STEPPING UP THE ONGOING WAR between the Government Service Insurance System and the Manila Electric Co., a GSIS official on Saturday said Congress should look into the possibly disadvantageous multimillion-dollar deals entered into by the Lopez group-led Meralco and its subsidiaries.
Independent power producers owned by the Lopez group owed some $148 million to Shell and other firms for the purchase of natural gas from the Malampaya offshore gas production platform a few years ago, said Estrella Elamparo, the GSIS senior vice president for legal affairs.
?Under the settlement agreement, that amount will be passed on to Meralco. Meralco in turn will pass that amount on to consumers,? Elamparo told a Sulo Hotel press forum Saturday.
?I?m not sure if they have started charging this,? she said.
The Lopez-owned IPPs, collectively grouped under First Gas Power Corp., placed the order for Malampaya natural gas in gas sale and purchase agreements with Shell Phil. Exploration BV, Shell Phil. LLC, Texaco Phil. and PNOC Exploration Corp., Elamparo said.
Passed on to consumers?
While it failed to consume the gas from 2002 to 2004, First Gas had to pay the four companies for its purchase order. It was originally billed about $231 million for the unconsumed gas, but this was lowered to $148 million, she said.
First Gas billed Meralco the same amount in October 2005 under the terms of their power purchase agreement, an amount ?which could be passed on to consumers,? Elamparo said, citing Meralco?s audited financial statements for 2007.
First Gas operates the 1,000-megawatt Santa Rita and 500-megawatt San Lorenzo gas-fired power plants in Batangas. Shell Phil. Exploration BV is the service contract operator of the Malampaya natural gas project.
At the same Sulo forum yesterday, Elamparo said another P140 billion worth of contracts needed to be looked into, involving contracts entered into by Meralco and its sister companies, which include Benpres Holdings, Rockwell and Miascor.
She said that aside from power distribution, these contracts involved conversion of debt to equity and procurement of services, among others, again citing Meralco?s 2007 audited financial statement.
?Although it?s not illegal for a company to enter into a contract with sister companies, or subsidiaries, it?s necessary to check if the terms are not disadvantageous to the mother company,? Elamparo said.
?There are charges that form part of the operational expenses, and these can be charged to consumers,? she said.
Joint congressional probe
The Joint Congressional Power Commission of the Senate and House is convening tomorrow to probe Meralco?s power purchases from the Lopez-owned IPPs, which has been cited as one reason for the high rates being charged by Meralco.
The House energy committee is opening an inquiry on Tuesday into Meralco?s allegedly exorbitant rates.
Meralco and the GSIS have been skirmishing the past few weeks over the state pension fund?s accusations that the Lopez group has been mismanaging the distribution utility.
GSIS president and general manager Winston Garcia, who has a seat on the Meralco board, is campaigning for a change in management in Meralco which he assailed for being inefficient, charging high rates and not being transparent about its financial status.
The government has a 33-percent stake in Meralco, which includes the GSIS?s 23-percent share. The Lopez group owns 33.4 percent of the utility.
On Thursday, the Lopez family patriarch, Oscar Lopez, said the government could buy out the Lopezes if it wanted to, to which Garcia retorted that the GSIS could easily raise the funds for a buy-out.
Focus on P54B
Garcia?s call for transparency is focused on the P54-billion annual business contracts that Meralco has with First Philippine Holdings Corp., the Lopez group?s holding company that has core investments in power, toll ways, property and manufacturing.
Aside from the power it buys from the state generator, the National Power Corp., and the wholesale electricity spot market (WESM), Meralco also buys power from Quezon Power Phil., First Gas Power Corp. and FGP Corp.
First Philippine Holdings has a 60-percent stake in First Gas and FGP through its subsidiary First Gen Corp. while the UK-based BG Plc. owns 40 percent.
Approved by ERC
In an interview Saturday, Meralco director Christian Monsod said government representatives in the Meralco board and in the committees that reviewed the firm?s contracts should also be investigated if there is to be a congressional inquiry into Meralco.
Monsod said Meralco?s contracts with its IPPs have been reviewed and approved by the Energy Regulatory Commission aside from two separate reviews made by the Meralco board where the government is represented.
?Meralco?s contracts [with suppliers] were first reviewed in 1997 and again in 2004 because they were amended,? Monsod said.
?The review committee, which was headed by now Finance Secretary Margarito B. Teves, saw nothing wrong with the contracts. The amendments were found to be beneficial to both stakeholders and consumers,? he said.
Monsod said it was beyond understanding why calls were being made again for a probe of the contracts.
He pointed out that when the contracts were reviewed along with those of Napocor?s contracts with its own independent suppliers, the concessions that Meralco secured were equal to, if not better, than what Napocor got from its own contractors.
?It is surprising they want another review because all our rates are approved by the ERC; they should also investigate the ERC,? he said.
Monsod lamented the ?short memory? of the media, the public and the government about why the Lopez group had entered into the power generation business.
He said the Ramos administration approached the Lopezes in the 1990s when the government wanted to tap the natural gas in the Camago-Malampaya fields.
?Shell Phil. Exploration BV did not want to develop the project unless there was actual demand for the natural gas, which Shell said should represent about 3,000 megawatts of power generation,? he explained.
?The government could only commit to half of that so they asked the Lopezes to build 1,500 MW, which they did,? he said.
The Lopez group built First Gas? 1,000-MW Sta. Rita power plant and FGP?s 500-MW San Lorenzo plant, both in Batangas. Sta. Rita has been operational since 2000 while San Lorezo went online in 2002.
?These projects were realized because of the government itself. What is so anomalous or non-transparent about this?? he asked.
He declined to comment on the statement by Oscar Lopez, the First Philippine Holdings chair, about his willingness to have the family bought out of Meralco.
?I am just a professional, the question should be addressed to other members of the family,? Monsod said.
Elamparo stressed that the GSIS was keen on changing the management of Meralco but not necessarily to buy out the Lopez group.
?What we?re just asking them is to replace the management, because we?ve seen that the management has become inefficient and lacked transparency. They (the Lopezes) need not leave the company,? she said.
Elamparo said replacing the key people in the Meralco management would be much easier than buying out the Lopezes.
She said that the GSIS would seriously study any offer by the Lopez group to sell their Meralco shares.
She said the state pension fund was all set to file charges against the Meralco management last Thursday over its lack of transparency, but deferred this after the Lopez group offered to sell its shares.
Meralco is set to hold a board meeting on May 26, and a stockholders? meeting the next day.
?They (Winston Garcia and the Lopezes) will be forced to talk to each other,? she said.