SC affirms ruling on Meralco, Napocor settlement

THE Supreme Court (SC) has upheld the validity of a settlement agreement between the Manila Electric Co. (Meralco) and National Power Corp. (Napocor) worth P20.05 billion.

In a 24-page resolution on Sept. 28 and made public on Oct. 20, the SC First Division said the Court of Appeals did not commit an error when it ruled the agreement between the two firms was not “disadvantageous to the government.”

“To reiterate, there is no longer any arbitrable dispute to speak of when Meralco and [Napocor] agreed to settle any dispute between them under the contract for the sale of electricity (CSE) through mediation,” the High Court said.

In 2003, a settlement agreement was reached by Meralco and Napocor where the private firm agreed to pay P20.05 billion for 18,222 gigawatt-hours (GWh) over a dispute related to the sale of electricity to the government.

The obligation was later reduced to P14 billion after Meralco made gradual payments to Napocor between the years 2003 and 2004.

The two firms had brought the dispute to mediation, which was overseen by former World Energy Council Chairman Antonio V. del Rosario.

Edgardo M. del Fonso, former president of Power Sector Assets and Liabilities Management Corp., represented Napocor while Meralco was represented by its former president and chief operating officer.

Meralco and Napocor entered into a contract for the sale of electricity (CSE) in 1994. The agreement obligated Napocor to supply Meralco with power while the latter had to purchase a minimum volume of power and energy at rates approved by the Energy Regulatory Board.

At that time, Napocor is engaged in generating, supplying, and selling electricity to distribution utilities approved by the government.

Meralco, a private corporation, obtained a franchise to operate and maintain a distribution system in Metro Manila, Bulacan, Cavite, and Rizal, among other municipalities and cities.

Executive Order No. 215 allowed private sector involvement in operating electric generating plants which can sell to the grid.

“This issue can hardly be considered a dispute, much less one arising from the CSE,” said the High Court. “Parties should not be barred from resorting to mediation, which, ordinarily, is a less adversarial and more conciliatory process than arbitration.”

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., which has interest in ����ý through the Philippine Star Group, which it controls. — John Victor D. Ordoñez