COA to Pagcor: Ask hotel to refund P14.2 million

MANILA, Philippines - The Commission on Audit (COA) has advised the officials of the Philippine Amusement and Gaming Corporation (Pagcor) to initiate legal remedy so the Waterfront-Mactan Hotel will refund some P14.2 million that the hotel overcharged as add-on cost for power consumption.

To address the frequent power outages and brownouts that severely affected the operations of the Casino and the hotel back in 2003, the hotel management initiated an alternative scheme by acquiring direct power supply from the National Power Corporation.

The state auditors learned that under the scheme, the hotel would construct a power supply substation to connect and distribute power generated from the Napocor directly to the hotel, Casino and other hotel tenants.

Based on the contract executed by the Pagcor and hotel officials on November 9, 2004, it was stipulated that the hotel would be the one to shoulder the expenses for the construction, manpower and maintenance and space rental of the power substation.

It was provided in the contract that the hotel management will impose an add-on rate of P1.35 per kilowatt hour of electricity consumed by the Pagcor-Mactan on top of its regular monthly bills.

COA learned that the hotel estimated the monthly electrical consumption of Pagcor to reach 700,000 kilowatts. After the negotiations between the hotel and Pagcor officials, the add-on rate has been reduced to P1.08 per kilowatt hour.

The state auditors said since November 2003 up to August 2009, representing 70 months, Pagcor-Mactan already disbursed P22,874,181 for the 24,704,115 total kilowatt hours of energy supply from the Napocor.

This showed that the monthly power consumption of Pagcor was only 352,916 kilowatt-hours or only 50.4 per cent of the estimated energy consumption of 700,000 kilowatts that the hotel used to charge Pagcor for extra cost under the contract.

“The extra charge of P1.08 add-on charge per kilowatt-hour was abnormally excessive and Pagcor could be paying extra for power that the hotel and other tenants could be using and paying for by themselves,” the COA stated.

COA recommended for Pagcor to review the contract and consider renegotiating the refund of the overcharged amount of P14,261,686 and to initiate proposal to reduce the add-on rate from P1.08 to 50 centavos per kilowatt-hour.

“If negotiations fail, we also recommend that Pagcor should take appropriate legal remedies available under existing laws to protect its interest,” the state auditors said.

Pagcor officials said their Corporate Legal Department advised them that before the contract was approved by the Board of Directors, the P1.08 add-on rate was subjected to a thorough evaluation.

The hotel management urged Pagcor to pay the supposed maintenance cost charges, or risk disconnection of their electrical supply. This was what prompted Pagcor to approve the add-on rate.

Pagcor officials told COA that they received notice from the hotel on March 5, 2008 that it would increase the add-on rate to P1.62 per kilowatt-hour. Pagcor quickly sent the communication to its legal officers.

COA said, “It is conceded that the imminent threat of power disconnection played significantly in forging a negotiated agreement. However, the established fact remains that the value of services that Pagcor had paid for based on the use of the base figure of 700,000 kwh was excessive, being highly disproportionate compared to actual consumption.”

COA advised Pagcor to look for other means of power supply.   (THE FREEMAN NEWS)