Setting the figures straight on Meralco

Now wait a minute. What’s all this talk about the government taking over Meralco if the electric firm fails to pay P42-billion debts to state-owned Napocor? What’s this Malacañang line that Napocor president and energy undersecretary Cyril del Callar has yet to tally the exact arrears of Meralco? Finally, what’s with Meralco first acknowledging only P15-billion liabilities, and then insisting it owes nothing at all? Let’s set the records straight.

To begin with, the amount government should collect from Meralco is P44, not P42, billion. The P44 billion consists of what Napocor actually lost (P20 billion) and penalty (P24 billion) when Meralco reneged on its deal to buy electricity solely from the state firm. The contract was for Meralco, as power distributor, to buy electricity solely from Napocor, as producer, for ten years from 1995 to 2004. In 2002-2004 alone, Meralco was supposed to procure 60,092 gigawatt-hours of electricity from Napocor. But Meralco unilaterally broke the pact in those last three years when two independent power producers, one of which is owned by the Lopez family that also controls Meralco, came into operation. Meralco simply turned its back on Napocor, which by that time had borrowed billions of pesos to refurbish its power plants and signed deals with other IPPs to meet Meralco’s demand. Now, in computing Meralco’s total arrears, an unnamed presidential aide missed the P2 billion from the P44 billion. What gives?

Del Callar must know the right figures. For, as Napocor CEO, he had entered into negotiations with Meralco to settle its liabilities. In those talks the P24-billion penalty came up as part of the supply deal. Too, Napocor’s actual losses were first computed at P27.5 billion. But Meralco countered that Napocor too had failed in some aspects of the contract, specifically in being late to connect its direct customers (big factories) to Meralco. That Napocor lapse led to Meralco’s loss of P7.5 billion in income opportunities. And so, the final Napocor actual loss was computed at P20 billion, that is, P27.5 billion minus P7.5 billion. Del Callar, as head of a strategic state firm, should have reported these final figures to Malacañang: P20 billion actual loss and P24 billion penalty, for a total of P44 billion. Did he?

Lastly, the stunner (which I already took up in a previous column, Gotcha, 9 Sept. 2005). And this belies Meralco’s claim of only P15 billion in arrears or none at all. As the Napocor-Meralco negotiations went on, the P24-billion penalty suddenly was dropped from the talks. Only the P20-billion actual Napocor loss was left on the table. Meralco filed with the Energy Regulatory Board a petition this year to collect that P20 billion by means of a power rate increase. Thus, it cannot now alternately say that it owes Napocor only P15 billion or nothing. The rate-hike plea is on record. Moreover, Napocor joined Meralco in that rate petition. Thus, also put on official files is that Napocor not only is supporting Meralco’s P20-billion plea, but also is foregoing the P24-billion penalty. So, why all this confusion over numbers that are on record?

Now here’s the catch, as pointed out by consumerists opposed to that Meralco rate petition. When Meralco unilaterally stopped buying electricity from Napocor in 2002-2004, it turned to its two IPPs First Gas and Quezon Power. The IPPs’ supply rates were higher than Napocor’s. Who paid the difference? Meralco customers did, of course. And now Meralco wants the same customers to pay another P20 billion to cover what it owes Napocor. If that isn’t double whammy, what is? And that’s why the consumerists are suggesting to the ERC that the P20 billion be collected from the IPPs that made a killing in 2002-2004. Meralco cannot simply say that it reneged on the Napocor supply deal because the government egged it to set up IPPs. The Electric Power Industry Reform Act, or EPIRA, specifically states that power firms must supply the cheapest possible electricity to consumers.

Actually, it’s a triple whammy. The P24-billion penalty that Napocor has written off from collecting has been passed onto taxpayers in the form of public debt. And many of those taxpayers are the very same customers in Meralco’s franchise area, which is most of Luzon.

Napocor over the past two decades has lost P700 billion and racked up another P600 billion in debts. This accounts for a third of the state’s P3.7-trillion deficit. The national government has assumed P200 billion of the P600-billion hock. Meaning, taxpayers will have to pay for that bigger amount too.

Meanwhile, the prospects of Napocor recovering the P700 billion losses become dim. Bad facilities and corrupt management caused those losses. With Malacañang’s creation of a new energy super body to supplant the energy department, chances are that the sector will be more politicized than ever. More so since it is under an energy undersecretary who was dismissed from the same post the environment department for gross violations of the law.

* * *

E-mail: [email protected]