No more special power rates for ecozones

MANILA, Philippines - Economic zones located within the Manila Electric Co. (Meralco) franchise areas will no longer enjoy a special rate, according to Power Sector Assets and Liabilities Management Corp. (PSALM) president and   chief executive officer Emmanuel R. Ledesma Jr.

After the privatization of most Luzon plants previously owned by the National Power Corp, PSALM ceased to become the sole supplier of electricity from which ecozones may procure energy.

PSALM issued the clarification in light of the request of the Manila Electric Co. (Meralco), the Philippine Economic Zone Authority (PEZA), and members of the Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) to retain the power rate discount inside the economic zones.

In their separate letters to the state-owned National Power Corp., Meralco, PEZA and SEIPI said extending the “Ecozone Rate Program” (ERP) would benefit the economy and the country as a whole.

ERP is an offshoot of a Memorandum of Agreement (MOA) between Meralco and Napocor which provides for the Provision of Generation Rates for High Load Factor PEZA-Accredited Industries signed on Sept. 19, 2007 and will expire once the transition supply contract (TSC) between the two firms ends on Dec. 25, 2011.

Meralco senior executive vice president and chief operating officer Oscar Reyes earlier said, “the extension of the ERP will help promote and extend the laudable objectives of Republic Act 9136 to help achieve operational and economic efficiency and enhance competitiveness of Philippine products in the global market.”

“We note that the ERP has benefited industrial customers of Meralco who have been driving force behind the continued improvement of the economy,” Reyes said.

Currently, the ERP benefits 279 customers in industrial areas. These customers contribute 43 percent of the total Philippine manufacturing exports or around $19 billion and provide more than 222,213 jobs. 

“The ecozone rates are a component of the power supply contract between PSALM and Meralco, which will expire on Dec. 25, 2011. Upon expiration of the contract, Meralco will be free to contract with other power generation companies,” Ledesma said.

Ledesma admitted that not extending the ERP may have an impact on the economy but PSALM could not do anything about it.

“Although we fully understand the possible implications of this decision to the economy, it is no longer reasonable for us to renew the power supply contract with Meralco given the limited supply that PSALM currently has and the high operating costs of generating power from the remaining PSALM-owned plants in Luzon,” Ledesma said.

He said Meralco and other ecozones proponents could look for other options.

“Upon expiration of the Meralco power supply contract, the customer is free to contract and negotiate with any power producer. As with any power supply contract, the power rate will depend on the contractual agreement between the parties,” Ledesma said.