Uncertainties cloud NPC transition supply contract with Meralco
Saturday, February 04, 2006
By MYRNA M. VELASCO
The lingering uncertainties threatening long-term financial viability of the Manila Electric Company (Meralco) wrought by various government entities, including Malacañang, has been pointed to as the major reason why the bid for it to sign transition supply contract (TSC) with stateowned National Power Corporation (NPC) has been thriving to be a very tough task.
Energy Secretary Raphael P.M. Lotilla has reiterated that a TSC attached to the NPC assets being privatized are still highly demanded by investors.
"A TSC is still paramount for investors," the energy chief said, adding that the presence of such in the tendered assets would also give leverage to the government to maximize their privatized values.
Because of the financial battering directed at Meralco, it is seen that the privatization efforts of the government for NPC is correspondingly affected adversely; with no viable offtaker of the output of the plants being sold.
It was gathered that Meralco is apprehensive on hastily signing up for TSCs because of the lingering regulatory uncertainties that are likely to shackle its financial standing.
A template for TSCs to be inked by NPC and its transferee-company Power Sector Assets and Liabilities Management Corporation (PSALM) with distribution utilities has already been issued by the Energy Regulatory Commission (ERC). For the NPC-Meralco TSC, the deadline set is within the month.
While the giant utility firm has not yet missed out on any of its obligations for contracted capacity from its power suppliers despite ongoing compliance with the Supreme Court-mandated refund of P30 billion, the pending resolution of its P20-billion settlement deal with NPC over the terms of their contract for the sale of electricity that lapsed in 2004, is seen foisting new round of uncertainty.
This dilemma is being compounded by constant opposition for it to increase tariff to fully recover adjustments in its distribution costs; and this was clearly manifested in an earlier ruling of the Court of Appeals attempting to set aside the ERC’s decision on its rate unbundling; one that practically adjusted its tariff levels based on the prescribed 2002 reference year for the filing.
The utility firm also has a pending application for P0.1476 per kilowatt hour (kWh) hike in its distribution tariff; but this in the same way is encountering heightened resistance from some groups.
Should a favorable ruling is handed down, the tariff hike will likely bring in additional revenue of P2.4 billion yearly for the utility firm.
However, it is being laid early on that even with a positive decision from industry regulators, Meralco can still not gain confidence that the ruling would not be overturned by Philippine courts; as had been the scenario several times in the past.
It was emphasized that Meralco’s inability to adjust its rates to recover its generation or distribution costs fully would have a material adverse impact on its ability to meet future payment obligations.
posted by philpower @ 12:27 PM,
