No transmission lines to deliver IPP power--Meralco
By Ronnel Domingo
Philippine Daily Inquirer
First Posted 23:05:00 05/15/2008
Filed Under: Electricity Production & Distribution
MANILA, Philippines -- Officials of the Manila Electric Co. accused Representative Luis R. Villafuerte on Thursday of stirring up a tired rehash about supposedly undelivered electricity from affiliated independent power producers (IPPs).
In a privilege speech at the House of Representatives last Wednesday, Villafuerte said Meralco paid First Gas Power Corp. P12.99 billion from December 2000 to November 2001 even though the latter could provide only 300 megawatts of generating capacity out of the contracted 1,000 MW.
Elpi Cuna, Meralco corporate communications director, said in an interview the problem back on 2000 was not on the generation side but the unavailability of transmission lines that would connect First Gas' power plant to the grid.
"This was a problem that had been much discussed and well-covered by the media," Cuna said. "Everything that we did and every contract that we had was scrutinized extensively by regulators."
In a statement, First Gas executive vice president Richard B. Tantoco refuted Villafuerte's claim that the company did not deliver to Meralco for 12 months.
First Gas, which operates the 1,000-MW Sta. Rita power plant in Batangas, is a subsidiary of the Lopez group's First Gen Corp.
Like Meralco's other IPP that uses natural gas -- FGP Corp. which owns the nearby 500-MW San Lorenzo plant -- First Gas is a 60-40 partnership with BG Plc. of the United Kingdom.
"The fact is, First Gas delivered power to Meralco from December 2000 to November 2001," Tantoco said.
He added that like the contracts of the National Power Corp. with its own IPPs, the contract between Meralco and First Gas has a "take or pay" provision, where the buyer has to pay for a predetermined volume of electricity regardless of whether this was actually delivered and used.
Tantoco explained that without the "take or pay" provision, no investor or bank would finance the building of any power plant here or abroad.
"Napocor's IPPs have the same "take or pay" provision and is even given a government guarantee," he added. "Private IPPs like First Gas do not enjoy such guarantees."
Also, Tantoco denied that First Gas engaged in any "ghost power deliveries" and that it had been ready to generate 1,000 megawatts since its full commercial operations in August 2000.
"However, state-owned Napocor has not kept its part of the bargain on the availability of the transmission lines needed to transport power from the First Gas plant," he said.
Back then, the National Transmission Corp. which owns and runs the power grid infrastructure, was still a part of Napocor.
Tantoco was referring to the Sucat-Araneta line and Dasmariñas line, which are part of the government's power development program and the $4.5-billion Malampaya deep water gas-to-power project.
"As records would show, the completion (of these lines, along with the) Zapote substation were delayed by over five years," Tantoco said. "A generating plant without a transmission line to transport power will definitely be stranded."
He said the result of the transmission bottleneck was that First Gas' Sta. Rita 1,000-MW plant and Napocor's 600-MW Calaca coal plant were limited to a total combined dispatch of only 600 to 700 MWs.
"Since August 2000, First Gas has always requested Napocor for a higher dispatch of its power plant, which will give Meralco consumers the best rate per kilowatt-hour," he added.
"When First Gas is dispatched as contracted, its rates are competitively lower in spite of natural gas being taxed heavily," he said, referring to government royalties on the fuel.
Meanwhile, Meralco chief financial officer Daniel D. Tagaza said that under the gas sale and purchase agreements of First Gas and the gas sellers -- the consortium of Shell Philippines Exploration, Chevron and PNOC Exploration Corporation -- there was a process of reckoning every January when actual gas consumption for the previous year is compared with the take-or-pay volumes for such year.
Tagaza explained that the portion of the take-or-pay volume that is not consumed in any year still needs to be paid to the gas sellers and is considered "banked" but available for future actual use.
"Banked gas is available for use within ten years (from the time it was banked), otherwise it will be forfeited," he said.
Tagaza said Meralco's consumers were not affected by Meralco's payments for banked gas as the fuel charges are only passed on to the consumers if and when they are made-up for by the First Gas plants and actually used to generate electricity.
Tagaza said that last year, the First Gas plants already utilized a portion of the gas banked in 2002, which translated to a P 0.11 per kWh savings to Meralco consumers in the month of January.
"The continued utilization of banked gas by the First Gas plants will translate to savings for the consumer, as the price of the banked gas is much lower than the current price of gas," he added.
He explained that the price of gas is indexed against the price of crude oil and oil products which in 2002 was around $25 per barrel compared to the current price of at least $125 per barrel.
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