Joint Statement of FDC and NASECORE

We strongly oppose the Settlement Agreement entered into between the Manila Electric Company (Meralco) and the National Power Corporation (Napocor) last 15 July 2003, wherein both parties resolved their dispute to their 10-year Contract for the Sale of Electricity (CSE) that expired last 31 December 2004.

The agreement will allow Meralco to pass-on to its over 4-million customers the PhP20.05 billion agreed settlement amount that Meralco will pay Napocor for its failure to purchase the electricity that it contracted. This will be an additional rate increase in the monthly bills of the consumers in the amount of 12-centavos per kilowatt-hour for a period of 5-6 years.

This also gives Meralco the right to impose penalties against Napocor for its alleged failure to construct transmission facilities for Meralco’s independent power producers (IPPs) when the truth is there was nothing in the CSE that obligates Napocor to construct the said facilities.

Additionally, it will allow Meralco to buy more expensive power from its independent power producers (IPPs) - the Lopez-owned First Gas San Lorenzo and First Gas Santa Rita and Quezon Power Philippines Limited, and less power from Napocor, which is much cheaper. This is a gross violation of Meralco’s obligation to provide the least cost supply of electricity to its captive customers as expressly provided for in the Electric Power Industry Reform Act (EPIRA) and in its mega-franchise granted by Congress.

Finally, the taxpayers nationwide will also suffer as Napocor will only charge Meralco PhP1.51/kWh for every kilowatt-hour that the latter contracted to buy but failed to purchase from the former – a price that is very much lower than the regulator approved selling price of Napocor. This discounted price will result in billions of pesos in losses for Napocor – losses that Filipinos nationwide even those outside the Meralco franchise area will shoulder as we are the ones paying for it.

The only parties who will benefit from the settlement agreement are Meralco and its stockholders, and Meralco’s IPPs. This one-sided arrangement should be opposed by all consumers and must be rejected by the Energy Regulatory Commission.

As this onerous settlement agreement was forged under the watch of Gloria Arroyo, we demand that she and her concerned appointed officials fully disclose to the public the full settlement agreement and why they agreed to it.

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