under contract with Napocor to the independent power producers.

The contract specifically provided for the supply of a total 33,188 gigawatthours (gwh) of electricity from 2007 to 2011, accounting for 26 percent of the forecast total energy requirement of Meralco for the five-year period.

This energy requirement is based on Meralco projected demand less its off-take from its independent power producers, namely First Gas Sta. Rita and San Lorenzo power plants and Quezon power plant; projected energy requirements under Meralco-Napocor programs such as the one-day power sales (ODPS) and customer choice program; and 10 percent of the total demand to be sourced from the WESM (wholesale electricity spot market).

Based on the contract, the remaining years can then be converted into a bilateral contract, which shall have a term of five years. However, should there be no open access five years after the signing, the contract is extendable for another five years.

The agreement, signed by Napocor president Cyril C. Del Callar and Meralco president and CEO Jesus P. Francisco Jr., was a TSC that is offered to customers of Napocor during the period of transition, while state-owned generation facilities are still undergoing privatization, as mandated by the EPIRA.