Efficient IPPs seen to lower Meralco rates

Electric consumers within the franchise area of the Manila Electric Co. (Meralco) can now look forward to reductions in their monthly billings, courtesy of a new accord forged last week between the utility firm and the state-run National Power Corp. (Napocor) that allows maximized use of the independent power producers (IPPs).

The two companies unwrapped yesterday the settlement agreement they signed last July 15 at the Department of Energy.

Under the new pact, Meralco’s two IPPs–First Gas and Quezon Power–can now dispatch at their contract levels of 83 percent and 86 percent, respectively, of their plant capacity.

On the other hand, Napocor’s supply of electricity to Meralco will be correspondingly scaled down.

"This will translate into reductions in the rates of our consumers, estimated at 25 centavos per kilowatt hour (kwh) using March 2003 figures," Meralco insiders said.

The contracted levels, also technically called minimum energy quantity (MEQ), enabled the operations of natural gas-fired First Gas and coal-fired Quezon Power to achieve what President Arroyo termed "economies of scale."

Of the 25-centavo savings, 14 centavos has been earmarked to settle Meralco’s contractual obligations to the Napocor representing "energy contracted but not consumed."

The cost-efficient operations of the two power plants will generates savings ranging from P23 billion to P27 billion in absolute terms – which will compensate for Meralco’s net obligation of P20.05 billion to Napocor, they said.

This explains the resulting reduced rates that will soon benefit electricity consumers.

Actually, the value agreed on to compensate for Napocor’s unused capacity is placed at P27.515 billion. However, under the agreement, Napocor will, in turn, compensate Meralco with P7.46 billion for its failure to adequately provide transmission services to First Gas and Quezon Power, as well as failure to turn over to Meralco the directly connected customers.

This brings down Meralco’s obligations to P20.05 billion which will settled over a five-year period.

Meralco and Napocor will presently file a joint petition with the Energy Regulatory Commission for approval of the mode of settlement and recovery of the P20.05 billion.