Napocor open to Meralco’s partial payment request

State-run National Power Corp. (Napocor) said it is open to Manila Electric Co’s. request for a partial payment scheme.

Napocor president Cyril del Callar, however, warned that while this arrangement may have a minimal impact on their financial position, it may lead to some problems in the long-run.

"Meralco’s default is manageable. It will only have minimal impact to our cash flow," Del Callar told reporters.

The Napocor chief also assured that it would continue to provide the power requirements of Meralco even if it would receive payments on a partial basis.

The Lopez-controlled power utility firm is also working out a similar arrangement with its other power suppliers, including the wholesale electricity spot market (WESM) and contracted independent power producers (IPPs) while waiting the regulatory approval on its bid for a comulative P1.73 per kilowatt-hour (kwh) rate adjustment to be collected from consumers its under-recoveries for generation charges.

For now, the IPPs want Napocor to assure them that they will be paid for the power they will supply because this would impact, not only their operations, but also their commitments to their lenders.

Philippine Electricity Market Corp. (PEMC) president Lasse A. Holopainen, speaking on behalf of WESM, pointed out that for now, the impact of the partial payment scheme would not be felt yet since the spot market operator can still draw from the utility firm’s prudential guarantee posted for its trading participation.

Meralco’s inability to recover its costs in a timely manner is technically the same dilemma faced by the California utilities when their rates were capped; thus, they were selling at low prices to consumers but procuring their supply at very high rates. The pricing imbalance resulted in a power crisis that badly hurt the US state’s trillion dollar economy.

Meralco’s cash flow problems started when it was unable to fully recover the costs of its power purchases from suppliers (i.e. Napocor and WESM) because of the regulatory lag that resulted from a Supreme Court ruling on a case lodged by advocacy group National Association of Electricity Consumers for Reforms (Nasecore).

The SC ruling prevented the automatic pass on of costs which are beyond the control of the distribution utilities, such as purchased power and fuel.

It will be noted that such requirement of public hearing and publication of applications has already delayed for five months Meralco’s recovery of generation charges.

Meralco was then forced to advance cash and pay higher cost for its power purchases as compared to its actual collection from customers.

One of the measures being pushed to resolve the industry’s growing dilemma is for the Joint Congressional Power Commission (JCPC) to immediately approve the proposed revisions in Sec. 4(e) of the implementing rules and regulations of the Electric Power Industry Reform Act.

Based on this proposal, the automatic pass on of costs relating to movements in generation charges and currency fluctuations would be reinstated.