BY CHERRIE REGALADO
POSTED ON 12/25/2013 3:02 PM | UPDATED 12/26/2013 11:00 AM
SCENARIO. The energy secretary says Meralco coulld go bankrupt due to the suspension of the rate hike collection.Photo taken by AFP
MANILA, Philippines - Energy Secretary Jericho Petilla is meeting on Thursday, December 26, with officials of power distributor Manila Electric Company (Meralco) and its suppliers to hammer out a compromise on delayed payments.
Petilla told Rappler Tuesday, December 24, that the power suppliers should defer Meralco’s payments to them in the wake of a Supreme Court order stopping the company from implementing its P4.15-per-kilowatt-hour rate increase.
“This has to be fixed, otherwise, we won’t have electricity," Petilla said. The situation could lead to massive brownouts, he added.
Meralco, the biggest power distributor in the country, has some 3.2 million customers, distributing power to most parts of Luzon.
“Nobody took into consideration the effects of the suspension of the rate hike collection on Meralco. What happens if Meralco fails to settle its obligations to the power suppliers and the suppliers stop supplying power to Meralco? This might result in massive brown-outs,” Petilla said.
Petilla said the Department of Energy has to step in to ask the power generators "not to collect from Meralco."
Meralco earlier said the increase resulted from the shutdown of the Malampaya gas field and outages of power plants that supply Meralco. The company said it was forced to source power from plants that uses diesel, which is more expensive than natural gas.
As a result, it needs to collect some P9.7 billion from its customers for the additional costs they incurred last November, Meralco president Oscar Reyes has said.
Two groups however had petitioned the Court to stop the increase. They said the approval by the Energy Regulatory Commission of the power rate hike was made without a public hearing.
Several quarters questioned the shutting down of the plants simultaneously as they said a possible collusion happened, sabotaging market competition.
But Petilla said: “From a consumers point of view, suspending the rate hike collection is a good move. But what will happen to Meralco if it is unable to collect from its customers?"
The WESM alternative
Aside from negotiating for the deferment of Meralco’s payments, Petilla said he will also ask power suppliers to continue supplying to Meralco despite the power distributor’s non-payment of its outstanding obligations.
Otherwise, Petilla explained, Meralco will be forced to source its power from the Wholesale Electricity Market ( WESM), which sells at a much higher price.
“If power suppliers stop supplying to Meralco, then it will be forced to get from PEMC (Philippine Electricity Market Corporation ). Then Meralco will be bankrupt,“ he noted.
PEMC is the operator of the Wholesale Electricity Market (WESM). ( READ: Understanding the PH Energy Chain)
Meralco has power supply agreements (PSA) with various power suppliers which include:
- San Miguel Energy Corp. (SMEC)
- South Premiere Power Corp. (SPPC)
- Aboitiz-led Therma Luzon Inc.,
- San Miguel Corp. (SMC) subsidiary South Premiere Power Corp.
- Masinloc Power Partners Co. Ltd.
- Consunji-led SEM-Calaca Power Corp.
These long-term power supply contracts allow Meralco to buy electricity at fixed rates, which are cheaper than the power being sold at the WESM. – Rappler.com
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