Meralco, First Gas redo PPA contracts
P0.03/kwh savings for consumers
Manila Bulletin, 8 January 2004

By MYRNA M. VELASCO

After more than a year at the negotiation table, utility firm Manila Electric Company (Meralco) and First Gas Hold­ ings Corporation finally reached a !30 billion settlement deal on their power purchase agreements (PPA) which will redound to an immediate savings of P10.6 billion that can be translated into P0.03 per kilowatt hour (kwh) reduction in the electricity bills of consumers starting this year.

This was announced by Land bank of the Philippines (LBP) president Gary B. Teves, who also sit as chairman of the Meralco IPP Independent Review com­mittee upon conclusion of the review process yesterday (January 7); which lasted for 17 months.

"First Gas grants many major conces­sions that directly benefit consumers in this renegotiated agreement, which offers added savings under every scenario," he stressed.

The generated savings in their revised power supply deal would be passed on to end-consumers upon approval of the amendments in their contracts by the Energy Regulatory Commission.

It was explained that among the con­cessions with immediate value, would be First Gas commitment to shoulder local and community+ taxes. Fast Gas operates both the 1,000-megawatt Sta. Rita and 500-MW San Lorenzo gas-fired plants in Batangas.

The proposed conditional concessions, on the other hand, would include increasing discounts on electricity rates, paying higher penalties for performance; and not charging Meralco for energy delivered be­yond the contracted amount until 2011.

In reaching such settlement, IRC member Emilio Vicens emphasized that " the positive results of this process are a dear indication of Meralco'scommitment to its customers. "

The renegotiation of Meralco-IPPs has been pursued simultaneous to the gov­ernment's move to also look into the pow­er purchase contracts sealed with private investors by state-owned National Power Corporation.

The Power Sector Assets and Liabili­ties Management Corporation (PSALM) which is the lead agency in the NPC-IPP review process has reported savings of up to $1.042 billion; and is also expected to result in electricity rate cuts for the end-users.

In the case of Meralco-IPPs, its review body also pushed for some modifications in the utility firm's power supply deal with Quezon Power Philippines Ltd. Co.; and similarly generated savings for consumers.

With the conclusion of the review process, Meralco is now working on other problems relating to the efficient and reliable service of its contracted IPPs; and among these are higher dispatches of First Gas and Quezon power plants, at least at minimum energy quantities which range from 83 to 86-percent of their installed capacities.

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