Transco exec tells Meralco: It’s time to let the truth out

State-owned power companies yesterday issued a joint statement refuting demands made by Meralco for the closure of state-owned power generation companies to reduce overcapacity as they also slammed published reports of the power giant’s plan to resend its power purchase agreement with the National Power Corp. (Napocor).

Jesusito Sulit, senior manager for corporate planning of Transco, in a statement, said festering issues among Napocor, Transco and Meralco must be clarified once and for all.

"It’s time to let the truth out so that media reportage on critical power industry issues would be truthful, accurate and fair. Consumers are entitled to know the exact extent and individual responsibility of the government and private sector especially Meralco to the controversial PPA charges and high power rates, as a whole," Sulit said. These are:

1. Meralco has a contractual obligation to Napocor for a minimum purchase of 3,600 MW of power. This contract expires in 2004. The decision on whether some of Napocor’s power generating companies will be shut down to deal with overcapacity will be part of Napocor’s internal planning with the taxpayer’s interest in mind, Sulit said.

However, closure of state-owned plants will never happen because Meralco and its lobbyists want it. Meralco must attend to the overcapacity problems of its own making, he said.

2. Minimum Off-Take Charges – The charges being made by Napocor for minimum off-take are consistent with the contracted minimum purchase requirement of 3,600 MW.

As a power supplier, Sulit explained that Napocor is entitled to minimum purchase requirements just like any power producer. The government invested billions in power generating capacity to meet its contractual obligations to distributors like Meralco.

Napocor, Sulit pointed out, would be remiss in the management of its own sales contracts if it does not pursue its contractual rights. Simply, these are not penalties and cannot be waived. These are legal, binding contracts imbued with great public interest, Sulit said.

3. Transmission Constraints – Transco has long informed Meralco and Lopez-owned First Gas even when they were still developing their IPP project that there were transmission capacity constraints in the Batangas area.

"It will be costly for Napocor to shut down its power plants just to make room for private bilateral contracts. We must protect the interest of taxpayers and electric consumers," Sulit said.

4. Overcapacity – The government is now dealing with its own contribution to the overcapacity. In the same vein, private distribution utilities must take responsibility for the overcapacity resulting from their bilateral contracts. "They simply cannot force government to absorb billions of pesos to solve their overcapacity problems," Sulit said.

Sulit said Meralco’s current demand is about 4,300MW. They signed a 10-year power supply contract with Napocor for a minimum 3,600 MW in 1995. Meralco also signed bilateral contracts with Duracom-East Asia for 200MW, Quezon Power Ltd. for 440MW and with Lopez-owned First Gas Power for 1,500 MW. The total contracts of 5,740 MW gave it an overcapacity of 1,400 MW, Sulit said.

Sulit said the cost of over capacity from their own IPPs are added by Meralco to the total PPA as allowed by existing regulation, Sulit said. This in turn, he said, simply and conclusively results in higher Meralco rates.

5. Napocor rates are lower than Meralco rates.

Sulit reiterated that if Napocor’s rate and Meralcao’s claimed P3.80 and P3.40 per Kwh are compared on "apples to apples" basis, Napocor’s rates are lower.

This is best proven. Sulit said, by Napocor’s unbundled rate of only P2.40 to P2.80 per kwh for generation charge. Meralco’s unbundled rate allows for a P4 per kwh generation charge.

Sulit said Napocor’s previous rate of P4.40/kwh was PPA-adjusted and that included underutilization partly due to the reduced Meralco off-take from NPC. Meralco is comparing it at their IPP price using 83 percent utilization which is baseless and thus, is untrue, Sulit said.