Can there Still be A truly competitive CSP with 5 Major IPP’s Partnering with Meralco PowerGen in a Cartel?

David Celestra Tan, MSK

Meralco PowerGen’s cartel has currently proposed 4,100mw of coal projects with five (5) major erstwhile independent power generators that on their own also control about another 5,000mw of power plants. That’s 80% already of the country’s power generation supply and 90% of Meralco’s power market.

Erstwhile rival San Miguel is now partners with the MVP Group in two 528mw coal projects and may have entered into partnership in the 1200mw Ilijan natural gas plant. EGAT of Thailand is in a 49% partnership in the San Buenaventura 455mw coal project in Mauban. EGAT also has acquired a significant interest in the 460mw Masinloc plant controlled by AES. MVP Group has acquired 56% of GT’s Global Business Power and GT bought a 15.6% interest in Metro Pacific. Maynilad water partner DMConsunji is also now a partner of Meralco PowerGen for the 400mw Semirara coal project in Calaca. The Aboitiz group for its part is partners with Meralco for the 300mw Redondo Peninsula Coal project in Subic.

With so much concentration and cross-ownership of power generation in one aggrupation how can true competition still exist in the generation market place, both in competing for bilateral contracts and bidding for the WESM spot markets?

Let’s assume that the government realizes the importance of maintaining or restoring a truly competitive generation market and the devastating impact of cartelization, negotiated contracts, collusion to the people and national competitiveness. And it also decides to stop this crime against consumers and evasion of the CSP policy, can there still be a truly competitive bidding given the dominant concentration of generating capacity in the country in the Meralco group? Would they not just collude among themselves and bid even higher just to prove that their negotiated prices were the “least cost”?

The government should not be afraid. Luckily there are enough remaining independent players both local and foreign who can be the core of a truly robust bidding, the kind that will be least cost for the consumers.

Ayala Energy, Filinvest of the Gotianuns, TeamEnergy of Japan, Kepco of Korea, AES of the USA, Energy World of Australia, First Gen and EDC of the Lopez Group, and more local groups TransAsia, GNPower, Conal of the Alcantara Family of Mindanao, and PeakPower Group of the Ng Family. Not to mention additional Japanese, Korean, and Canadian companies who are actively looking at Philippine projects. If Ayala and GNPower end up the partner of Meralco in the 1200mw Atimonan Energy One, then they also lose their independence.

These are highly qualified power generating companies with the kind of resources to offer truly competitive energy supply packages and innovative ideas and technologies. They have not yet been conflicted by a partnership or cozy relationship with Meralco PowerGen or the MVP Group.

The Aboitiz and San Miguel Groups participation in the Meralco cartel is not beyond repositioning and they may still be genuine players in a truly competitive bidding.

Only three serious bidders are needed for a healthy competition as long as at least two of them are not from the Meralco cartel.

We don’t believe potential independent bidders will be the problem in trying to hold a truly competitive CSP. It would be administering properly the bidding so that Meralco cannot tilt the playing field and favor their partners.

These still independent companies need to be assured and see that this type of open and competitive bidding will be implemented by the government at least through the 6 year term of President Duterte. Otherwise they will hesitate to offend the Meralco group if there is a chance that down the road they will need to beg for power supply contracts with them. It costs million dollars to prepare a good bid for major projects.

These independents will be looking for signals that it will be truly open, competitive, and transparent.

1. The government must reiterate a commitment to the CSP policy and the ERC must send the signal that it is honestly implementing it.

2. There must be an independent Third Party bid administrator to assure a proper bidding of proper capacities.

3. The winner must be objectively determined and truly awarded.

4. The CSP is the opportunity for the DOE to put an imprint on the nations power supply with its energy mix strategy.

For all its loopholes, the Epira Law is clear in its mandate that the generation sector shall be “competitive and open”. When we do that, we are able to achieve the twin goals of the Epira Law. 1) adequate power supply in the country for the long term is assured by keeping the market open to new and competitive investors. No barriers to entry. and 2) to achieve fair and reasonable rates supplied in the least cost manner through the maintenance of healthy competition in the market.

In addition to the Epira Law, Let us hold true to the spirit of the Philippine Competition Act, a landmark milestone for maturation of the Philippine government and society. It took us decades to get this far in anti-trust protection of consumers. Let us show that we are mature enough to implement seriously such an enlightened law.

Let us not be afraid in preventing Meralco and the MVP Group from monopolizing and cartelizing the power generation sector. If that is allowed to happen the EPIRA law would be for all intents thrashed as a law and aspiration. Let us not kid ourselves anymore. The millennials? They are still unaware because we the parents are paying for the monthly electric bill. It is supposed to be up to us adults who should try protect their generation. And we are failing. Ironically it can happen under an era when we are supposed to be determined to fight crime and corruption.

Franchise holders of public utility services must be expected to serve the public interest and not be exploitive. There are still enough highly qualified power generation players comfortable with the Philippines who can participate in an honest to goodness bidding. It is not yet very late!

Do we have what it takes? We owe it to our people.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.


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