Power rate cut eyed in Napocor-Meralco deal

Electricity consumers will experience a power rate reduction of an average of 12 centavos per kilowatt hour (kWh) in their monthly billings once the independent power producers (IPPs) supplying energy to the Manila Electric Co. (Meralco) could operate at higher levels.

Part of the settlement between National Power Corp. (Napocor) and Meralco is to allow Meralco to source its electricity from its IPPs, namely First Gas and Quezon Power, at their contracted levels. At the same time, the government-run Napocor will reduce the supply of electricity to Meralco.

Estimates show that, with this arrangement, allowing First Gas and Quezon Power to operate at a minimum energy quantity (MEQ) of 83 percent and 86 percent, respectively, will bring down power cost by about 25 centavos/kWh.

Because of these substantial savings, both Napocor and Meralco agreed that about 14 centavos would be given to Napocor as settlement for the unused generating capacity of its power plants from 2002 to 2004.

Meralco senior vice president for utility economics Ivanna de la Peña explained that, cumulatively, the unused capacity of Napocor would actually amount to P28 billion. However, since Napocor owes Meralco P8 billion for its failure to provide transmision services to Meralco’s IPPs as stipulated in their contracts, the total amount to be extended by Meralco for Napocor’s unused capacities was pegged instead at P20 billion.

Thus, De la Peña explained, there is no additional cost to consumers as the cost of Napocor’s capacity, used or unused, is already part of the consumers’ current billings. "With this arrangement of allowing Meralco to source more from its IPPs, power rates will even go down, and consumers will definitely benefit from it," she said.

De la Peña added that to ensure that consumers will get a reduction in their rates by as much as 12 centavos/kWh, the P20 billion that will be extended to Napocor would have a recovery period of five years."With this compromise settlement between Napocor and Meralco, we hope that the consumers will understand that both companies are working towards the goal of lowering power rates. This is not an additional burden or debt being passed on to them" De la Peña said.

The compromise settlement between the NPC and Meralco will be filed with the Energy Regulatory Commission (ERC) for approval.