Solons say midnight ERC deals allow Meralco to lock down consumers for 25 years

March 16, 2017
from Business Mirror

Congressmen today assailed the alleged sweetheart deals engineered by officials of the Energy Regulatory Commission (ERC) to favor power distributor Meralco that would allow the latter to lock down consumers in its franchise areas to disadvantageous and predatory power rates for up to 25 years.

Bagong Henerasyon Party List Rep. Bernadette Herrera-Dy said the power supply agreements (PSAs) entered into by Meralco with its sister generation companies and affiliates were made possible by ERC’s decision to postpone the competitive selection process (CSP) under which power supply contracts should have gone through competitive biddings.

‘The CSP requirement was designed to lower power rates by subjecting power supply contracting to competitive bidding,” said Herrera-Dy. “But when the ERC postponed the competitive selection process for power supplies in December 2015, it effectively allowed Meralco to lock consumers into self-dealing contracts with its sister companies for up to 25 years.”

Herrera-Dy’s sentiments were echoed by Cebu 3rdDistrict Rep. Gwendolyn Garcia, the Deputy House Speaker for the Visayas and a member of President Duterte’s PDP-Laban party.

It was learned during Monday’s (March 13, 2017) joint hearing of the House committees on Good Government, Public Accountability and Energy that on November 6, 2015, the Department of Energy (DOE) and the ERC ordered distribution utilities to conduct competitive biddings to prevent the charging of self-negotiated generation rates and thus lower power costs to benefit consumers.

However, the ERC delayed by five months the implementation of the DOE circular, during which Meralco was able to corner the lion’s share of 3,551MW out of the 4,500MW in aggregate supply covered by all the 93 PSA applications filed with the ERC during the extension period.

Meralco was able to secure the 3,551MW supply through just seven agreements it negotiated with its own power generation companies and affiliates. The remaining 86 PSAs covered less than 1,000MW, triggering suspicions that the Meralco contracts were sweetheart deals.

 

In a press statement, Bayan Muna Rep. Carlos Zarate said the ERC move to extend the implementation of the competitive bidding circular denied consumers the benefit of competition and exposed them to potentially overpriced contracts between Meralco and its own generation companies.

Zarate said the seven contracts entered into by Meralco and its affiliated generation companies are clearly “midnight contracts” since they were signed only four days before the new deadline set by the ERC on April 30, 2016 to conduct competitive supply biddings.

He said the resulting damage to consumers from the alleged midnight deals would easily translate to P12.44 billion a year. Moreover, he said the deals foreclosed any form of open market competition and ties down consumers to Meralco’s dictated supply rates for at least two decades.

“For the next 20 years, itinali na ninyo sa power supply agreements ang consumers. In the next 20 years, nakatali na, isinara na ng Meralco ang industriya. Wala na silang bibilhin sa labas… nakakabahala,” Zarate said.

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