Ecozone power rate discount ends this year

State-run Power Sector Assets and Liabilities Management Corp. (PSALM) will not extend by another year the special discounted rates offered to ecozone locators despite appeals for the government to continue providing relief to big power consumers, particularly the industrial sector.

“Although we fully understand the possible implications of this decision on the economy, it is no longer reasonable for us to renew the power supply contract with power distributor Manila Electric Co. [Meralco] given the limited supply that PSALM currently has and the high operating costs of generating power from the remaining government-owned plants in Luzon,” PSALM president and CEO Emmanuel R. Ledesma Jr. said.

Ledesma made the announcement months after Meralco, the Philippine Economic Zone Authority (PEZA) and members of the Semiconductor and Electronics Industries in the Philippines Inc. (Seipi) wrote separate letters to the government-owned National Power Corp. (Napocor) requesting an extension of the discounts inside the economic zones up to December 2012.

Called the “Ecozone Rate Program” (ERP), this is an offshoot of a memorandum of agreement between Meralco and Napocor in 2007 wherein special rates would be provided for PEZA-accredited industries. The granting of special rates would stop once the transition supply contract between Meralco and Napocor ends on December 25 this year.

“Upon expiration of the Meralco power supply contract, the [ecozone locators or customers] are free to contract and negotiate with any power producer. As with any power supply contract, the power rate will depend on the contractual agreement between the parties,” Ledesma explained.

At present, PSALM no longer has the capacity to supply adequately the electricity requirements of the ecozones as it has sold to the private sector most of the government-owned facilities in Luzon. PSALM, according to Ledesma, “ceased to become the sole supplier of electricity from which the ecozones may procure energy.”

To date, 79.56 percent of the power-generation assets in Luzon and Visayas had been sold while 76.85 percent of the contracted capacities had been transferred to independent power producer administrators.

Meralco senior executive vice president and chief operating officer Oscar Reyes earlier said in a letter to Napocor that the extension of the ERP would help “achieve operational and economic efficiency and enhance competitiveness of Philippine products in the global market.”

The ERP is benefiting 279 Meralco customers in industrial areas, which contribute 43 percent of the total Philippine manufacturing exports or roughly $19 billion.

“Considering the benefits of the ERP to the economy and the country as a whole, there is a greater reason and necessity to extend the term of our [agreement] to ensure an affordable supply of power to vital industries and thus enhance their competitiveness in the global market,” Reyes had said.