Meralco-First Gen deals enrich Lopezes — GSIS

PHILIPPINE NEWS SERVICE — MERALCO customers are bearing the cost of the Lopez family’s self-dealing transactions to the tune of at least P20 billion a year or a minimum of P500 billion for 25 years, the duration of the much-criticized “sweetheart deals” between Meralco and Lopez power producer First Gen.

The Government Service Insurance System (GSIS) made this assertion yesterday, citing no less than Meralco’s own 2007 financial statement which, the state pension fund said, reflects the “killings being made by the Lopezes” through First Gen.

GSIS chief legal counsel and spokesperson Estrella Elamparo said that the P20 billion Meralco pays First Gen each year represents “capacity fees” which the Lopez IPP, being a BOO (build-operate- own) project instead of a build-operate- transfer (BOT) undertaking, has no right to collect.

Elamparo pointed out that only BOT power generators can rightfully collect capacity fees because they are to turnover their power plants to the government at the end of their contracts.

In contrast, ownership of First Gen perpetually stays with the Lopezes, thus First Gen has no right to collect capacity fees, she stressed.

The capacity fees collected by First Gen, amounting to P60 billion in the last three years, are on top of the fixed and variable operating and maintenance fees, wheeling and pipeline charges, and supplemental fees it charges Meralco.

“Thus, what Gina Lopez said, is not true that her family does not profit from the generation charges Meralco collects from its customers. They do through First Gen in the amount of P20 billion in capacity fees each year, not including profit realized from First Gen’s sale of overpriced power to Meralco,” she said.

These capacity fees will be paid by Meralco customers every year until 2025 for the 1,000-megawatt Sta. Rita and 500-mW San Lorenzo power plants of First Gen, which like Meralco is controlled by the Lopezes through First Philippine Holdings.

As of December 2007, Sta. Rita and San Lorenzo have total net book value of $652 million. With an average cost of $7-8 million per megawatt, Sta. Rita and San Lorenzo are the most overpriced power plants not only in the Philippines but probably in the whole world, said the GSIS.

Elamparo said that based on data from the Energy Information Administration of the U.S. Department of Energy, the most expensive plants using cutting-edge technologies like photovoltaic and fuel cells cost slightly less than $5 million/mW.

The lawyer said the purchase of expensive power and Meralco’s acquiescence to paying capacity fees to its sister company violates the term of its franchise and the EPIRA law mandating power distributors to provide its captive market power at the least cost to them.

“Meralco is hitting us with generation charges bloated by its self-deals with First Gen, while burderning us with high distribution charges padded by its pension cost, bloated bureaucracy and its pass-on charges for electricity Meralco itself had used.”