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)

 

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