ERC suspends hearings on Napocor-Meralco penalty settlement row

MANILA, Philippines - The Energy Regulatory Commission (ERC), the country’s power sector watchdog, has suspended hearings on the multi-billion peso unpaid penalty settlement between Manila Electric Co. (Meralco) and the National Power Corp. (Napocor).

“The ERC issued an order suspending the proceedings in the Napocor-Meralco settlement agreement case,” ERC director Francis Saturnino Juan said, adding the more would allow the proper courts to hear the case.

The ERC has been conducting public hearings and deliberations on the settlement agreement between Meralco and Napocor since the deal may lead to a pass-through cost to consumers.

But Meralco has argued there is a need to suspend the hearings as the case should be resolved at the regular courts.

“This (ERC order) is an offshoot of the Office of the Solicitor General’s intervention wherein it raised arguments that in affect assail the validity of the settlement agreement,” Juan said.

“Since the ERC has no jurisdiction over such issue as this should more appropriately be threshed out before the regular courts, the ERC granted the motion to suspend filed by Meralco.

Napocor and Meralco jointly filed an application for their settlement agreement in 2007 over unsettled collections arising from their 10-year contract for the sale of electricity (CSE) that lapsed in December 2004.

When the joint agreement was signed in July 2003, the estimated settlement amount was initially at P20 billion, net of the P7 billion worth of counter-claims lodged by Meralco.

But the computation of the settlement amount continues to rise after the expiration of the power supply contract, reaching P14.32 billion as of last year.

Meralco claimed the amount was reduced because their level of supply procurement beyond July 2003 had gone up in the succeeding months.

The penalty was an offshoot of the failure of Meralco to meet the required minimum energy requirement prescribed under its 10-year supply contract with Napocor.

Meralco then argued that it would not source 85 percent of its power requirement from Napocor because it should have been entering into a transition supply contract (TSC) when the Electric Power Industry Reform Act (EPIRA) was signed in 2001.