Meralco, Napocor to draw up guidelines on consumer choice program

Manila Electric Co. (Meralco) and the National Power Corp. (Napocor) are expected to come up with guidelines for the proposed "Consumer Choice Program" (CCP) soon.

Under the CCP, Meralco would allow its large industrial and commercial customers with demand of at least one megawatt (MW) to choose their own power supplier.

Meralco president Jesus Francisco, in a forum sponsored by the Economic Journalists Association of the Philippines (EJAP), said they may opt to give more emphasis on this new power reduction scheme rather than pursue talks on a settlement agreement with Napocor.

"I think we have to prioritize this. It is more important to give our customers the power to choose where to source their electricity needs," he said.

The two power companies have been trying to reconcile their dispute over penalties for failure of Meralco to comply with the terms of their 10-year supply contract which expired last December 2004. Based on the previously signed settlement agreement, Francisco said they have applied with the Energy Regulatory Commission (ERC) for a total settlement amount of P14.3 billion, lower than the previous level of P20 billion.

The CCP, Meralco clarified, is not a direct-connection nor an open access arrangement but just an opening to provide large consumers the option to avail of Napocor’s time-of-use (TOU) rates.

Meralco also emphasized that consumers failing to avail of the Napocor’s TOU will avail of Meralco’s average generation charge based on Napocor and Meralco IPP power suppliers.

Based on the basic feature of the CCP, Meralco will continue to bill and collect from its consumers and remit full payment to Napocor corresponding to the kilowatthour purchased by its consumers.

Customers who would want to avail of the CCP will have to submit the accomplished application data sheet to Napocor or Meralco.

Meanwhile, Francisco said consumers will be able to save an average of 18 centavos per (kwh) if independent power producers (IPPs) are allowed to operate at minimum contracted level.

In the same forum, Francisco said the price reduction would be achieved if the distributors’ IPPs are contracted at 83 percent.

Meralco’s IPPs include First Gen Corp.’s Sta. Rita and San Lorenzo power plants, Quezon Power Phils. Ltd. and Duracom Power.

"We proposed that we be allowed to really optimize the plants of Napocor by maximizing what we will draw from them at night, which is cheaper, so that we can optimize our IPPs to run higher at daytime," Francisco said.

He said Meralco has agreed to the CCP but proposed that they be allowed to optimize the use of their IPPs.

Meralco’s commercial and industrial users account for 25 percent of the company’s total customers while the remaining 75 percent are residential customers.

"We have to look what is in the best interest of our consumers.We are really looking at optimization to see if we can get the best of both worlds," he said.

To date, Meralco sources between 53 to 54 percent of its electricity requirements from Napocor and the remaining from its own IPPs.

Francisco admitted that with the higher utilization of its IPPs, Meralco would likely source about 46 percent of its electricity requirements from Napocor but stressed it would reduce rates by 18 centavos per kwh.

In the same forum, Napocor president Cyril del Callar has recognized that Meralco’s move to allow its customers with one MW demand to choose its suppliers is a welcome development.

Del Callar said Meralco’s move is not tantamount to "open access" but an opening to provide its large consumers to avail of Napocor’s TOU rates.

However, Del Callar said Meralco’s offer could pave the way for the conclusion of a transition supply contract (TSC) between the two companies. Up to now, the two firms have yet to enter into a new TSC as provided for under the Electric Power Industry Reform Act (EPIRA) due to unresolved issue on the settlement agreement.

The Department of Energy (DOE) earlier expressed support to Meralco’s offer saying that it would "enable the industrial sector avail of the lower TOU rates of the Napocor, help reduce the costs of doing business in the Meralco franchise area, promote investments and the creation of additional jobs, and help push privatization forward."

Energy Secretary Raphael P.M. Lotilla stressed that if the industrial users get to have lower rates, then the opportunity for expanding their business is there.

"We have over-capacity, so by allowing industrial users to shift to the TOU rates of Napocor, the large industrial users would be able to save and the savings can be significant enough for them to become more competitive in the export sector and encourage expanding and retaining their activities here," the energy chief said.