What President Duterte Said and Did not Say about Meralco’s More Advanced Technologies.
Meralco’s 2nd CSP Round
David Celestra Tan, MSK
30 October 2019
President Rodrigo Duterte was invited to the recent inauguration of Meralco PowerGen’s 500mw San Buenaventura Power Corp.,the country’s first “super critical coal technology” with high efficiency and low emissions or HELE. It was held at the Grand Hyatt Hotel in Fort Bonifacio last October 16, 2019.
The President was quoted to have ordered the Department of Energy “to ensure that the power plants operating in the country are strictly complying with operational efficiency standards as well as environmental laws and regulations.” The President is also calling on investors – primarily power plant project sponsors and developers – to take steps on deploying more advanced technologies even in coal-fired power ventures, chiefly those that shall be spewing lower emissions”, the news report further quoted.
“I ask you to follow the lead of San Buenaventura Power by investing in the generation of clean energy. I can assure you that you’ll be able to pursue more effective and efficient business strategies, as long as you give utmost importance for the protection of our environment and the welfare of your host communities” Duterte reportedly stressed.
The Meralco press release published last October 25, 2019 evidently tried to ride on the President’s statements and added “the P56.2 billion San Buenaventura power project is the first to be equipped with super-critical boiler technology among all coal-fired power facilities in the country. This is a technology in the high efficiency, low emissions (HELE) genre which has up to 45% efficiency compared to the more than 30% of the older technologies and also has the potential to bring down carbon dioxide emissions by up to 25% more”.
Clearly Meralco’s public information strategists are trying to spin a stinging endorsement from the President no less for its “super critical technology, HELE” which happens to be the same technology being restricted by Meralco for the 1,200mw Atimonan One competitive selection process.
Was the President actually endorsing Meralco’s “super critical HELE technology”? Let us breakdown what apparently the President said in the above press account.
1. PRRD Ordered the DOE “to ensure that the power plants operating in the country are strictly complying with operational efficiency standards as well as environmental laws and regulations.”
2. “The President is also calling on investors – primarily power plant project sponsors and developers – to take steps on deploying more advanced technologies even in coal-fired power ventures, chiefly those that shall be spewing lower emissions”
3. “I ask you to follow the lead of San Buenaventura Power by investing in the generation of clean energy”.
The Presidents statements were valid, legitimate, and entitled from the country’s chief executive. And let us grant that PRRDs words can be yarned to actually saying that advanced technologies like super critical HELE that was adopted by Meralco’s San Buenaventura is good for the country.
Those are however actually not issues.
Without trying to play Presidents mind reader, President Duterte did not say however the following in case there is an attempt to take the interpretation that far:
1. that Meralco should be allowed to restrict in the terms of the bidding of their CSP for the 1,200mw greenfield project to only super critical coal HELE.
2. That the DOE is ordered to allow Meralco to do so.
3. That Meralco should be allowed to manipulate the CSP by insisting on 1,200mw and allowing a limited time for potential bidders to prepare the bid and hence restrict competition.
It is HOW Meralco is acquiring and contracting for those technologies and the rates they are charging to the consumers that are the real issues.
MERALCO’s Second CSP Round
Meralco announced that it will proceed with the second CSP round for the 1,200mw greenfield project where in the first round only its sister company Meralco PowerGen submitted a bid under Atimonan One Energy. One more failed bidding and the 20 year contract will be allowed to be negotiated between Meralco and its sister company Meralco PowerGen.
1) they will retain bidding the 1,200mw as a greenfield project, meaning brand new power plant “to boost the supply in the power grid at the least cost possible”.
2) “To accommodate more prospective bidders”, Meralco would relax the terms of the second round of CSP by lowering the power plants configuration and moving away from a single location requirement. Instead of only blocks of plant configuration of 600mw, Meralco is bringing it down to 150mw as opposed to just a block of 600mw or 1,200mw.
3) They will move away from single location requirement, basically allowing multiple requirements. Again, to make sure those who are willing to bid for a 1,200mw greenfield have the ability to put up these plants in multiple locations
Things Meralco is not changing
The misnomered Third Party bid and award Committee will remain to be glaringly Non-Third Party. Consequently there would be questions on whether the CSP will really be revised to enable serious bidders to participate:
a) Will they allow enough time for potential bidders to study their participation, buy documents, and to undertake meaningful due diligence?
b) Will they remove the restriction to super critical HELE and instead specify the low emissions that must be met.
c) Will they open the technology and fuel and not limit it to coal?
d) Will they be accepting bids for less than 1,200mw? And in case there is no one bidding a total of 1,200mw, will it be a failed bidding? Hence the PSA will be negotiated with Atimonan One?
It appears from the changes being made by Meralco, that they are doing their best to tweak the bidding rules just enough to make it look like they are opening it to more bidders but not really making the kind of changes that will make the CSP truly competitive. The kind that will really give the consumers genuine least cost power. And that can come only from a truly robust competition among unrelated parties.
We wonder what’s in the revised TOR that they have been tryng to get the DOE to approve? As they say in the power industry, the devil is in the details.
This game Meralco is playing, trying to dance around true CSP rules is fascinating to watch. Unfortunately until the CSP rules are changed there would only be one ending when the music stops, and that is the electric consumers will be charged high rates, screwed completely. What do we expect from a system where the bidding is run by an in-house bid committee of the DU and the participants are their sister companies and or business partners?
By the way, when the PSA is finally negotiated between Meralco and its sister company Meralco PowerGen, what rules are in place to give consumers a measure of protection from being abused? When will we ever believe that “competition beats regulation” in protecting the consumers from being overcharged?
A blessed All Saints Day Weekend to everybody.
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