THE Supreme Court has dismissed the petition filed by the government in connection with the dispute between the Manila Electric Co. (Meralco) and National Power Corp. (Napocor).

In a ruling penned by Associate Justice Lucas Bersamin, SC’s First Division denied the petition for review filed by the Office of the Solicitor General (OSG) as it affirmed the decision promulgated by the Court of Appeals on October 14, 2011.

Meralco and Napocor had entered into a contract for the sale of electricity (CSE) on November 21, 1994. The CSE would be effective 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 electric power and energy 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 the years 2002, 2003 and 2004, however, due to circumstances beyond the reasonable control of the parties, Meralco drew from Napocor electric power and energy less than the minimum quantities stipulated in the CSE for those years.

Meralco did not pay the minimum monthly charges but only the charges for the electric power and energy actually taken. Thus, Napocor served 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.

Recognizing that any delays in the resolution of their dispute was inimical to public interest, Meralco and Napocor agreed to submit their dispute to mediation.

They appointed the late Ambassador Sedfrey Ordoñez and Antonio del Rosario as their mediators, and the mediation required about 20 meetings, during which Napocor and the Government were represented by high-level officials (including then Energy Secretary Vincent Perez Jr. and PSALM President Edgardo del Fonso). The mediation resulted in the execution on July 15, 2003 of a settlement (entitled An Agreement Resolving The Issues In Mediation Between The National Power Corp. And The Manila Electric Co. In Regard To The 1994 Contract For The Sale Of Electricity).

The Settlement Agreement covered 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 to Napocor P27,515,000,000 (i.e., 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 Meralco 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 P7,465,000,000, reduced the net amount payable by Meralco to Napocor under the Settlement Agreement to P20,050,000,000.

The appeals court dismissed the original and the supplemental petitions for certiorari prohibition and mandamus of the government, in effect upholding the assailed interlocutory orders of November 3, 2010 and November 4, 2010, and the pre-trial order of November 24, 2010, all issued by the Regional Trial Court (RTC), Branch 71, in Pasig City in the Special Civil Action.

The CA ordered the RTC, Branch 71, in Pasig City to proceed with the trial in Special Civil Action 3392, and to resolve the case with dispatch.


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