Meralco and Napocor : Sharing the Guilt
The Philippine Star
June 10, 2002

Now, something the media has completely been missing out - for one reason or the other - can be told.

Electricity costs in Metro Manila are such a burden not only because of wrong decisions the government made in the past, but also because consumers are made to shoulder the costs of the "sweetheart deals" between the Manila Electric Co. (Meralco) and its own independent power producers (IPPs).

Recent Senate hearings on the IPPs have added another piece to the puzzle that has been racking and cracking the consumers' head, and it's called the Power Purchase Adjustment or PPA.

During the hearings, Senator Edgardo J. Angara was able to squeeze out that Meralco is in fact as equally guilty as Napocor in this PPA mess, with almost half of the P3.22 per kilowatthour (kwh) PPA charge accounted for by the Lopez-led distributor.

Meralco now buys roughly 50% of its electricity from its own IPPs that include Duracom, the "overpriced" Quezon Power Ltd. and First Gas. The latter, a joint venture of the Lopez group and British Gas, is a sister company of Meralco.

These Meralco IPP contracts also contain provisions that critics have now regarded as "onerous" such as the take-or-pay obligation, fuel and foreign exchange guarantees. These provisions are the reasons for Meralco's PPA charges to its customers.

Apart from that, inefficiencies embedded in Meralco's distribution system - such as systems losses that are above the standards - are also included in the PPA charges.

Presentations made at the Senate hearings also showed that the final prices of Meralco's IPP are more expensive than the others.

Only "iffy" solutions are offered

While some Senate inquiries would turn into a circus at some point, this one on power proved to be very illuminating and interesting.

For instance, when asked by a senator how Meralco could contribute to lowering f electricity costs, a company representative presented several "iffy" situations. Apart from being "iffy", the situations only raised more questions.

For example, if its power plants could run at full capacity, Meralco claims it can lower costs by P0.60 per kwh. However, this would mean Meralco reneging on its long-term purchase commitment with Napocor. Is this real or is it a way of passing the ball to Napocor?

Meralco also stated that rates could be reduced some more if subsidies embedded in their system would be removed eventually. But, let's not forget that these subsidies are political commitments. And no government would give its blessing for their removal, more so if the government is in an election mode, just like where it is now.

So, where does that leave us? Please, can't something more concrete be done?

As Senator Angara said, the Lopez distributor is asking for an "ideal" situation when it should be confronting reality: that power rates are high, consumers are suffering and something should be done.

This brings me to the Angara proposal that I think is better than the administration's bill. BusinessWorld has a description for that: "populist and fair."

IT makes sense to put a cap on the PPA costs that both Napocor and Meralco can charge at, say, P0.23 per kwh and let these two "main players in the PPA mess" look for ways to refinance their stranded obligations.

At the same time, government should gear itself to absorb about P400 billion as its share of the PPA burden. Why not, when the whole problem of higher electricity rates all started from wrong decisions and projections committed by government?

One thing the public should realize though: at the end of the day, we will still end up footing the bill, in one form or another. We always wind up as the unwilling victims of bureaucratic bungling and political misadventures.

Overcharging accusations

What's behind a study that found Meralco allegedly overcharging its customers anew, and this time by an even larger amount?

Meralco's Elpi Cuna said this is a "rehashed" issue against them. I really doubt whether that's the best way to handle the accusation. The public, who has been religiously paying their bills, after all deserves an explanation.

Why doesn't Meralco discuss the allegations point-by-point, and clearly explain to the public and submit proof to show that there is no overcharging. This would be a test case for the Energy Regulatory Commission (ERC), which is a less than a year in the job.

Interestingly, Energy Secretary Vincent Perez has opted to take a low-key position, while Napocor and Meralco are embroiled into this mess. It's time the energy czar is heard, lest he be accused by the public of being "spineless" as what my friend Boo Chanco recently wrote in his widely read column.

What's government stand on this whole issue? What is the energy secretary pre-occupied of at the moment? Why the silence? The energy sector, more so the public, needs to know.

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