Meralco to refund P1B due to SC order voiding GRAM

The Philippine Star 09/15/2006

The Manila Electric Co. (Meralco) is likely to refund its customers about P1 billion starting January 2007 with the recent Supreme Court’s order voiding the company’s application for a second generation rate adjustment mechanism (GRAM).

In its application for approval with the Energy Regulatory Commission (ERC), Meralco said it will start its refund scheme by next year and will be implemented over the span of three months across all customer groups.

Meralco’s head of utility economics Ivanna dela Pena said they requested to undertake the refund next year to give the utility firm ample time to determine which customers are entitled to the refund.

The 2nd GRAM application nullified by the High Tribunal covered the period from June to August 2004.

"It will take us some time to retrieve the data from our customers which will determine their per kilowatt-hour (kwh) consumption for the period covering June to August 2004," Dela Peña said.

Based on Meralco’s proposal on the mode of the refund, it said it may deduct it to the customers’ bills.

The power utility firm believes this scheme will be ‘convenient’ for the customers since the average refundable amount is very small as compared to their average monthly bill.

But Meralco pointed out that the credit-to-future-billing mode will also be cost-efficient for the company.

"It also provides minimal operational implication and cost on the part of the company," Meralco said in its ERC application. Based on its ERC submission, Meralco noted that a household with a monthly consumption of between 201 to 300 kwh can expect a refund of about P35. Households consuming 401 kwh and above can expect a monthly refund of P110.

Commercial customers with the highest monthly kwh consumption can expect a refund of P191,000 while industrial customers with the highest monthly consumption can expect a refund of P986,000.

According to the Meralco official, the refund scheme is part of their compliance with the ERC’s order.

She admitted that this new refund scheme will affect the company’s cash flow. It would be recalled that Meralco is being ordered to refund some P30 billion worth of overcharges to customers. It has nearly completed the refund process and is in the last phase of the P30-billion refund scheme.

Earlier, Meralco said it will file a formal petition to recover the cost which will be subjected to public hearing.

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Mirant shortlists eligible bidders

The Philippine Star 09/15/2006

Atlanta-based Mirant Corp. has drawn a shortlist of groups that will be given the right to bid for its assets in the Philippine power sector, reliable sources said yesterday.

"Due to pre-emptive news articles on low indicative bids, Mirant-Atlanta is forced to put up a shortlist on the advice of Credit Suisse," industry sources said.

The sources said those on the list are basically the same companies named earlier: Marubeni-Tokyo Electric-First Gen; Korea Electric Power Corp. (Kepco)/ Chubu Electric; One Energy with China Light and Power and Mitsubishi Corp.; and Mitsui/International Power Group.

Others such as Avenue Capital were apparently dropped from the list since they do not have an O&M (operations and maintenance) partner.

It was learned that the same verdict was given to the Carlyle Group, an investment firm with no technical expertise on O&M of power facilities.

"Mirant sets criteria and chose candidates from those that have a strong O&M track record for power facilities and those deemed to be acceptable to the Philippine government," the sources said.

Credit Suisse, the financial advisor of Mirant for the sale of the shares in Mirant Philippines Inc., will reportedly release the official list this week. "They are eyeing to finalize the shortlist before this weekend and correspondingly inform the bidders," the sources said.

In another development, some 1,200 employees of Mirant Philippines have appealed to the Philippine government to make their separation package a pre-condition to the consent to be given on Mirant’s asset sale.

A source familiar with the matter but who declined to be identified said Mirant employees are asking the parent firm for the payment of 2.5-months worth of pay for every year of service to be paid out to all employees regardless of rank once the sale is completed. The sale of the Philippine shares is expected to fetch between $2 billion to $3 billion for the mother company.

"Mirant employees just want their years of service to the company protected. After all, they have given the parent firm billions of pesos in net income the past years. What they are asking for is just standard industry practice. It is a very small amount compared to what will be earned from the sale," said the source who has been working closely with the employees.

Mirant, the country’s biggest independent power producer (IPP) has consistently posted net incomes in excess of P10 billion every year for the past five years on account of its long-term energy conversion agreements (ECA) with government.

The employees, the source added, are willing to sign a transition contract to ensure that they will continue to work and run the plants for at least three months after the sale to give the new management the prerogative to re-organize the company. Should they be re-hired, they can start their tenure with a clean slate.

Earlier this week, Jose Leviste Jr., Mirant Philippines president, said the company has a generous severance package for employees who will be separated as a result of the sale.

He pointed out that Mirant employees are among the best compensated in the industry.

However, employees are reportedly uneasy over the assurance since there is no written policy, only company practice, which are non-binding on the new owners, who can easily change such a practice.

"They (employees) will seek the help of the Napocor and possibly Malacanang in order for the rights of the Filipino worker to be protected," said the source. "Napocor will be asked to withhold its consent until separation packages are paid outright once the sale takes place."

Majority of Mirant Philippines employees are plant workers and technical staff operating the plants 24 hours a day.

In July this year, it announced plans to begin an auction process to sell of its Philippine assets.

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