Meralco to reduce rates by 25¢/kwh

The row between Manila Electric Co. (Meralco) and the National Power Corp. (Napocor) over a 10-year power supply contract ended positively for consumers as power rates will be reduced by 25 centavos per kilowatthour (kwh).

In a statement, Sedfrey Ordoñez and Antonio del Rosario, heads of the mediation panel, reported that under the terms of the amicable settlement of the 10-year contract for the sale of electricity (CSE) between the two power firms, Napocor guaranteed the timely dispatch of Meralco’s independent power producers (IPPs) at mutually approved levels from 2002 to 2004 and offered appropriate adjustments for any failure to do so.

Meralco, for its part, agreed to pass on to its customers the financial benefit of its IPPs running at mutually agreed levels, which in March 2003 was computed at 25 centavos per kwh.

"This is anticipated to translate into a price reduction to consumers of electricity," the mediators said.

The settlement also provides that the Lopez-controlled power distribution firm will recognize its obligation to draw 60,092 million kwh of electricity from Napocor with a minimum of 3,600 megawatt (MW) starting 2001 as provided for under the CSE.

On the other hand, Napocor will recognize its responsibility for transmission delays and turn over its directly connected consumers to Meralco.

Accordingly, the two parties agreed that Napocor will charge Meralco for undrawn electricity at P1.51 per kwh, now estimated to reach P28 billion. Meralco agreed to pay the said charges over a five-year period. However, adjustments for transmission delays, delays in turn-over to Meralco of directly-connected consumers amounting to some P8 billion will be deducted from the amount.

The mediators, however, said the agreement will be subject to the review and approval of the Energy Regulatory Commission (ERC).

With the passage of the Electric Power Industry Reform Act (EPIRA) or RA 9136, Meralco decided in early 2002 to purchase the bulk of its power requirements from its own independent power producers (IPPs) such as Duracom, Quezon Power Phils. Ltd. and First Gas Power Corp.

Meralco said it has legal basis to terminate the contract because under the EPIRA, Napocor is required to enter into a transition supply contract with its customers. Meralco, so far, is Napocor’s biggest client.

While in the middle of the mediation process, Meralco had sent Napocor a demand letter requesting payment for some P8.5 billion in damages. It claimed that Napocor owes it some P8.5 billion consisting of damages and losses brought about by Napocor’s violations of the CSE which took effect Nov. 21, 1994.

Since early last year, Meralco has not been meeting its required power purchase from Napocor, prompting the state-owned power firm to also impose a penalty on Meralco amounting to about P12 billion.