Meralco: Power sourced from IPPs cheaper

Meralco said yesterday that it would be cheaper for consumers if it could source its power from its independent power producers instead of the National Power Corp. (Napocor).

During a hearing conducted by the Senate committee on energy headed by Sen. Renato Cayetano, Rafael Andrada, vice president of Meralco, said that power sourced from the Napocor is more expensive than that from First Gas and Quezon Power.

He asserted that consumers would benefit more if Meralco could buy its power from the IPPs than from Napocor. At the same time, he said that Meralco does not enjoy any margin at all on whichever is the power source, because the cost of power is passed on to consumers at one-to-one basis.

Roland Quilala, officer-in-charge of Napocor, said that Napocor’s charges went up only because Meralco had reduced by 89 percent its purchases from Napocor in favor of its sister companies, the two IPPs. He explained that the lower sales to Meralco have forced Napocor to increase its rates.

Quilala also said that while Napocor and Meralco have a 10-year agreement, Meralco has reduced its purchases from Napocor in favor of its own IPPs.

Upon questioning of Sen. Sergio Osmeña III, Quilala admitted that Napocor is charging Meralco, its biggest customer, about 40 centavos more than the power distributor in Angeles City.

Osmeña said that based on the figures submitted to the committee, it would appear that Meralco could lower its price by 66 centavos per kilowatthour if it could source its power from its own IPP.

Andrada told the committee that Meralco gets no discounts even if it buys power in bulk and pays in full 30 days after receiving the bill. He said that other power distributors get discounts if they pay within 30 days.

He also justified Meralco’s decision to reduce its power purchase from Napocor, saying Napocor had failed to deliver the committed 3,600 megawatts.

"Napocor is also distributing power to 32 areas within the Meralco franchise, thus competing with Meralco," he added.

Sen. Edgardo Angara expressed concern that the row between Napocor and Meralco would add to the burden of consumers.

Sen. John Osmeña asked Chairman Fe Barin of the Energy Regulatory Commission to determine which would benefit consumers most – Meralco buying its power completely from Napocor or buying it from its two IPPs.

Barin said that this is not in the ERC mandate, but she would gladly do it "for the benefit of consumers."

During the same hearing, the committee learned that the country, already awash in 5,000 megawatts of unused power, would be having 2,000 more megawatts of power in the next two to three years.

There is at present an available supply of 12,800 megawatts, of which only 7,800 is being used. The unused power is paid by consumers under the so-called purchased power adjustment (PPA), at the rate of P1.25 per kilowatthour.

Cayetano said that once the 2,000 megawatts go on stream, the problem of excess power would worsen. He, however, expressed confidence that the increased unused power would not lead to an increase in the PPA.

"Once my bill becomes a law, the PPA could not go beyond 40 centavos per kilowatthour," he said.

Cayetano’s bill also seeks to exempt from the PPA customers of Meralco using not more than 50 kilowatthours a month and customers of electric cooperatives using not more than 75 kilowatthours a month.