Meralco seeks court verdict declaring agreement with Napocor valid

Manila Electric Co. (Meralco), the Philippines’ largest electricity distributor, has asked a court to declare its settlement agreement with the National Power Corp. (Napocor) as valid. On Monday, Meralco filed a petition for declaratory relief at the Pasig City Regional Trial Court, the company said in its disclosure to the Philippine Stock Exchange (PSE). Its agreement with Napocor is neither prejudicial nor disadvantageous to the government, the company added in its disclosure. The April 2004 agreement, which requires Meralco to pay P14 billion to Napocor for electricity sales, was opposed by the Office of the Solicitor General (OSG) in July 2006. If the agreement secures regulatory approval, Meralco would be authorized to increase rates by ten centavos per kilowatt hour price for five years, the company's utility economics head Ivanna de la Peña told GMANews.TV. In its complaint, the OSG said the agreement was neither submitted to nor reviewed by the body. As a result, it violated the Revised Administration Code of 1987 (Executive Order 292) and the Napocor Charter (Republic Act 6395), the OSG claimed. The OSG complaint has prompted the Energy Regulatory Commission (ERC) to issue an order in September indicating that it has no jurisdiction over the case. The ERC also suspended proceedings covering the agreement, which, upon regulatory approval, would authorize Meralco to charge higher rates. The settlement agreement was the result of a mediation process after both parties failed to comply with a ten-year electricity sales contract they both approved. Under a November 1994 contract, Meralco agreed to buy electricity from Napocor – then and now the Philippines’ largest power producer – for a ten-year period starting 1995 to 2004. But from 2002 to 2004, Meralco drew less power from Napocor, paying less than what was required under the contract. The company claimed that Napocor failed to generate and/or transmit supply since it either lacked capacity and/or was unable to dispatch purchased power to Meralco’s facilities. - Robert JA Basilio Jr., GMANews.TV