ERC refuses to confirm ‘least cost’ claims in new Meralco contracts

By Myrna M.Velasco – September 27, 2019, 10:00 PM
from Manila Bulletin

The Energy Regulatory Commission (ERC) is still not inclined at confirming that the new power supply agreements (PSAs) underwritten by power utility giant Manila Electric Company (Meralco) are on the “least cost” sphere as these are still subject to the regulatory body’s evaluation.

Agnes T. Devanadera

ERC Chairperson Agnes T. Devanadera

ERC Chairperson Agnes T. Devanadera forthrightly stated that “at the moment, we cannot as yet determine or confirm whether the proposed rate in the Meralco PSA adverted to was indeed the least cost.”

She qualified though that “once the subject Meralco PSA application has been filed, the ERC will conduct a thorough evaluation to ensure that the proposed rate in the PSA is the least cost.”

The regulatory body indicated that in its evaluation and eventual ruling on the PSA applications arising from the conduct of competitive selection process (CSP) of the DUs, it will have to guarantee that the consumers will only be afforded the “least cost option” to pay for in their future electric bills.

By edict, the CSP exercise or the auction of power supply procurements of the DUs must yield not just the “lowest cost” for Filipino consumers, but the procuring distribution utility must also ensure that such power supply must be delivered as needed.

In the recent CSPs of Meralco, it procured brownfield baseload capacity of 1,200-megawatts to partly serve its 10-year requirements; then 500MW for the mid-merit needs of its load network for the next five years.

The power supply deals had been cornered by the industry’s major players – such as the various energy corporates of the San Miguel group; PHINMA Energy Corporation (recently renamed as AC Energy Philippines, Inc.) of the Ayala Group; and First Gen Corporation of the Lopez group – based on their headline rate and all-inclusive levelized cost of energy (LCOE) offers.

Following the conclusion of the CSP and the signing of the contracts, the parties-in-interest will need to file these power supply contracts with the ERC for its evaluation, validation and then approval.