NEWSFLASH

NAPOCOR TO BORROW $100 MILLION TO PAY THE IPPs

Manila, May 10, 2002 (STAR) By Donnabelle Gatdula - President Arroyo’s decision to temporarily reduce electricity charges may force the government to borrow about $100 million to cover a projected P15 billion in losses, an official said yesterday.

Meanwhile, Energy Secretary Vince Perez clarified yesterday that the collection of a portion of the purchased power adjustment (PPA) was being suspended for two months.

Last Wednesday Mrs. Arroyo ordered the state-owned National Power Corp. (Napocor) to defer the collection of 85 centavos per kilowatt-hour from consumers who have paid more for electricity since a power sector reform law was passed last year.

Under its contractual obligations with independent power producers (IPPs) that sell their output to Napocor, the state-run firm has to buy all the power generated by the IPPs whether Napocor uses it or not.

Napocor uses the purchased power adjustment or PPA – the extra money consumers pay for electricity they do not use, and which Meralco collects on Napocor’s behalf – to pay for the power purchases.

According to government estimates, electricity consumers pay P1.25 per kilowatt hour for electricity they did not use. But since the collection of 85 centavos per kilowatt hour of the PPA was deferred, Energy Secretary Vince Perez said Napocor would now have to borrow about $100 million to pay the IPPs.

"We will be cash-strapped at Napocor and that’s why we have to refinance power purchase (costs)," Perez said.

"Napocor is already incurring big losses," Budget Secretary Emilia Boncodin said. The deferred collections "will add to that," she added.

In the short term, Mrs. Arroyo’s decision is not expected to impact on the government’s pledge to limit the 2002 national budget deficit to P130 billion, Boncodin said.

"The national government is also a (power) consumer, so there will be a beneficial effect," she said. "But over the long term, to the extent that Napocor will be going to absorb it and won’t be able to pass it on (to consumers), the taxpayers will eventually have to pay."

The government has no immediate budget provisions for funding the Napocor losses because the budget is fixed by Congress, Boncodin said.

Perez said Mrs. Arroyo is urging Congress to pass two bills aiming to address the purchase power charges. "We hope they pass the bill, which is the long-term solution, before they close session on June 5," he said.

Once passed, Power Sector Assets and Liabilities Management Corp. (PSALM) – the state-run firm tasked by law to privatize Napocor – would pay 85 centavos of the PPA, and impose a 40-centavo "universal charge" on electricity consumers to cover the 40-centavo balance.

Edgardo del Fonso, PSALM president, said the $100 million will come on top of the remaining $750-million financing requirement for Napocor for 2002.

They have also programmed another $350 million in additional borrowing to pay for the 85-centavo per kilowatt hour in PPA charges.

Altogether PSALM would borrow $1.2 billion in the remaining months of the year. They have one problem, however — they could only borrow $1 billion because of a limit on loans.

Napocor chief executive officer Roland Quilala said the two-month suspension of the PPA "is like getting the money from your right pocket to the left pocket."

Quilala said "instead of [PPA] being paid by consumers themselves, it will now be the burden of the government that would be borrowing money. This is the need of the day, we have to address the problem now and think of the future later. We are not actually reducing the PPA, we are restructuring the payment."

While the PPA reduction ordered by Mrs. Arroyo may bring relief to Filipinos, some congressmen said it’s only temporary.

"This monster known as the PPA will sooner or later be replaced by another monster, the universal charge or levy. It will be the same PPA named differently," said Rep. Robert Ace Barbers (Lakas, Surigao del Norte).

Renegotiating contracts

Yesterday, Mrs. Arroyo indicated that the government might renegotiate Napocor’s contracts with IPPs in an effort to bring the PPA charges down.

Mrs. Arroyo gave a committee headed by Perez until June to complete the review. Despite the uproar over the PPA, Mrs. Arroyo saw no need to speed up the review.

"If they do sloppy work, then how would we know that the figures they will negotiate or decide on will be right?" she said. "I would rather they come up with a good study that we can rely on, and the figures will give us a bedrock of support for whatever actions we would have to take, rather than something that is sloppily done."

However, militant groups like the Kilusang Mayo Uno labor group and the People Opposed to Warrantless Power Rates want the PPA scrapped altogether and said they would launch protests to press their demand.

At a hearing of the Senate committee on energy, Senate President Pro Tempore Manuel Villar proposed that electricity be sold at a discount in the future since consumers have already paid for power they did not use.

"The moral issue is: why should we pay for power that we are not using? But since the 5,000 megawatts are already paid for anyway, why don’t we give them for free to consumers or at a discounted rate?" Villar said. His proposal was supported by Senators Ralph Recto and Joker Arroyo.

‘Meralco owes customers’

Meanwhile, POWER yesterday also claimed that utility giant Manila Electric Co. (Meralco) owes its customers about P3.13 billion and has been trying to avoid paying it.

According to a study made by Leonardo Aurelio, POWER consultant, the amount represented interest accrued from so-called "customer deposits" since 1975.

This is how it works, the study said: when a customer seeks electricity service from Meralco, the customer is required to make a "bills deposit" and a "meter deposit" to the utility firm.

Meralco requires the deposits to guarantee that the customer’s last bill would be paid, and that the meter would be returned to the company in case the service is terminated.

The meter deposit would also cover the cost of the meter in case it gets stolen. Further, Meralco is authorized to require an additional bills deposit if the customer’s average monthly billing is bigger

According to its service agreement with customers, Meralco, the study said, is obligated to pay an interest of six percent on the deposits, later increased to ten percent in 1995.

The STAR tried to get Meralco’s side but was told that no one was available for comment. — With reports from Marichu Villanueva, Efren Danao, Jess Diaz, Mayen Jaymalin, Romel Bagares, Katherine Andraneda, Artemio Dumlao