Will the ERC and DOE Remake Themselves as a result of the Supreme Court Ruling on Meralco CSP? (Part 3)

David Celestra Tan, MSK
14 June 2019

In the ongoing saga of the MVP Group’s money making schemes to also monopolize power generation and charge Meralco customers self-negotiated sweetheart electric rates for the next 20 years,  the cause oriented group Alyansa Para Sa BagongPilipinas (ABP) had petitioned and the Supreme Court had spoken that ERC’s extension of the date for the effectivity of the CSP policy is beyond its authority and therefore illegal. Consequently all power supply contracts that were applied with the ERC after November 7, 2015 should undergo competitive selection process or bidding.The biggest lot of those is Meralco’s seven (7) PSA totaling 3,551mw with a guaranteed 28 Billion kwh a year sales for 20 years, fully 80% of the energy needs of the National Capital Region.

In its ruling GR 227670 the Supreme Court not only ruled on that issue but also reiterated enlightening provisions of the Constitution on other aspects of jurisdiction, governance, and autonomy related to ERC that the regulatory agency had been ignoring for a long time. If heeded, these constitutional reminders would have long term implications on the ERC and DOE as oversight institutions for the public interest.

Here are some excerpts of the Supreme Court Decision:

  1. On Page 2 on unfair competition and protection of public interest

Section 19, Article XII of the 1987 Constitution provides: “The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.”

The State grants electricity distribution utilities, through legislative franchises, a regulated monopoly within their respective franchise areas. Competitors are legally barred within the franchise areas of distribution utilities. Facing no competition, distribution utilities can easily dictate the price of electricity that they charge consumers. To protect the consuming public from exorbitant or unconscionable charges by distribution utilities, the State regulates the acquisition cost of electricity that distribution utilities can pass on to consumers.

As part of its regulation of this monopoly, the State requires distribution utilities to subject to competitive public bidding their purchases of electricity from power generating companies. Competitive public bidding is essential since the power cost purchased by distribution utilities is entirely passed on to consumers, along with other operating expenses of distribution utilities. Competitive public bidding is the most efficient, transparent, and effective guarantee that there will be no price gouging by distribution utilities.

x-x-x

Section 6, Article XII of the 1987 Constitution provides: “The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands.”

Indisputably, the use of electricity bears a vital social function. The State, in requiring competitive public bidding in the purchase of power by distribution utilities, has exercised its constitutional “duty x xx to intervene when the common good so demands. “

  1. Page 16 Functions of DOE and ERC

Thus, the very first mandate of the ERC under its charter, the EPIRA, is to “enforce the implementing rules and regulations” of the EPIRA as formulated and adopted by DOE. Clearly, under the EPIRA, it is the DOE that formulates the policies, and issues the rules and regulations, to implement the EPIRA. The function of the ERC is to enforce and implement the policies formulated, as well as the rules and regulations issued, by the DOE. The ERC has no power whatsoever to amend the implementing rules and regulations of the EPIRA as issued by the DOE. The ERC is further mandated under EPIRA to ensure that the “pass through of bulk purchase cost by distributors is transparent [and] non-discriminatory. “

  1. Page 20 Independent Power of the ERC

In the present case, where there is no exercise of the ERC’s quasi-judicial powers, the ERC is legally bound to enforce the rules and regulations of the DOE as authorized under the EPIRA. The ERC has no independence or discretion to ignore, waive, amend, postpone, or revoke the rules and regulations of the DOE pursuant to the EPIRA, as it is horn book doctrine that rules and regulations issued pursuant to law by administrative agencies, like the DOE, have the force and effect of the law.  In fact, the first duty and function of the ERC under its charter is to “enforce the implementing rules and regulations” of the EPIRA as issued by the DOE. Certainly, the ERC has no power to ignore, waive, amend, postpone, or revoke the policies, rules, regulations, and circulars issued by the DOE pursuant to the EPIRA.

  1. Page 21

In any event, even in quasi-judicial cases, the ERC is bound to apply the policies, rules, regulations, and circulars issued by the DOE as the ERC has no power to ignore, waive, amend, postpone, or revoke the policies, rules, regulations, and circulars issued by the DOE pursuant to the EPIRA. To repeat, the DOE’s rules, regulations, and circulars issued pursuant to the DOE’s rule-making power under the EPIRA have the force and effect of law which the ERC is legally bound to follow, whether the ERC is exercising executive, quasi-legislative, or quasi-judicial powers.

 

(Emphasis are ours)

ERC

Considering that the legality of the Meralco power supply contract applications have delayed the power development of the country by 3 years, the compelling question is what will the affected institutions, ERC, Meralco and its 5 partners, and DOE, do? Will they continue fighting the legal issue, protract the impasse,  and not care about the delay in the nation’s power supply? Will the consumers be held hostage again and will the government passively watch as Luzon’s power supply deteriorate?

The new ERC will be tested on what they hold important, Self-interest or public service? Will they continue fighting for their domain over the power sector and put self-empowerment first over focusing on averting a power crisis by starting in earnest to making enough of the Meralco projects comply with legitimate CSP?

 a. Jurisdiction, power, and autonomy of ERC

Is the ERC willing to temporarily loosen its grip on its empire?

Almost from the beginning, the series of trapo politicians that were made Chairmen of this supposed public interest agency from 2003 to 2018, worked hard at protecting its power and jurisdiction over the power industry domain. As politicians steeped in the culture in Congress, they evidently wanted absolute power over a sector that the private entrepreneurs and oligarchs discovered they can profit handsomely, especially if they capture the regulators. The seasoned politicians effectively kept at bay past attempts by the DOE, Congress, and the Courts to influence the regulatory agency’s power by arguing they are an independent body and stigmatized any input from other government agencies as “meddling”.

This assertion by ERC of absolute power led to the regulatory agency’s total disregard for power policies set by the Department of Energy, the mandated policy making body under the EPIRA law. ERC routinely tries to appear to be in synch with the policies set by the DOE but in the process of implementation, they exercise so much privilege that they often violate if the not the word but the spirit of the DOE policies.

In fact, on the ruling by the Supreme Court years ago that Meralco as a public utility should be entitled to only a 12% annual return on their investment, the ERC evidently felt they were above the Supreme Court when they adopted the rate setting methodology PBR that effectively deregulated the profits of Meralco who is now making officially 25% return on equity.  Asked in a hearing on PBR, two senior commissioners declared in open court that they did not have to follow because the Supreme Court ruling was “no longer applicable when ERC changed the methodology to PBR and that the 12% return is no longer valid because “economic conditions had changed”. (Who brainwashed them?)

It is under this kind of hubris that the ERC evidently felt they can get away with fooling around with the implementation of the CSP policy from November 7, 2015 to April 30, 2016, despite them turning down Meralco’s request as late as January 2016 to be allowed to do swiss challenge type CSP.

What happened in February 2016 that made ERC change its mind and incongruously “clarified the implementation date of the CSP to April 30, 2016, a full 176 days after the original date? Most Filipinos can guess correctly on this one.

b. ERC’s mandate under the Epira Law

RA 9136 or the EPIRA Law of June 2001 indeed gave ERC a lot of power, many of them even motuproprio and all for the purpose of protecting the public interest. The most important of which is insuring the fair and reasonableness of the rates. It is true that previous ERC’s invoked those other non-rate setting powers like Section 43 sub-sections f,o,r,  whenever convenient but rarely in the genuine intent to serve the public interest.

Now the Supreme Court is saying they must implement only the policies laid down by the Department of Energy which had the effect of law. And we interpret that to mean not to exceed or contradict one whenever a policy had been established by the DOE.

A current case in point, the DOE had issued in February 2018 a Guideline for the procurement of power supply for the Distribution Utilities. And the ERC has been working on coming up with its own implementing guidelines of such policy. It is now in its 3rd draft and interestingly, while the DOE circular and expressed clarifications did not provide for unsolicited proposals or swiss challenge type biddings, ERC’s guidelines is devoting fully 1/3 of its pages to rules on unsolicited proposals and swiss challenge.

So the question is will the new ERC now respect the authority of the DOE to set policies and rules and not freelance and exercise privileges with their own implementation rules?

c. Will there an advent of a New DOE?

DOE is the reverse of ERC. They were given a clear mandate by the law to insure that there would be sufficient supply and least cost power with broad policy powers.  For many years they seem to have accepted that their job is to formulate and issue policy. And be contented that the implementation is left up to the discretion of the ERC, NEA, NPC, PSALM, come hell or high water.  One recent Secretary of Energy lamented that they don’t have enforcement capability, a sad perspective.

For the last 15 years one reality has been hitting DOE and that is when things are going wrong in the power sector, regardless of privatization and deregulation, it is the DOE that the people and the legislators are holding responsible.

Yellow and Red Alerts

In the recent case, yellow and red alerts started lighting up in the Luzon grid, and the JCPC called the power players to hearings. It was admirable that the DOE officials were trying to explain except they really could not provide the answers and solutions to the mysterious coincident downtimes of the power generators in Luzon.  The reason is it is really Meralco, to whom those power plants are contracted to, who is capable of ensuring the performance of these power plants and shepherding their downtime schedules.

It is evident they themselves feel it is DOE’s responsibility to make sure there is enough power supply and reserves and that the prices do not skyrocket. But they must stop thinking that their job is passive and only persuasive in making things happen.

Now the Supreme Court had clearly spoken.  It is the job of the DOE to establish policies and guidelines and those will have the effect of law.  ERC’s job is to implement the policies set by the DOE.

It is true that in the past the ERC was forced to write more implementing guidelines to executive the vague and motherhood guidelines set by the DOE or where the later had not written one.  For example, the implementation of Section 45 of the Epira law on limiting the market share of the owners of Meralco to only 50% of the power utility’s demand and energy needs. Some people managed to dilute the Epira law by writing a different way of implementation under Rule 11 of the Epira IRR in 2004. This has been paving the way for the MVP Group that controls Meralco to covet 100% of the contracts of Meralco’s power supply….. because they could.

But since the DOE had evidently not even recognized the illegality of Rule 11 through the years, the ERC had been implementing it in their own way and in their own time.

Now the DOE needs to step up and provide clear guidelines, monitor their implementation, and take proactive action if say power supply is not materializing on time.

This will require DOE to remake itself from a passive issuer of policies and rules and gatherer of statistics on evolving power development, to a proactive enforcer and pursuer of power development objectives if the private sector is not getting it done on time or the right way. The people is expecting that from the government and DOE.

The Supreme Court message is clear…..but will the ERC and DOE heed the call?

 

We will see soon enough in the rest of the year.

 

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph

The Supreme Court Decision was supposed to be a Consumer’s Checkmate on Meralco’s 7 Midnight PSAs….It Turned Out to be a Stalemate! Bummer! (Part 1)

David Celestra Tan, MSK
26 May 2019

Consumers and Cause Oriented Groups were overjoyed when the Supreme Court issued a decision last 17 May 2019 granting the petition of Alyansa Para saBagongPilipinas (ABP)to declare the extension of the CSP policy by ERC from November 7, 2015 to April 30, 2016 to be beyond its authority and therefore illegal and null and void. We all felt it is a major consumer victory and checkmate of the monopolizing Meralco.  Alas, Meralco power supply contracts will be subjected to true competitive selection process or bidding.No more negotiated contracts between sister companies! It is going to be a wonderful world for consumers! So we thought!

Sorry Aya, Sorry Noel, Sorry Neri, Sorry Meralco consumers.  I think we are wrong! When we read the full SC decision in GR No. 227670, there were odd things about it. Parts of it are out of tune. It is like listening to the victory song in Les Miserables and hearing the enemy marching in the background. Did the Supreme Court make a mistake?  We asked a retired Justice.  He said we may disagree with the decision, but the SC rarely makes a mistake in writing its decisions. It means whatever they wrote and the words they used are intended to be there. Just to repeat, the SC doesn’t make a mistake in writing decisions. Whatever is there is intended to be there.

Having said that, Lets talk first about the Great Things about the Supreme Court Decision.

1. It reiterated the constitutional obligation of the government agencies, particularly the DOE and ERC in protecting the consumers and promoting true competition.

“Section 19, Article XII of the 1987 Constitution provides: “The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.”

The State grants electricity distribution utilities, through legislative franchises, a regulated monopoly within their respective franchise areas. Competitors are legally barred within the franchise areas of distribution utilities. Facing no competition, distribution utilities can easily dictate the price of electricity that they charge consumers. To protect the consuming public from exorbitant or unconscionable charges by distribution utilities, the State regulates the acquisition cost of electricity that distribution utilities can pass on to consumers.

As part of its regulation of this monopoly, the State requires distribution utilities to subject to competitive public bidding their purchases of electricity from power generating companies. Competitive public bidding is essential since the power cost purchased by distribution utilities is entirely passed on to consumers, along with other operating expenses of distribution utilities.

Competitive public bidding is the most efficient, transparent, and effective guarantee that there will be no price gouging by distribution utilities”.

 It is a breath of fresh air!

2. It clarified that the function of the ERC is to enforce and implement the policies formulated, as well as the rules and regulations issued by the DOE.

“Thus, the very first mandate of the ERC under its charter, the EPIRA, is to “enforce the implementing rules and regulations” of the EPIRA as formulated and adopted by DOE. Clearly, under the EPIRA, it is the DOE that formulates the policies, and issues the rules and regulations, to implement the EPIRA. The function of the ERC is to enforce and implement the policies formulated, as well as the rules and regulations issued, by the DOE. The ERC has no power whatsoever to amend the implementing rules and regulations of the EPIRA as issued by the DOE. The ERC is further mandated under EPIRA to ensure that the “pass through of bulk purchase cost by distributors is transparent [and] non-discriminatory. ”

“In any event, even in quasi-judicial cases, the ERC is bound to apply the policies, rules, regulations, and circulars issued by the DOE as the ERC has no power to ignore, waive, amend, postpone, or revoke the policies, rules, regulations, and circulars issued by the DOE pursuant to the EPIRA. To repeat, the DOE’s rules, regulations, and circulars issued pursuant to the DOE’s rule-making power under the EPIRA have the force and effect of law which the ERC is legally bound to follow, whether the ERC is exercising executive, quasi-legislative, or quasi-judicial powers.”

This is an important reminder because since the tenure of the 3rd ERC Chair, the ERC has been arrogating its stature as an independent body, creating its kingdom, co-equal even to the courts, and  free to write its own guidelines based on its own interpretation of the law. Many of those are contrary to the policies handed down by the DOE. 

It is this mind-set that apparently emboldened the ERC to ignore the Supreme Court ruling in 2005 that public service utilities should only be allowed a 12% return on their investment. They still adopted the PBR rate setting methodology that essentially deregulated the profits of distribution utilities which in Meralco’s case has been reaching 25% per year, double what the Supreme Court ruled was the limit. Never mind that the Epira Law of 2001 clearly says the Distribution Sector is regulated.

We hope with this new Supreme Court ruling on the limits of its discretion, the ERC can be more sanguine and usher in an era where both the DOE and ERC are pulling in the same direction.

At the same time we hope it will serve as a reminder to the DOE that they have a big responsibility to see that their own policies are actually implemented.

There are however Curious omissions and additions in the written decision of the Supreme Court

These are the things that are odd and sticking out like sore thumbs in such a wonderful and enlightened interpretation of the law.

Next: The omission and addition to the Supreme Court decision that would stalemate the DOE and the Consumers.

 

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph

Wake Up Calls For All of Us On Power Yellow Alerts…Whose Job is it Anyway?

David Celestra Tan, MSK
23 April 2019

The Yellow and Red alerts of power shortages should wake up all of us towards the reality that a power crisis can be upon us and can have devastating impact our economic boom years. The blame game is going wild so let us take stack and see who should be waking up and for what reality.

1. You, I, and the Public

We the consumers have a lot of waking up to do. It is quite scary that in the face of a power crisis we the consumers would lose however it is resolved.

If the power crises happens we will be down on our knees begging for electricity at any price, by any method, and no matter how dirty. To avert these blackouts, new power plants will need to be built. And guess whose new power projects are being rammed through our throats? 4,005mw of MeralcoPowerGen’s all coal projects no less….and counting.

In case you have not heard, seven of these contracts totaling 3,551mw are stuck in legal controversy since 2016 brought about by ERC itself. The Prices and terms that will be charged to you and I were just negotiated between Meralco and its sister companies. One called Atimonan One with 1,200mw has a published rate with ERC at P3.75 per kwh but if updated to current exchange rate, inflation, and coal fuel, is actually now P5.65 per kwh. And who knows what else are hidden in the secret provisions that they asked not to be disclosed to the public? In short, if those MeralcoPowerGen contracts are approved as we, the ERC, and the DOE, and probably the Supreme Court are being manipulated to agree to, we the consumers are screwed and stuck with sweetheart prices and terms for 20 years. And those pass on charges are not small. PowerGen is cornering 80% of the energy needs of Meralco.

That happened in April 2016, three (3) years ago. Since then, no new power projects were announced, either by Meralco, Aboitiz, and their cartel partners. The power development of the country is at a standstill and it seems everything is being bet on those Meralco contracts. Meralco by the way as the largest distribution utility is exerting its market control since no major power project will happen without them agreeing to be a buyer. And they will not agree unless….you know the rest of the story.

It is depressing to wake up to the reality that we as consumers are screwed either way. If it were a game of chess, “mate natayo” even before we realize there is even a game going on. And what is worse is the feeling that no one is truly protecting us in this country of ours. Sure we hear all these government officials saying they are doing things to protect the public, to assure supply. So does Meralco using that line in vain.

MSK as your advocacy group has been trying to point out regulatory flaws but the regulators especially the last batch were evidently apathetic to public interest. We hope we have a better one in the new batch but so far it is not encouraging if we go by the guideline for power supply procurement that they are drafting. Loopholes for circumvention of true CSP are evidently being built into it. Hayy.

( See our article Who is to Blame for the Delays of the 1,200mw Atimonan One and 600mw Redondo Power Coal Projects? Meralco, Consumer Groups, or ERC? Matuwid.org June 5, 2018)

At this stage though it is no longer what Meralco and ERC did but how do we move forward with new power projects. And Meralco, the new DOE, the new ERC, and the Chairmen of the Energy Committees of Congress and the Senate, the JCPC, the Supreme Court, and even the President of the Philippines, could have taken proactive moves to break the impasse and get the country moving so a power crises is prevented…..while there is still time to prevent it.

Eerily, no one is moving. Sadly, when something happens, we the consumers are disadvantaged. And no one is protecting us. Why are we always in a lose-lose situation….and they the vested interests are always in a win-win position?

2. Your beloved Distribution Utility Meralco

The first move should have been coming from Meralco, the distribution utility itself. It is them who have the contractual mandate with the consumers by virtue of their public service franchise to assure the provision of adequate power supply in the least cost manner.

But they will not move because they are conflicted and protecting their power generation interest. Meralco clearly is putting higher priority to being the sister company of their MeralcoPowerGen instead of being the public service provider to the consumers. And they appear to be willing to push the country to the brink of power crisis so that they can get their way.

But “we are looking after the public interest”Meralco would argue. That is why they want all seven (7) of our power supply contracts approved by the ERC starting with their 1,200mw Atimonan One and the 600mw Redondo Power in Subic. Why can’t they initiate a happy compromise (front door or backdoor) where they get to implement their earlier projects for commissioning in 2020 and 2021 and subject to true CSP the balance those that are needed for 2022 to 2025? Should it really be all or nothing? Their way or no way?

Meralco should act like your distribution utility looking after the public interest.

3. The new Department of Energy

We are calling them new because the Meralco deals were done in April 2016, a month before the last Presidential elections and before President Duterte is able to appoint his own Energy Secretary. (That’s another reason those contracts became known as “midnight”)

Under the EPIRA Law of 2001, the Department of Energy has the specific tasks of assuring there is adequate supply of power through enabling policy and proactive promotion of investments in power and energy.

They could have been excused from proactively getting involved in resolving the effective freeze in power generation projects in 2017 as they try to learn the ropes but by 2018 alarm bells should be ringing. The country is on its way to a power crisis and the DOE needs to do something and make things happen.

Why not be the catalyst for a national consensusfor a solution? The Alyansa Para saBagongPilipinas and the Bayan Muna,the cause oriented groups that filed the cases in the Office of the Ombudsman and the Supreme Court against ERC and the seven (7) Meralco contracts, should not be above participating in a national resolution if it is to the public interest.

Then if not resolving the legally questionable Meralco contracts, why not the DOE push for new tenders for power supply under true CSP rules. Why not hold tenders for LNG power plants? If the Meralco cartel members are not willing to participate there are many highly qualified and proven power generators who can participate. Such truly competitive biddings will have the added benefit of answering for the country the question of which is better for the consumers, negotiated or openly tendered power supply?

Are there factions within the DOE that are participating in allowing the country to slide to the brink and helping create an environment where the public will be so scared of a blackouts that they will not care if the power supplies were anomalous and overpriced and violative of its own CSP policy?

4. The Supreme Court

The ERC, DOE, and Meralco are all pointing at the Supreme Court for their collective inability to resolve Meralco’s seven power supply projects. And the longer the highest court of the land takes to make a ruling on whether ERC has the legal right to extend the deadline for the CSP, the closer the country is pushed to the brink of the power crisis.

Our Honorable Justices will need to wake up to this reality. The ruling of the Supreme Court is now part of the problem instead of a solution.People believe that there is really no major constitutional divide on the issue. Most people predict anyway that the Supreme Court will rule that the ERC had the legal authority to extend the implementation of the CSP but will leave it up to the office of the Ombudsman on whether the previous batch of ERC Commissioners abused that authority.

5. The Country’s Conglomerates and Economic Powerhouses

Let us wake up to the reality that Meralco’s cartel oligopoly are also the major business conglomerates that are having a field day in the current consumer driven economic boom. They are in real estate, construction, retailing, telecommunications, banking, tourism, water, roads, and media. Their market caps are soaring.

Count on them to exploit opportunity and profit from the people’s adversity. Meralco is happily negotiating emergency power supply contracts “to protect the consumers” with the same people whose power plants are conveniently shutting down.

Predictably, media is exploiting the hysteria over the yellow alerts and putting pressure is on for ERC and DOE to approve the Meralco contracts. They are blaming the ERC for being “indecisive”. Two illustrious columnists in the major daily controlled by the Meralco group, called out DOE Usec Fuentebella for inaccurately assuring the public of no power shortage. Then she went for it.

“What we need are new power plants.Some of the country’s power plants are so old, some as old as dirty old men. It’s not surprising that, perhaps, just like these men, these plants conk out too every now and then. Clearly, there’s an urgent need for new power plants, but the private sector’s investments have been hampered by regulatory challenges.”

Another one asked “who is minding the store” and taking to task the Department of Energy for the impending power crisis.

It could also be a wake up call to these diversified conglomerates that the customers they abuse in power, water, toll roads, telephones and internet, are the same people who provide the market for their shopping malls, condominiums, and travel.And it is the same economy that if thrown into a power crisis will sabotage the whole economy and the market for the rest of their empires.

6. President Rodrigo R. Duterte

Many of these conglomerates are having a heyday because they have the blessings of the President for their projects and many are enjoying the profits from the economic boom that the Presidents leadership is bringing about.

But maybe the President can also wake up to the reality that this same people that he is helping are also willing to push the country to the brink of a power crisis to serve their selfish interest and in the process sabotage a good legacy of progress for the people that his Presidency has been working so hard to create. So much for gratitude and true friendships. Or are those relationships co-terminus with the President’s term?

7. “Whose Job Is It, Anyway?”

Our impending power situation reminds us of a story about four people named Everybody, Somebody, Anybody and Nobody. There was an important job to be done and Everybody was sure that Somebody would do it. Anybody could have done it, but Nobody did it. Somebody got angry about that, because it was Everybody’s job. Everybody thought Anybody could do it, but Nobody realized that Everybody wouldn’t do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have.

And how was your holy week!

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org

For private comments send to email david.mskorg@yahoo.com.ph
For public comments please send below.

Yellow and Red Power Alert, Things to Ponder, The Outdated and Onerous Genco Contracts, and Permanent Solutions (Part 2)

Part 2 of 2

 

4. The Onerous Guaranteed Payments for Downtimes in the PSA in Main Grid

These power plants will predictably blame technical reasons for the outages. These are however the “effects” and not the “root causes”.

It might surprise many people but the solution to these Power Plant shutdowns are not technical but contractual and financial.To explain, the PSA’s in place now and new ones being signed are still the old 1990’s era, BOT type contracts where the IPP is guaranteed his full capacity fees and fixed costs even if his power plant is down for maintenance and not available to deliver power.

These are in the form of maintenance downtime provisions in the PSA where the IPP is excused from delivering power.  Typically 45 to 60 days per year for coal plants. There is nothing wrong with legally excusing them from delivering power when their