Meralco’s Abuse of Market Power Corrals Generators Into a Meralco Cartel …..With Long Term Implications (Part I)

David Celestra Tan, MSK

21 September2017

Meralco’s public service franchise specifically prohibits it from engaging “ in any activity that will constitute an abuse of market power such as but not limited to, unfair trade practices, monopolistic schemes and any other activities that will hinder competitiveness of businesses and industries”.

Meralco’s electric distribution  franchise did not come with the right to also monopolize power generation. In fact they are specifically prohibited from abusing their market power.

Yet that’s exactly what Meralco and the MVP Group apparently was able to do on April 26 and 27, 2016 just in time to beat the new April 30 deadline set by the ERC.  They negotiated and signed seven (7) power supply contracts totaling 3,551mw that will corner 80% of Meralco’s energy needs with several strategic partners but all controlled by its sister company MeralcoPowerGen.

 Corralled into becoming  MeralcoPowerGen’s working minority partners  if they want access to the lucrative 6,500mw Meralcodistribution market are erstwhile giant independent generators San Miguel Corp., Aboitiz Group, DMCI, Global Business of MetroBank, and EGAT of Thailand.

 The contracts effectively evaded the new Department of Energy policy to require a Competitive Selection Process or bidding (instead of negotiating) power supply contracts whose prices and terms will be passed on to the electric consumers.  The Energy Regulatory Commission itself passed a resolution requiring that effective November 6, 2015, any new power supply agreements will be accepted for approval only if they went through a CSP.

 Meralco and the MVP group lobbied against this policy from the beginning.  Their chairman claimed that CSP is illogical and would work against consumers. At various times since 2014, they also lobbied for the delay in the implementation of the CSP policy, to make it voluntary, for them to be allowed to do swiss challenge type biddings. They also fought the requirement by DOE to have the bidding process administered by Third Party consultants. From December 2015 to February 2016 they were reported to have been unofficially lobbying to be allowed by the ERC to do swiss challenged bidding evidently to assure their favored generators win.

 Then for some inexplicable reasons, the ERC postponed in March 2016 the implementation of the CSP policy by six months to April 30, 2016 allegedly to give reasonable time to those who had signed power supply contracts as of November 6, 2015 to complete their ERC application and filing documents.

 MeralcoPowerGen’s booty of 3,551mw of 20-year power supply contracts were not signed until 171 days later on April 26 and 27 2016. ERC accepted the applications whichnow appear to be   now on the way to fast approvals. Legislator supporters of the power supply contracts even cajoled President Duterte into signing a EO30 to fast track the approvals of these “projects of national significance” within 90 days.  Consumer advocacy group Alyansa Para saBagongPilipinas filed an anti-graft case with the Ombudsman against the ERC Commissioners for abuse of discretion.

Market Power and its Abuse

 Meralco is the nation’s most dominating distribution utility with a demand of 6,500mw by 2020 72% of Luzon grid and 62% of the national demand. All the other 130 distribution utilities combined, including the Aboitiz owned Visayan Electric of Cebu and Davao Light which are the 2nd and 3rd largest, is just about half of Meralco.  That is a lot of market power to wield in buying supply.A veritable 800lb gorilla in the distribution market. The 122 electric coops nationwide only have demands of 5 to 150mw.

Soon after the MVP Group took over control of Meralco in May 2010, they already formed its own power generation company, Meralco Power Gen, with an announced goal of acquiring 3,000mw of generating capacity within a few years. Even the Lopez Group that used to own Meralco, only had a disciplined level of 1,500mw of generating capacity with an additional 500mw when Meralco’s demand grows.

The demand of these distribution utilities is the gold in the power generation business and as the “golden rule” says, he who holds the gold makes the rules. With that 6,500mw of power market, any generator who wants to build a power plant of any significant size of 300mw and larger will need to be a chosen one of Meralco and the MVP group that controls it. They are the virtual gate keeper to the generation business.  And they appear to have leveraged that market power to the hilt.

The Midnight Contracts and the resulting Meralco Cartel

 Hammered just four (4) days before the gratuitous new deadline of April 30, 2016 by ERC, Meralco parceled out 85% of its future energy needs to the following new partners and the ownerships of MeralcoPowerGen in the project companies

1) Semirara DMCI group,  400mw for 2020 (51% of St. Raphael Power)

2)  Aboitiz Group,  1,500mw for 2021 (51% of both Redondo and Atimonan One)

3) San Miguel Power, 1,056mw for 2020 and 2022 (49% of Central Luzon and Mariveles Power)

4) Global Business Power of the George Ty Group,  670mw,  (51% of North Luzon)

5) EGAT of Thailand, their partner in the 455mw Mauban coal power complex. (51% of San Buenaventura)

Meralco undoubtedly negotiated aggressively with these partners as their officials claimed but it was not only to get least cost rate for the consumers but to overpower them to agree to a 51% Meralco majority ownership. It appears only Ramon Ang of San Miguel hung tough and had a measure of negotiating victory for only a 49% Meralco ownership.

One generator offered to Meralco to expand its facilities with 450mw. At the end of the negotiations, the project became owned 51% by MeralcoPowerGen with the new P4.30 per kwh price reportedly higher by P0.50 per kwh than was originally proposed by the independent power generator.

 The resulting power generation cartel is the largest the country can ever have with a combined 14,000mw of power plants, P1.2 Trillion in assets, P225 Billion yearly revenue, and an estimated overcharge to consumers of P25 billion a year.

The issue is not whether the country needs more power supply. It is the way they are contracting and cornering the power generation contracts among their oligopoly at rates they negotiate among themselves and pass them on to the consumers. It is self-dealing in a grand scale at the expense of the consuming public.

 Anti- monopoly, anti-competitive, and market power abuse rules have to have delineated lines that should not be crossed by the private sector. Unfortunately when the CSP line was drawn by the DOE, the ERC that is supposed to implement it moved the line!

 Overcharge to Consumers

 The rates negotiated by Meralco with their majority owned projects would be passed on to the consumers. It is not only the official base rate generation rates published but there could be sweetheart fuel allowances, generous downtime allowance and minimum capacity payments disguised as load factors, and price escalation indices that can hit consumers further down the road.

 MSK estimates that there is at least a 10 to 15% difference in the base rate of negotiated contracts compared to true competitively bidded projects. Then there is the issue of rent seeking from the distribution franchise.

 Price Premium from Rent Seeking by Distribution Utilities

 On top of the negotiated sweetheart prices,  Meralco as the DU with control of the market and the privilege to negotiate and choose the awardee,  will most likely exact free equity for bringing the critical Power Supply Agreement to the project. It is not going to just throw that into the project without value especially when it is at premium rates. Of MeralcoPowerGen’s 51%free equity or “carried interest” will probably be in the 15 to 25% range since the MVP Group is known to be a shrewd negotiator.  Politically it is called “rent seeking”. It is a powerful negotiating leverage. No PSA no project.

 It means if Meralco is not wielding its market power and it is a true competitive bidding, the profits from the project could be up to 25% less and those, if eliminated, could result to lower rates to consumers by easily another 10%.

Imagine tough dealmakers Ramon Ang of San Miguel, EGAT of Thailand, and George Ty of GT Power squirm in their seats on the subject of MeralcoPowerGen getting 51% of the ownership with say only 30% real equity and 21% free?

Let us remember that Meralco already makes 25% return on equity AFTER tax on the distribution franchise. These super profits on the generation side would be on top of that. All those are ending up in the monthly power bill of Metro-Manilans.

 If there is free equity in the 51% shareholding of Meralco in these projects, it must be given back to the benefit of the Meralco consumers. Or the ERC must reduce its rate correspondingly.  The MVP Group is not entitled to trade on the market power of the distribution franchise granted by the government.

 The Meralco Cartel that Emerged

 In addition to the 4,011mw of 20 year power supply contracts Meralco signed with this chosen strategic partners they already own and would own 10,575mw of power generating capacity in the country by 2021,  resulting to a cartel with a total of 14,586mw of the country’s installed capacity and approximately corner 70% of the energy needs of the top three distribution utilities, Meralco, Visayan Electric, and Davao Light. Our national power demand is projected to be only 15,732 in 2020 and 20,090mw in 2025.

 The Meralco Cartel is not done. Tough industrialist George Ty of Metrobank commiserated to Meralco’s market power that it sold 56% to the MVP Group its 1,000mw Global Business which in turn also bought controlling interest in the Alcantara coal projects in Mindanao.  EGAT of Thailand bought 35% of the 460mw Masinloc plant owned by American IPP AES, which had indicated an intent to sell the rest and will be most likely bought by one of the Meralco cartel.

Aboitiz Energy Ventures thru its subsidiary Therma North Power acquired in December 2016 66.1% of the 604mw GNPowerMariveles Coal plant and 40% of the 600mw GNPowerKauswagan. GNPower is one of the most aggressive competitors in CSP’s for electric cooperatives selling at 20% lower than other coal plants. Now they have become part of the Meralco Cartel.

With 14,586mw of power supply capacity just in one cartel, it also spells death of true competition in the WESM market whether it is Luzon, Visayas, or Mindanao.  Good luck to the new transition team at PEMC that is supposed to make the WESM truly competitive and protected from manipulation.

 Not content,  Meralco  and the Aboitiz Group are also not bashful about wanting to takeover all the electric coops they can acquire. Luzon, Visayas, Mindoro, Palawan. And there is no wanting of LGU officials willing to broker the deals.

16 years since the passing of the EPIRA law in 2001, we turned a Napocor monopoly in power generation into a private sector oligopoly.  And worse this cartel or oligopoly also dominates the distribution sector which Napocor never had.

(to be continued)

 MatuwidnaSingilsaKuryente Consumer Alliance Inc.

matuwid.org

david.mskorg@yahoo.com

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ERC Must be Cured Not Abolished Nor Crippled

Posted on: Sep 16, 2017

David Celestra Tan, MSK
15 September 2017

There is no question that the ERC has not been living up to its mandate to protect the consumers, to assure long term supply at fair and reasonable rates. In our book we give them a grade of 65% as an institution, failing in many measures. Our electricity rates are the highest in Asean because of this failure.

We interact with many of their Commissioners, directors, and employees and most of them are competent professionals with true dedications to public service. That’s why we are scratching our heads why this agency as an institution has been doing so badly as an electric industry regulator and seemingly cannot find its way back to true public service.

Many members of Congress, and the consumers they represent, are frustrated with the regulatory agency and it is understandable that they would use whatever congressional power (like budget approvals) they have to jolt this organization if only to make them shape up. The threat to give them only P1,000 budget is a major message. It could cripple the critical public services agency though and we lose the 65% that they do right. Further, we would be barking at the wrong tree.

The Energy Regulatory Commission badly and urgently needs to be reformed in their regulatory philosophy, rate setting methodology, transparency, honesty, and commitment to their mandate under Section 43 of the Epira Law that created it. No argument about that. The Epira Law may even have to be amended.

Things have to start with giving it proper leadership and the President of the Philippines is in a position to do so by appointing a good Chairman. One chosen for integrity, competence, and independence from major power industry players.

There is really no need to shorten the tenure of the now more experienced current four (4) Commissioners. What they need is a new clear mandate from the President. It can be as simple as a “do your job and be faithful to your mandate under Section 43 of the Epira Law. Be transparent and no corruption. Serve the public interest. Create competition and reduce rates. Do what is necessary. No sacred cows” (this last one is very important).If they are disobedient, then the President may need a new team. But first he has to find a good leader who can carry the torch for the consumers.

To be fair, most of what ails the regulatory agency were done by the previous Chairmen and Commissioners. However, the new set of officers have no excuse in not correcting the anti-consumer methodologies.

Abolishing the ERC will cause infinitely more harm and disruption than good. The options for performing the regulatory functions are much worse. Even creating a new regulatory agency will set us back and the consumers are the ones who will suffer.

So how do we gauge whether the current ERC is not beyond salvaging?

Your consumer organization has filed with the ERC several petitions to improve the methodologies and those can be used as tests of whether the current ERC can still serve the public interests or is already hopelessly compromised.

1. Petition to change the PBR Rate Making Methodology to prevent overcharging

The ERC is allowing Meralco to make money on things they have not invested. Under PBR they have effectively deregulated the profit limits of this public service utility. They took the position that the 12% limit ruled by the country’s Supreme Court does not apply because the “economic conditions” are different. Now Meralco regularly makes a 25% annual return on equity AFTER TAX. We would like ERC to be on the side of the consumers and country. Itama lang natin.

2. Systems Loss

The ERC’s own rules put a limit of 8.5% systems loss. But the captive customers that use 70% of Meralco’s energy are charged more than 10.3%. Instead they reduce the systems loss to industrial customers to only 4% and have the temerity to boast that their systems loss is only 6.5% which is the overall average. A regulatory agency with their hearts in the right place for consumers would enforce the 8.5% limit and no customer should be charged higher. It is Meralco’s option to charge certain customers lower but never higher than the 8.5% limit. Itama lang natin.

3. Guard Against Cartelization

It can be argued that the ERC Commissioners committed a misjudgment when they inexplicably extended the deadline of the CSP implementation by six months that enabled Meralco to fast track the signing of 3,551mw of midnight contracts four (4) days before the new deadline. The courts will decide whether there were improprieties.

The ERC however has a clear obligation to assure that the negotiated contracts did not create a cartel and cartelization is clearly prohibited by the Epira Law. The ERC’s duty to investigate and assure that there is no cartelization cannot be disputed.

Your consumer organization MSK has filed a petition with the ERC to investigate and stop the resulting Meralco Cartel. This would be a loud indicator of for whom the ERC Commissioners bell tolls. Consumers or vested interests? Itama lang natin sana.

The ERC needs to be cured not abolished nor crippled. But let us wait to see which one they deserve. In many ways the fate of the institution is in their hands.

MatuwidnaSingilsaKuryente Consumer Alliance Inc. matuwid.orgdavid.mskorg@yahoo.com

Comparing Philippine Electricity Rates vs Asean – Just the Facts

David Celestra Tan, MSK

September 8, 2017

Most Filipino consumers know that every month their electricity bill takes a significant part of his budget.  And he better pay up or his lights will be cutoff.

One side of his brain is revolting but the other side is being brainwashed into believing that it is just life and all people are paying the same.  They are also told that the reason Meralco’s rates are high is because our Asean neighbors are subsidizing their power rates.

Recently some reports are headlined that Philippine power rates are the same as Singapore as if that should be a consolation.

So let us just get to the facts. What is the truth?

The Philippines is the highest in Asean together with Singapore at P5.84 per kwh. But that is only for the Industrial Sector. Still, Thailand is lower by 8%, Malaysia by 19.35%, Indonesia by 71.58%.

For Commercial customers, the Philippine rate for 2015 was P7.49 per kwh and Singapore was only 3% lower. Thailand was lower by 28.3%, Malaysia by 33.64%, and Indonesia by a whopping 71.30%.

 For Residential customers, The Philippine rate is the highest ay P8.90 per kwh and Singapore is lower by 18.32%, Thailand by 38%, Malaysia by 32.36%, and Indonesia by a mindboggling 85.51% at only P1.29 per kwh.  That is one hell of a government subsidy.

One reason our neighbors have lower rates is because they use more natural gas generation compared to us that uses more coal.  That is right, LNG. Despite this, your beloved Meralco negotiated with its sister company MeralcoPowerGen 4,011mw of power projects, all coal! Then they are unabashedly claiming that they are looking for “least cost power”.

Let us remember that in the case of Meralco, 30% of their energy sales are from Residential customers and 40% to Commercial customers. Both of these customer class are charged by Meralco at much higher rates.

Meralco’s charge to all classes of customers for generation is uniform at P4.1299 per kwh in December 2015. One reason their rate to industrial customers is the same as Singapore is because Meralco works hard and gives better deal to these contestable customers.

For example, Meralco’s systems loss charge to industrial customers was only P0.1681 per kwh or 4%.  This is lower than the systems loss rate that Meralco has been boasting about at 6.47% which beats the government limit of 8.5%. Admirable on the surface.

However, Meralco’s systems loss charge to commercial and residential customers as of December 2015 was P0.4322 per kwh or 10.46% of the generation charge which is the right way to compute it.

(Systems loss is the amount of power that Meralco purchases but lose in its system and not able to sell.  Its amount must be based on the amount of the average generation rate.)

The systems loss of 6.47% being publicized by Meralco is the average for all its customers. It is being tolerated by the ERC.  The law says the limit should be 8.5%.  Your consumer group MSK had filed a petition asking ERC to enforce the 8.5% for all customers, not average. So far we have not heard from them.

Currently, commercial and residential customers that comprise 70% of Meralco’s sales are being charged 10.46%, much higher than the 8.5% limit.  In effect, Meralco’s rate for industrial customers is lower partly because they charge them only 4% in systems loss, less than half what they charge us, the captive customers.

We believe the numbers also show that Meralco charges industrial customers lower for distribution, metering, and supply fees.

We also estimate that our Asean neighbors have much lower generation charges than Meralco’s P4.1299 per kwh in December 2015. We are sure if Meralco’s procurement for power supply that it passes on to the consumers are done on arms length manner and honestly trying to achieve least cost power as their franchise require, our generation rate will be much lower by 10 to 20%.

As long as the government is allowing Meralco and the other private DU’s to negotiate the power supply with sister companies and our rate setting methodologies are anti-consumer,  the Philippines will always have the dubious distinction of having the highest rate in Asean.

Being the same as Singapore in 30% of the user base is not good enough. Our economic rivals are Thailand, Malaysia, Vietnam. And we are at a big disadvantage against them in the critical power production cost.  Sadly, it does not need to be this way. Someone in the government especially the ERC just need to move for the consumers.

When will that happen?  We continue to hope. That’s all we have for now.

MatuwidnaSingilsaKuryente Consumer Alliance Inc.

Meralco’s CSP Of Solar Proves Consumer Benefits of True CSP … and the Excessive Cost of Fit Subsidies

David Celestra Tan, MSK

20 August 2017

Meralco, after their apparently successful circumvention of the CSP policy for their 3,551mw of 20 year coal power contracts, is now highly publicizing their embracing competitive selection process (CSP) for renewable energy supply, mainly solar. And it is quite revealing.

Meralco heralded their signing of contracts 50mw of solar power from Solar Philippines at P5.39 per kwh, another 50mw at 4.69 per kwh from PowerSource, and now 85mw at only P3.50 per kwh from Citicore on swiss challenge. All within a matter of months. Note that just a year ago in June 10, 2016 Solar Phils CEO Leandro Leviste announced that they can sell solar at P4.00 per kwh. Now Meralco is boasting that it signed for P5.39 per kwh? That’s a premium of P189 million a year! Was there a Loren factor?

Meralco also originally agreed to a P5.39 per kwh price with PowerSource out of a Bulacan location. The swiss challenge was submitted by Equis of Singapore at P4.69 per kwh which PowerSource immediately matched. It is curious that no one dared to challenge the P5.39 rate of Solar Philippines when there are at least 200mw of stranded solar projects that were left out of the 2nd fit despite meeting the March 2016 deadline.

Meralco apparently is content with boasting that these contracts are lower than the P8.69 per kwh FIT, a very high bar to beat easily.

Now Solar Philippines is offering only P2.95 per kwh in the Citicore Challenge! Yet another evidence that the consumers will get much better rates under a true CSP. Why don’t they just do a straight CSP for solar and RE? The difference is almost P2.00 per kwh and P4.69 under Solar FIT.

The solar alliance

Efforts through the National Renewable Energy Board (NREB) a government agency that seem to act as lobbyist for subsidies for the solar industry are continuing for more government (actually consumer) subsidies.

If we assume that the true market rate for solar is now at P3.50 per kwh which is on par with the international rates in the middle east and latin America, then the FIT losses of the government on solar is P5.19 per kwh. 500mw of solar projects in the 2nd FIT round would cost the consumers is P5.2 billion a year or P104 billion for 20 years on them alone.

Solar needs to be lower than coal and natural gas. Because solar is only intermittent with only 6 to 7 hours of generation and little when the rains, clouds, and typhoons come. The utilities still need to buy reserve power and for the remaining 18 hours of reliable continuous power supply. Even storage batteries become cheaper, solar power for the grid can be extended only a few hours during nighttime. Storage batteries can be more economical for rooftop solar when homeowners use more power at night peak. To the solar lobbyists who go overboard and claim that they can replace coal, geothermal, natural gas, just try to be more realistic. It is ruining the credibility of solar.

There is nothing wrong with establishing Renewable Power Standards or RPS with a target minimum of utility purchases and RE installations. However, they must be all subjected to straight competitive bidding. Swiss Challenge is not really competitive because few people decide to really take the time to bid, only to be matched by a favored proponent.

We, and Meralco, have seen the good results of competition for consumers. Why are we insisting on all sorts of variations that only hoodwink us into believing it is a CSP. The drop in international rates for solar had been known even before they finalized the P8.69 rate. Why did we even continue to dole out those subsidies?

Filipino electric consumers do not really get any respect. They are the meek and subservient people to take advantage of. And the government is of no help either.

When will we get a savior?

Matuwid na Singil sa Kuryente Consumer Alliance Inc.

matuwid.org

david.mskorg@yahoo.com

LIGHT ON THE DARKNESS OF CORRUPTION OF ELECTRIC COOPERATIVES IN MINDANAO

By David A. Tauli, President, Mindanao Coalition of Power Consumers

In the year 2104, sixteen electric cooperatives in Mindanao entered into long term power supply contracts with the 405-MW coal power plant of FDC Misamis Power Corporation located in Villanueva, Misamis Oriental, at a price of 5.40 pesos per kilowatt-hour. These power supply contracts were anomalous, having been entered into by the ECs by violating the requirement of the EPIRA for distribution utility companies to carry out least-cost acquisition of power supply for their consumers. This requirement for least-cost acquisition entails among others that the distribution utility companies should carry out public bidding for their power supplies. No public bidding for power supply was carried out by any of the ECs that entered into the anomalous power supply contracts.
In the same period when the miscreant ECs entered into power supply contracts with the FDC coal power plant, two other coal power plants, the 405-MW coal power plant of GNP in Kauswagan, Lanao del Norte and the 300-MW coal power plant of San Miguel (SMCPC) in Malita, Davao del Sur were also offering long-term power supply contracts at prices of around 4.00 pesos/kWh and 4.20 pesos/kWh, respectively. Thus, the deviant ECs would be defrauding their member-consumer-owners (MCOs) in the amount of at least 1.20 pesos per kWh of power supply from the FDC coal plant, and enabling the FDC Misamis Power Corp to earn exorbitant profits in the same amount per kWh. The estimated additional profits of FDC-MPC from the anomalous contracts would have been at least ninety (90) billion pesos over the 25 years of commercial operation of the coal plant.

ERC’s Reasons for Postponing CSP Implementation Weak and Not True.

Evelyn VirayJallorina, Alyansa Para saBagongPilipinas

16 July 2017

The justifications being given by the Commissioners of the Energy Regulatory Commission for their postponement by six months of the implementation of the Competitive Selection Process, or CSP bidding policy,  are weak, not true, and only shows that the ERC abused their discretion. Effectively they deprived the consumers the protection from the sweetheart prices and terms from negotiated power supply contracts between sister generators and distribution utility.

In their recent press statements, Commissioners Taruc and Non of the ERC claimed that “the extension of the CSP implementation was not intended to benefit any electric power industry participant, but to give time to those who have already completed their power supply agreements [PSAs] but failed to submit the same to the ERC prior to the effectivity of the CSP,”

They further claimed “The ERC, soon after its promulgation of the CSP in November 2015 until April 2016, received letter-inquiries from DUs and gencos assailing the legal implications of the CSP to the PSAs that are currently existing, due for renewal, submitted to the ERC for approval, or otherwise already executed.”

These Meralco statements are not truthful.

ABP has documents to prove that the ERC received only seven requests for reconsideration from distribution utilities who had signed power supply agreements as of the November 6, 2015 but had not yet filed their ERC applications. The total was less than 500mw. Meralco itself had one request for an interim supply for the summer of 2016. Instead of addressing these specific requests for additional time to file during a transition period, the ERC Commissioners inexplicably deferred the implementation of the CSP effectivity by six months from November 6 2015 to April 30, 2016. This is serious abuse of discretion.

The biggest beneficiary of the six month postponement was Meralco and its sister company MeralcoPowerGen who on April 26, 2016, just four (4) days before the new deadline of April 30, 2016, signed four PSA’s totaling 2,656mw and the following day on April 27, 2016 signed two more totaling 670mw. Only one contract of the seven (7) midnight contracts signed by Meralco was signed on April 20, 2016. It was for 225mw with Redondo. The ERC applications of the seven (7) midnight contracts were all filed at 7am on April 29, 2016, the day before the new April 30, 2016 deadline set by ERC. All seven contracts are with joint ventures owned 49 to 51% by MeralcoPowerGen.

These seven Meralco PSA’s effectively circumvented the CSP policy with the assistance of the ERC who conveniently postponed the implementation of the deadline. This denied the consumers the benefit of true bidding with a minimum higher generation charge of P12 billion a year.

The Alyansa Para saBagongPilipinas had filed a criminal and administrative complaint with the Office of the Ombudsman against the ERC Commissioners.

Meralco

Meralco for its part claims that they are not one of those who wrote ERC asking for the CSP postponement. “there is absolutely no factual basis to claim that these are  ‘midnight contracts’,” Lawyer William S. Pamintuan, Meralco first vice president and head of legal and corporate governance, cited that in fact, negotiations on one of the contracts “started way back in 2012 and was only concluded and signed in 2016.” Meralco negotiated these PSAs in utmost good faith and the resulting rates and other terms and conditions that were filed before the ERC are very competitive and favorable to consumers,” he stressed.

Meralco further noted that “each of the PSAs had undergone a very rigorous, lengthy and at times, contentious negotiation process with the generation companies which actually took many months and years before these agreements were signed and filed with the ERC.”

Meralco’s half truths

Meralco’s assertions are self-serving claims.We can grant that Meralco’s contract negotiations with its sister company MeralcoPowerGen were “very rigorous, lengthy, and contentious” but they cannot credibly claim that they did so for the least cost interest of the consumers. The only way to really do that is to open the contracts to true competitive bidding.
As to Meralco’s claim that they were not one of those who wrote ERC for consideration on CSP deadline. This might be technically true. But it is a matter of record and media that Meralco had been asking for a delay of the implementation of CSP. They also asked for voluntary CSP.  They don’t want a Third party to oversee the CSP. Their Chairman said the CSP is illogical and will work against the consumers. They even threatened ERC with a lawsuit.

Meralco is also reported to have been informally lobbying in the months of October 2015 to February 2016 with ERC to be allowed to do “swiss challenge” bidding which is clearly intended for them to control the process and the awards.

In the American TV show “law and Order”, one of their tricks in finding the motive for a crime is to “follow the money trail”. Who will benefit most from the crime?  In the mysterious ERC postponement of CSP by six months, the party who would most benefit was Meralco who had  been busy negotiating for months with “strategic partners” who are willing to be Meralco’s minority partner.

But the fact of the matter is as of November 6, 2015 they were not even close to signing an agreement with these partners. As of April 30, 2016, they don’t appear to even have a partner for the 1200mw Atimonan One.  Aboitiz was identified as the partner months after.

Meralco spokesmen claim that one of the contracts started negotiations in 2012. He is referring to Redondo. But the delay was not because of contract negotiations but because of the writ of kalikasan environmental opposition to the Subic coal plant.

The ERC Commissioners are not being truthful on the postponement and it is borne by their weak argument and evidence. Both ERC’s and Meralco’s alibi’s are contradicted by evidence…..and simple logic.

Alyansa para saBagongPilipinas (ABP)

 

Power Crisis Would be Coming If We don’t Act Now!

David Celestra Tan, MSK

4 July 2017

The National Capital Region, the nerve center of the country’s economic activity, will soon be facing a “power crisis” sometime between October 2017 to March 2018. Or there would be a big spike in the WESM prices that will be blamed on lack of power supply.Or both.

All it will take is a confluence of events like several coal plants declaring downtimes due to “boiler leaks”, hydro power being low, NGCP power grid problems, Malampaya shutdown, and etc.

Then the media campaign will go on the high gear for the fast approval of pending MeralcoPowerGen projects (remember the seven (7) midnight contracts totaling 3,551mw). The energy family, the power committees of Congress, the DOE, the ERC, PEMC, NGCP, and DENR will also rise in unison to “protect the public and consumers” and call for the urgent approval of power generations projects, conveniently 80% of which are Meralco’s negotiated power supply projects.

Conveniently they will blame the consumers groups specifically ABP, Bayan Muna, and MSK for causing the delay in these negotiated projects. ABP for filing cases at the Supreme Court and Ombudsman.Bayan Muna for launching a congressional investigation.All effectively freezing the Energy Regulatory Commissions processing and approval of the negotiated contracts. The DOE itself is ominously silent on the issue.

MSK for its part feel that these 3,551mw of midnight contracts, all with project companies controlled by MeralcoPowerGen, the 480mw of Mauban expansion called San Bernardino Power, and the Metro Pacific’s purchase of controlling interest in the 1,000mw Global Business Power, which also now purchased 50% of the Alsons coal projects in Mindanao,will result to evident and alarming monopolization and cartelization of the power generation sector, something that the Epira Law had mandated the ERC to guard against as part of its motuproprio duty. MSK had accordingly petitioned the ERC to suspend the processing of these Meralco project applications and hold hearings first to determine if these projects will create harmful monopolization, market power abuse, and cartelization. ERC seems not interested in making that determination or they are too busy dealing with the convolutions of their suspended Chairman.

The Calm Before the Storm

All these could be part of the orchestrated calm before the storm. Meanwhile, the Meralco coal projects and their strategic partners continue to announce the pursuit of pre-construction activities like DENR and BOI approvals, award of EPC contracts, project finance packaging.

Why is everyone so quiet? This is the calm before the storm.

If the ERC is unable to act because they were the ones who extended the CSP implementation deadline that allowed these Meralco contracts to sneak in just days before the new deadline of April 30, 2016, it is curious why the Department of Energy whose job it is to assure power supply development, is staying clear of the subject. Instead they are saying the DOE is technology neutral or the cuter word “technology agnostic”. The Supreme Court also had not acted.

Power Crisis Syndrome

The power generation oligarchy saw it worked wonderfully during the power crisis of 1990’s. A power starved or threatened nation will beg for power supply at whatever cost or at whatever shortcutting of competitive processes. That’s the “power crisis syndrome” that now, 25 years later, is still being used again and again whenever they want to ram power projects through the throat of the hapless consumers.

The consumers can only continue to hope for a savior. Meanwhile we are down on our knees praying or begging.

 Let us brace for the coming power crisis. real, imagined, or staged.

Let us act now before it is too late!

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
Matuwid.org
david.mskorg@yahoo.com