TUCP condemns Court of Appeals NPC-Meralco settlement ruling; Meralco to pass-on to consumers P14 billion Penalty

By TUCP
October 20, 2011

QUEZON CITY  –  The Trade Union Congress Party (TUCP) through its Representative Raymond Democrito C. Mendoza today called on the Court of Appeals (CA) to reverse its ruling affirming the validity of the P14 billion settlement between the National Power Corp. (NPC) and Meralco in 2003.

“If not, our last line of defense is if the ERC will not allow Meralco to pass this amount through to the customers of Meralco.  The history of ERC of abject surrender to Meralco inspires little confidence and we fear the worst,” said Mendoza.

“We cannot allow our consumers to be further burdened by another P0.12 centavos increase in electric tariff for the next six years because of the corporate greed of Meralco,” said Mendoza.

The case stems from the 10-year Contract for the Sale of Electricity (CSE) of Meralco with NPC which was signed on November 21, 1994 which covered the period from 1995 to 2004. It was stipulated in the contract that the power distributor Meralco will buy “a total of 60,092 GWh covering the years 2002, 2003, and 2004 from NPC.”

While its contract with NPC was still in force, Meralco, then still majority-owned and managed by the Lopez Group, also entered into Power Purchase Agreements with its own sister corporations, the independent power producers (IPPs) of Quezon Power Plant Limited (QPPL), First Gas Sta. Rita, and First Gas San Lorenzo – to supply the electricity requirements.

“Those IPPs were also owned by the Lopez Group.  Meralco was engaged in self-dealing with these Lopez-owned IPPs with which it arranged new sweetheart deals. Meralco was therefore in breach of its contract with NPC.  Why will the consumer now be penalized by Meralco for its deliberate breach of its contractual obligation to buy from NPC?  The Lopez Group already earned tremendous amounts by buying and selling to itself.  Now the guilty Lopez group will have consumers pay?” exclaimed Mendoza.

In 2001, Meralco started to reduce its power purchase from NPC while increasing its procurement from its own IPPs. When in 2002 the NPC started to bill Meralco based on their CSE, the latter instead “served NPC a formal notice to terminate the CSE.” In effect, Meralco did not make good its contract with NPC and NPC naturally wanted to be duly compensated. In the end, after an arbitration process, the two power companies had a settlement in 2003 saying that Meralco will just pay NPC a total of P14 billion to cover its obligations. “The problem however is that the P14 billion will be charged by Meralco to the consumers which means that the people will pay for the obligations of Meralco to the NPC,” explained Mendoza.

“That is unfair! Meralco and its sister IPP companies had made a lot of money already from their sales of electricity to the public. Why should the people pay for Meralco’s obligations when in fact it had raked-in huge profits for its wrongful and illegal actions in the past?” asked Mendoza.

“If Meralco needs to pay the NPC, then it should get the P14 billion from its own accumulated incomes, not from the hapless consumers” Mendoza insisted.

TUCP noted that the country’s power rates are now 5th highest in the world and the most expensive in Asia.

“There are numerous rate increase petitions pending now with the ERC amounting to an aggregate total of P5/kwh. These were filed by PSALM, Meralco, VECO, NPC, NGCP, RE groups and other distribution utilities including electric cooperatives. And now, plus another P0.12/kwh to pay the obligations of Meralco to NPC? Certainly, if all these petitions will be approved by the ERC, then the Philippines will gain the status of having the most expensive power in the world. That will be the kiss of death for our industries and the much-touted PPP. This will increase unemployment, worsening poverty and accelerate social unrest.” warned Mendoza.