Consumers big losers in Meralco-Napocor deal

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THE Supreme Court is yet to rule on the P4.15 per kilowatt-hour rate increase the Manila Electric Co. wanted to collect last year but another power rate hike looms.

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The Court of Appeals (CA) has rejected a plea filed by the government seeking to stop Meralco from passing on to consumers its debts to the National Power Corp. (Napocor).

In a 30-page decision dated April 15, 2014, the CA’s Special 12th Division, through Associate Justice Victoria Isabel Paredes, denied the appeal of the government as it affirmed “the decision dated May 29, 2012 of the Regional Trial Court, Branch 71, Pasig City in Special Action Case No. 3392-PSG[.]”

Meralco and Napocor had entered into a contract for the sale of electricity (CSE) on November 21, 1994 for 10 years starting January 1, 1995.

Under the CSE, Napocor was obliged to supply and Meralco was obliged to purchase a minimum volume of electricity from 1995 until 2004 at the rates approved by the Energy Regulatory Board (ERB), now the Energy Regulatory Commission (ERC).

A provision of the CSE required Meralco to pay minimum monthly charges even if the actual volume of the power and energy drawn from Napocor fell below the stated minimum quantities.

In 2002, 2003 and 2004, Meralco drew from Napocor electric power and energy less than the minimum quantities stipulated in the CSE for those years.

It failed to pay the minimum monthly charges but paid the charges for the electric power and energy actually taken.

This prompted Napocor to serve on Meralco a claim for the contracted but undrawn electric power and energy starting the billing month of January 2002.

Meralco objected to the claim of Napocor, and served its notice of termination of the CSE.

Later, they agreed to submit their dispute to mediation with then-Ambassador Sedfrey Ordoñez and Antonio del Rosario as their mediators.

The mediation resulted in the execution on July 15, 2003 of a settlement covering the charges being imposed by Napocor and the National Transmission Corp. (Transco) under Section 2.1 (Contract Demand and Contract Energy of Meralco) in relation to Section 5.2 (Transmission Service) and Section 7 (Direct Connection within Meralco’s franchise area), all of the CSE.

Meralco agreed to pay Napocor P27.515 billion (for the equivalent of 18,222 gigawatt hours valued at P1.51 per kilowatt hour), which represented the value of the difference between the aggregate contracted energy for the years 2002, 2003 and 2004, and the total amount of energy.

It actually purchased from Napocor from January 2002 until April 30, 2003 and the amount of energy Meralco was scheduled to purchase thereafter and until December 31, 2004.

Napocor reciprocated by agreeing to give credit to Meralco for the delayed completion of the transmission facilities as well as for the energy corresponding to Napocor’s sales to directly-connected customers located within Meralco’s franchise area.

The credit, valued at P7.465 billion, reduced the net amount payable by Meralco to Napocor under the Settlement Agreement to P20.05 billion.

The CA dismissed the original and the supplemental petitions for certiorari prohibition and mandamus of the government, in effect upholding the orders of the Pasig RTC that granted Meralco’s petition for declaratory relief.

The lower court held that the settlement executed in 2003 between the two parties, independent of the pass-through provision that is reserved for approval of the ERC, was valid and binding.

This prompted the government to seek redress with the appeals tribunal.

In its decision, the CA opined that “there is nothing in the law… that would prevent the [Napocor] from entering into the subject settlement agreement with Meralco.”

“Essentially, the settlement agreement, subject of the action for declaratory relief, is a contract; and, since all the elements of a contract appear to be present, there is no reason to declare it invalid,” it said.

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1 Comment

  1. apolonio reyes on

    in Canada, their equivalent of ERC, always decide in favor of the public and the power companies passes thru the eye of the needle before they are given a price increase or any decision that will adversely affect the public.
    WHAT IS NEW TO THE DECISION OF THE JUDICIATHIEVES NAMED CA? MERON BA HO?