ENRILE EXPOSE #2:
Lopez - Meralco - First Gas Power

September 18, 2002

IN THE MERALCO-FIRST GAS POWER CONTRACT (For Sta. Rita 1,000 MW Plant Only)

1. SCHEMES IN ESCALATION OF CAPACITY FEES (Double Whammy!) 1.1 It provides for an escalation of $0.00159/kwh equivalent to 8.8% of the capacity charges based on changes in project cost.
   
   
   • This amounts to US$11.56 million a year at the minimum take-or-pay of 7,270.8 million kwh. At 51:1 exchange rate, this is an escalation of P589 million per year or P14.74 billion over 25 years.
     
     This unbridled overpricing is passed on to consumers.
     
     
   • The increase is decided only by and among the Lopezes! This escalation clause is unprecedented and unequalled by any of the Napocor's most onerous contracts.
   
   
   1.2 The one time adjustment of the basic capacity fee for the years 1996 to 2001 using the CPI Index, would mean conservatively an additional 10% or $0.0018 per kwh or P0.094 per kwh.
   
   This amounts to $13.08 million or P667 million per year at 51:1, or a whopping 16.68 bi11ion in 25 years!
   
   This double whammy on the capacity fees total P31.42 billion or 0.17 centavos per kwh.
   
   
2. SCHEMES IN FUEL CHARGES (Tripol Bukol)
   
   The Meralco-First Gas Power bilateral contract provides for schemes to overprice the fuel charges to the Meralco consumers.
   
   FUEL SCHEME 1 (Appendix G p. G-31)
   
   The contracted guaranteed heat rate of 6,559 BTU/Kwh used is only for a single cycle plant with efficiencies of 51 %.
   
   The First Gas Power Plant is a combined cycle plant with efficiency of at least 6,204 BTU/kwh (or typically 55% efficiency).
   
   The difference of 355 BTU/kwh translates to US$12.725 million overprice per year or P662 million a year, or P16.55 billion in 25 years.
   
   This over charging alone translates to P0.12 per kwh to the Manila consumers.
   
   FUEL SCHEME 2 (p. G-53)
   
   On top of this, the family-negotiated contract also provides for a minimum take-or-pay on fuel. This means Meralco consumers are charged for fuel even if not used. This becomes part of the Lopez's PPA.
   
   In Napocor's case, only the carrying cost of unused fuel is being charged. This means when the First Gas Power plant eventually uses the natural gas, it will again charge the Meralco consumers for the same fuel.
   
   The double charge of fuel will give a windfall profit of about P500 million a year to First Gas!
   
   Over 25 years that could mean 12.5 billion in windfall profits.
   
   FUEL SCHEME 3 (Appendix G. Attachment C Clause 2 (p. G-20)
   
   There is also a 4% metering tolerance. (meaning an allowed margin of error in meter reading)
   
   This means the actual quantity of fuel charged to Meralco and passed on to the consumers can be over-metered by 4%.
   
   This is a very wide tolerance for error that can be easily manipulated between two related companies controlled by the same family.
   
   The Sta. Rita plant is estimated to consume P10 billion a year in natural gas. 4% of that is P400 million a year or another P10 billion in 25 years.
   
   These fuel schemes alone will total P39.05 billion overcharges to the consumers over 25 years! This is equivalent to 23 centavos in PPA charges.
   
   
3. The First Gas Power price is not competitive against Napocor 3.1 Even at 83% plant utilization, First Gas Power all-in cost is 4.5155 per kwh, broken down as follows:
   
   

   Generation Charge	P 3.56
   Transmission wheeing	.5619
   Ancillary Charge	.3936
   	P 4.5155/kwh

   
   
   3.2 At 83% utilization, Napocor rate would be P3.50/kwh, all-in or a full one-peso (P1.00) lower than First Gas.
   
   3.3 Because of the excess capacity of Meralco, its effective buying prices from the IPP's negotiated by the Lopez's is P10.00 per kwh compared to Napocor's highest charge of P4.00 per kwh.
   
   The price difference is added as Meralco PPA.