Zamcelco, Western Mindanao Power Corp. agree to extend compromise deal

By Lenie Lectura - July 18, 2019

https://businessmirror.com.ph/2019/07/18/zamcelco-wmpc-agree-to-extend-compromise-deal/

THE Zamboanga City Electric Cooperative (Zamcelco), through its investor-managers Crown Investments Holdings Inc. and Desco Inc., and Western Mindanao Power Corp. (WMPC) of the Alcantara-led Alsons Power Group, have agreed to extend their compromise agreement, which will include an additional payment of P150 million to the power supplier.

The compromise agreement will be signed next week. Upon signing, Zamcelco will pay WMPC P150 million and pay an additional P80 million in security deposit.  In exchange for the payment, WMPC run its plant for 90 days and supplies its output to Zamcelco.

This was agreed upon during a hearing held Wednesday at the Energy Regulatory Commission (ERC).

Last May 2, both parties signed a compromise agreement in a bid to put to an end the rotating brownouts in the city. The terms and conditions set forth in the May agreement were met. These include a partial payment of P220 million to WMPC, which, in turn, resumed the supply of electricity to Zamcelco for 60 days. The agreement lapsed last July 3.

The compromise agreement is without prejudice to the respective claims of both parties before the ERC.

“We are still waiting for the ERC’s decision on our motion for a claim for refund and for the dismissal of the application for Zamcelco-WMPC PSA’s  [power supply agreement] approval. We want to make sure that Zamboangueños get their P441 million back,” said Zamcelco Chief Management Officer Henry Virola.

Crown-Desco was awarded the investment-management contract for Zamcelco in September 2018. It began managing the operations of Zamcelco in January 2019.

In February this year, Zamcelco flagged overbillings from WMPC in the amount of P441 million made from 2015 to 2018. Zamcelco maintained that these overpayments covered the pending payables it incurred to the power supplier. Responding to this, WMPC unilaterally cut its power supply to Zamcelco.

“Of Crown-Desco’s P2.5-billion capital infusion into Zamcelco, P370 million have already gone to WMPC,” said Virola. “So far, we paid P370 million of the disputed amount of P441 million in payables that WMPC is demanding—on top of our overpayments.”

In April, Crown-Zamcelco filed a motion with the ERC for a claim for refund of its overpayments. The motion also prayed for its withdrawal from and the ERC’s dismissal of the application for approval of Zamcelco’s PSA with WMPC.

The motion said the overpayments were made as WMPC overbilled Zamcelco for capacity recovery fees, and operations and management. This was done without basis as the PSA between Zamcelco and WMPC was not yet in effect, the motion added..

“WMPC charged Zamcelco for a fixed capacity of 50 megawatts, when Zamcelco would not use over 25 MWs a month. Without an effective PSA, WMPC should have only charged the cooperative for actual nominated or utilized capacity,” Virola said. “WMPC also uses diesel, so their power is actually the most expensive in Zamboanga City.”

In the first seven months of Crown-Desco’s management, Zamcelco said it has been focused on improving facilities and equipment. It has already installed a new transformer in the Cabatangan substation, with more installations in other substations to follow. Rehabilitation of Mercedes substation has already begun.

It also started repairing and installing electrical poles, and conducting city-wide right-of-way clearing to minimize fluctuations.

Zamcelco has also rolled out its meter replacement program and upgraded nearly half of its target of 18,000 meters. This has driven down systems loss rate and the number of power interruption hours per day, compared to 2018 figures.