David Celestra Tan, MSK

Updated 22 April 2017 from 8 November 2016

The inexplicable postponement by the ERC of the policy requiring competitive biddings for power supply contracts by five (5) months and 20 days from November 6, 2015 to April 30, 2016 caused so much brouhaha that the future power supply of the country in Luzon is now threatened.

ERC’s deferment enabled Meralco to fast track the signing ofseven (7) midnight power supply contracts totaling 3,551mw purportedly with various power generators that turned out to be all majority owned by its own subsidiary MeralcoPowerGen. The contracts were signed on April 26, 2016 and  filed with the ERC at 7am on April 29, 2016, just beating the new extension given by the ERC of April 30, 2016. The contracts with five different companies have similar language and pricing formula and obviously came from one template. Signed on the same day!

Uproar among consumers

Consumer advocacy groups smelled a rat in the apparent evasion of the CSP policy and filed cases seeking nullification of the ERC resolution 1 of 2016 and the suspension of the ERC hearings on the approval of the power supply contracts. Alyansa Para saBayangPilipinas or ABP filed a lawsuit in the Supreme Court to nullify the extension of the CSP by the ERC. ABP also filed an administrative anti-graft case against the five ERC commissioners.  Party-list Bayan Muna had called for Congressional investigation in aid of legislation of the alleged midnight contracts signed by Meralco with several partners but all controlled by MeralcoPowerGen.

Your organization MSK itself had filed a petition seeking the suspension of project approval hearings until the ERC resolves first it’s obligatory“motuproprio” review of the evident monopolization, market power abuse, and cartelization of the power market by Meralco and its affiliate MeralcoPowerGen. ERC’s obligation is mandated under Section 43 of the Epira Law of 2001.

The threat that is being floated is that all these lawsuits to stop Meralco’s 3,551mw of new power supply with indicative completions of 2021 and 2022 will result to debilitating power shortages in the future and well within the term of President Rodrigo RoaDuterte.

Who is to blame here? The people who are evading the CSP rules or the consumer groups who are seeking to protect the consumers from such actions? After all it is estimated that the overprice in the negotiated power rates is about P12 billion a year for 20 years compared to the rate that they can get from a truly open competitive bidding.

Meralco is claiming urgency and scaring the people about power shortages and brownouts. The truth is of the 3,551mw only 70mw (2%) was coming on line in 2016. Meralco’s previous 440mw San Buenaventura coal project in Mauban is scheduled for 2018. (not one of the 7 new contracts) That’s two years from now.  Most of the new 3,500mw will come on line in 5 to 7 years yet.  It takes only 3 to 4 yearsto build those coal power plants. We still have one year to go through an honest to goodness competitive bidding.

A Challenge to Meralco and the DOE and ERC

To settle all arguments on competitive power and how that can be achieved better, by “aggressive negotiation” with sister companies as claimed in Meralco propaganda or by truly open bidding, why don’t we hold even one pilot biddings now?

The DOE, which is tasked to assure sufficient supply of power at fair and reasonable rates can push for biddings now. Perhaps a 300 to 500mw generation projects in Luzon, one with coal and another in natural gas, that would be administered by an independent third party and where only the truly independent power generators can participate or at least there should be a minimum of three independent bidders in the competition mix. (Meralco’s chosen partners in the seven (7) midnight contracts have been compromised and should not be allowed to participate in this pilot project intended to show truly independent bidders can result to better rates).

There are still independent bidders that may not be hopelessly compromised. Ayala Group, TeamEnergy of Japan, AES of USA, Kepco of Korea, Filinvest of the Gotianuns, GN Power, PeakPower of the Ng Family, First Gen of the Lopez Group, Energy World of Australia, TransAsia.   Other Japanese, Korean, Singaporean, French and Canadian companies looking to participate in power generation.

This future supply in Luzon can even be offered by 2,000mw of coal projects in Mindanao if DOE steadfastly pushes for the completion of the power transmission interconnection between Mindanao and the Visayas and Luzon grid by 2020.

True Competitive Bidding not Swiss or Price Challenge

The DOE promoted biddings will also open the generation market to more investors and not only to the ones anointed by Meralco and the MVP Group that controls it. This is the right way to assure future additions to power supply in a sustainable manner. By tearing down the “Berlin wall” barrier to entry to the generation market that negotiated contracts present. 

By bidding, we don’t mean the swiss or price challenge type that the MVP Group had been lobbying for because that type is a sham competitive bidding.  It is rigged in favor of the supposed “unsolicited proponent” especially if it is the subsidiary of Meralco and MVP Group.  It doesn’t even comply with the true wordings of the BOT law that allowed such unsolicited proposals.  We are just playing games with the public.

Let us hope that the Court cases will be resolved soon enough. Finding someone to blame does not serve the public interest.  Meanwhile, we need to keep in mind the two important things. The country’s need for sufficient power supply to meet the demands of our growing population and economy and for competitive, fair, and reasonable rates.

The bidding process could take a maximum 12 months. Less if administered by a truly capable third party consultant. This would be way enough time to build plants within 4 to 5 years.If the DOE, ERC, Meralco, and the Energy Committees of Congress really want to assure there is sufficient power supply in the future,  why not hold legal and truly competitive CSP biddings now?  Otherwise, power shortage can become a self-fulfilling prophecy.

How about it sirs?