Meralco asks court to allow P14-billion settlement

MANILA, Philippines - Power utility firm Manila Electric Co. (Meralco) has asked the Pasig regional trial court (RTC) to uphold its P14 billion settlement claim with state-run National Power Corp. (Napocor).

“No law requires Napocor to obtain OSG approval,” Meralco said, in a 20-page petition for declaratory relief.

“The settlement agreement was entered into directly by the president and chief executive officer of Napocor, duly authorized by its board of directors, which is the sole corporate organ that can authorize the corporation to enter into contracts or compromises,” Meralco said.

Meralco said industry regulators should decide if the amount should be passed on to consumers. 

In 2007, Napocor and Meralco filed a joint application for settlement of unpaid balances from their 10-year contract for the sale of electricity (CSE), which expired in December 2004.

Under the contract signed in 1994, Meralco agreed to purchase 3,600 megawatts of power from Napocor every year. But Meralco gradually reduced its power demand from Napocor because it had started drawing electricity from its independent power producers.

In 2001, it pushed for a renegotiation to obtain a transition supply contract (TSC). Napocor, however, insisted on charging Meralco because it failed to meet the required minimum power purchase under the contract.

In 2004, Napocor computed Meralco’s balance at P42 billion. Meralco, in turn, demanded Napocor to pay P10 billion because of transmission delays and other charges.

In 2006, the two parties agreed to a computation of Meralco’s liabilities at P14.3 billion. 

Last year, Meralco filed a motion to stop the hearings being conducted by the Energy Regulatory Commission (ERC on the settlement application after the Office of the Solicitor General (OSG) filed a motion for intervention.

State lawyers said the agreement is invalid because it is the Commission on Audit which has the authority to negotiate for Napocor.

State lawyers also argued that the agreement’s pass-on provision will put an additional burden of P0.12 kilowatt-hour on consumers.