OpinYon # 25 February 4, 2011




                                     MERALCO OWES NPC P56.8 B: SolGen

In Crossings of October 4 last year we said Meralco owed National Power Corp. (NPC) P33Billion for failure to take electricity it contracted, but Solicitor General Jose Anselmo Cadiz in a recent formal pleading at the Court of Appeals says it is P56.8 B.

I stand corrected, Sir SolGen, and I stand to salute you for taking up the consumers’ fight as Tribune of the People.

In ancient Rome, according to my google search, the Tribunus Plebis or People’s Tribune represented the plebeians (that’s us) and had the right to intervene in the activities of patrician (that would be Meralco) magistrates (the ERC, of course) and the Senate and to veto their decisions. If we were in ancient Rome, and with SolGen Cadiz on our side, ERC could not be granting annual increases in distribution rates and monthly ‘adjustments’ in generation charges as it is doing now and Meralco would not be clearing unearned net earnings of P1 Billion a month.

Anyway, Tribune Cadiz is fighting for us now at the ERC and in the Courts, and his timely intervention will not only save us from a P0.12 pkwh pass-on charge which Meralco, with the complicity of NPC, is trying to collect from us. He could even generate for taxpayers additional revenues of P56.8 B, if NPC will do his bidding and collect the full amount of Meralco’s liability for contract violations.

BACKGROUND. In November, 1993 Meralco signed with NPC a 10-year Contract for the Sale of Electricity (CSE) from 1994 to 2004, covering annual volumes of 18 B kwh to 22 B kwh, at a fixed and firm price.

Starting in 2001, however, when the Lopez-owned natural gas generation companies, and the coal-fired Quezon Power plant earlier, came on-line Meralco unceremoniously walked away from its contractual commitments to NPC, preferring the Lopez supply that according to some consumers even turned out to be more expensive.

In all, the total shortfall on Meralco’s contracted off-takes added up to about 18.22 Billion kwh. Computed at P2.51 pkwh, and with other charges, the total liability of Meralco arising from its contract violations amounted to P56.8 Billion, according to the SolGen. This was first reduced by NPC to P27.5 B, then to P20.5 B, and finally to P14.319 B in the Settlement Agreement (SA), the OSG said.

CONSUMER OPPOSITION. As early as August, 2003, or less than a month after the Settlement Agreement was signed by Meralco and NPC on July 15, 2003, Pete Ilagan of the National Association of Electricity Consumers for Reforms warned NPC, through its Chairman Sec. Jose Camacho to desist from the “highly irregular and anomalous arrangement which affects the interest not only of the consumers but also of government.”

NPC and Meralco persisted with the SA which was in fact an abrogation of the CSE and a waiver or compromise of government rights, and jointly applied in 2004 for authority to collect  from Meralco’s captive customers the cost of the settlement – approximately P14.3 B – under ERC Case No. 2004-109.

On November 23, 2005, former Judge Gualberto Dela Llana filed a formal Letter-Complaint against the parties to the SA, which the Ombudsman booked as OMB-C-A-0568-L for grave misconduct and OMB-C-C-05-0660-L, for violations of RA 7080 and/or RA 3019. The cases remain pending, perhaps awaiting final ERC action on the joint application to make the acts complained of actionable. Nonetheless, the Ombudsman case could have stalemated the joint application, and just as important, bought time for the entry of the OSG in behalf of the consumers.

THE PEOPLE’S TRIBUNE. On May 8, 2008, the Office of the Solicitor General filed a motion to intervene and oppose the joint application on the grounds that the settlement agreement, the outcome of mediation, was illegal because the CSE between Meralco and NPC called for arbitration, not mediation.

As eventually argued by the OSG in an urgent motion for the Court of Appeals to issue a preliminary injunction against Judge Franco Falcon of Pasig RTC Br. 71, Meralco and NPC (CA-G.R. No. 116063), “the failure of NPC and MERALCO to submit their dispute to Arbitration infringed the right of the public to due process and deprived the public of a chance to participate in the resolution of the dispute.”

According to the SolGen, Sec. 9.3 of the CSE specifically states that the parties shall utilize arbitration to settle their disputes and therefore the agreement arrived at after mediation is illegal. The settlement, OSG said, “constitutes a waiver or release of a valid and settled claim of NPC amounting to billions of pesos… contrary to law, public policy, and prejudicial to a third person…”

NPC not being expressly authorized to compromise or release claims under its charter, the OSG said, that power is given to the Commission on Audit.

Also, the SA was never passed upon by the OSG, contrary to the Revised Administrative Code. In the words of SolGen Cadiz: “Despite the gargantuan amount involved, the NPC surreptitiously and without the information, legal guidance and approval of the OSG opted to mediate and thus accepted and agreed to terms and conditions clearly detrimental to the interest of government in general and the consuming public in particular.”

“Without the Settlement Agreement, the original claim or receivable of NPC against MERALCO for contracted but unconsumed energy as of December 31, 2004 is around Php56.8 Billion. Under the Settlement Agreement, such claim or receivable was significantly reduced by NPC itself first to Php 27.515 Billion, and then to Php 20.050 Billion further reduced to final settlement amount of Php 14.319 Billion”, the OSG said.

With the national outrage over the AFP pasalubong and pabaon in amounts running from P50 Million to P164 Million… how we wish a little of that outrage is channeled to the mediated settlement that can give pabaon to 850 Chiefs of Staff at the minimum, or 260 on the high side of P164 Million, reckoning from the 42,481 Million pesos NPC is writing off for Meralco.

Next issue, we will talk about NPC’s shameless efforts to exclude the OSG from the ERC and judicial review of the Settlement Agreement. And we will see who should do time for not doing their job and giving undue advantage to the utilities.

Email crsng_47@hotmail.com for comments, suggestions and concerns.

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