Meralco reaches accord with QPL, but not with First Gas

The Manila Electric Co. (Meralco) has finalized its negotiations with Quezon Power Ltd. (QPL) but negotiations with First Gas Power Corp (FGPC) is seen headed into a deadlock over penalty rates.

According to the Independent Review Committee headed by Landbank president Margarito Teves, QPL and Meralco were preparing to sign the official agreement by December but negotiations with FGPC have not moved.

Teves said that in the agreement with QPL, the company has agreed to pay rebates of about $44 million over a period of six years as well as to increase the discount on excess energy. He said the company also agreed to shoulder local business and community taxes while paying larger penalty on energy shortfall.

Negotiations with FGPC, however, are more problematic. Teves said FGPC has not budged on Meralco’s demand for the power company to agree on the increase the penalty whenever it fails to meet its energy volume commitment to Meralco.

FGPC is wholly-owned by the Meralco-controlled First Generation Holdings Co. (FGHC).

"Unfortunately, FGPC up to now has not moved a bit," said Ricardo Buencamino, head of Meralco’s transmission and distribution business.

Buencamino said QPL, in contrast, had been willing to cooperate and negotiate from the start. "This is the kind of company we would like to be doing business with in the future," he said.

As FGPC refused to iron out a deal, Buencamino said Meralco could consider its legal options, including the possibility of arbitration. "But I don’t want to even discuss that yet. We’re hoping it won’t get to that," he said.

However, Teves admitted that since the renegotiation of Meralco’s independent power production (IPP) contract with FGPC was largely voluntary, there was nothing that Meralco could do to FGPC should it decide to walk out on the negotiations.

"Theoretically and legally, there is nothing Meralco could do to compel FGPC to return to the table should it decide to walk out of the negotiations," Teves said. Even arbitration might not be an option since FGPC and Meralco were not in legal dispute and the renegotiation was voluntary.

"It’s now only a matter of moral suasion," Teves said. "In the future, the government would look at FGPC in a more favorable light if it cooperates fully with this entire process."