Headline: Duterte orders strict compliance by power plants.

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.

Meralco announced

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.

 

Matuwid na Singil sa Kuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph

Meralco’s CSP HELE HELE with Super Critical Coal Technology

David Celestra Tan, MSK
11 October 2019

Meralco has been super publicizing its adoption of this ultra super critical coal technology with high efficiency and low emission (HELE) for the 1,200mw Atimonan One project. It is supposed to be the country’s first (after Mauban’s San Buenaventura) and implying a high bar for high efficiency and low emission. Such high standards and big project size of 1,200mw were the reasons there were no bidders other than Meralco’s own Atimonan One Energy Corp.

(Not to mention that Meralco’s “Third Party” Bid and Award Committee gave bidders only 7 days to pay P6 million to buy the bid documents and only 40 days to do technical studies, due diligence, and prepare a bid for the approximately $ 3billion project!)

One more “failed bidding” for such super critical technology would mean a legal negotiated contract for the 1,200mw project in Atimonan, Quezon.

Meralco ally San Miguel Corp. who won most of the initial CSP for the 1,200mw and 500mw  brownfield projects due for delivery in December 2019, had his two companies (Panasia and Mariveles Power) withdraw from the bidding. (Paying P12 million for bid documents is small change in this game). SMC President and COO Ramon Ang is quoted in the press saying “allowing power plants with a wide range of technology to join the bidding would allow a level playing field in Meralco’s bid. We want to make an offer, so allow us to join the CSP”. “We did not join the bidding because CFB plants do not meet the requirements” the SMC COO continued. Meralco’s President Ray Espinosa said “we want all gencos to join, but we have considerations why the terms of reference for the greenfield supply are stringent”.

So What’s Ado with Meralco’s Ultra Super critical HELE technology?

Supposedly the high efficiency part (HE) means an improvement in energy efficiency from about 34% to 44%. To you and me it means supposedly lower fuel costs that are passed on to us consumers. The “low emission” (LE) part means it will have much lower harmful emissions specially CO2 and contribute less to global warming.  The ultra super critical part I think refers to the much higher combustion temperature and other thermal processes in the system.

As you can guess, this is much more expensive technology. Meralco had been announcing a project cost of $3 billion for the 1,200mw capacity or $2,500 per kw capacity compared to less than $2,000 for circulating fluidized bed or CFB.

In other words, Meralco is nobly trying to “introduce” this advanced coal technology to be charged to the consumers, who is supposedly going to benefit from “HELE” or high efficiency and low emission.  In so doing, they are able to restrict the CSP to this particular technology and project magnitude, effectively discourage competition and hence be able to negotiate among themselves a rate and terms of PSA. In the past, Meralco evidently tried to secure an “unsolicited proposal status for Atimonan One for a “swiss challenge” type CSP where A1E will have the right to match, another way to tilt the playing field for MeralcoPowerGen.

By super publicizing this super critical HELE technology, Meralco is evidently trying to acquire entitlement to the preferred status in biddings as provided for under Sections 10.2 and 10.3 of the Revised IRR of Republic Act No. 6957 otherwise known as the Built Operate Transfer law.

Project proposals for this advanced technology can acquire original proponent status must meet more or less 1) it is a project not envisioned by current policy programs of the government; 2) it must represent advanced technology not yet used in the Philippines and 3) it must be certified so by the National Science Development Board.

Now let us grant that Meralco’s Super Critical coal HELE meets number 2 and 3, clearly the power development is an established government policy and the introduction of efficient and environment friendly technology.  And CSP is similarly a primordial government policy.

The key question and I guess the main point of this article is, to achieve “high efficiency and low emission” (HELE), does the bidding really have to be restricted to super critical coal or even advanced ultra super critical coal technology that effectively they will scare away competitors, cause a failed bidding, and be allowed to negotiate PSA and prices that will be passed on to the consumers?

At the time Meralco and MeralcoPowerGen negotiated the Atimonan One project in April 2016, it was publicized with a rate of P3.75 per kwh. A few months ago this year 2019 we updated the rate using the escalation rates and fuel adjustments and it became P5.60 per kwh, higher than the then rates of other coal at P5.10 per kwh. Given that all competitors and pretenders have been shooed away from the CSP by the “super critical” requirement, and the 1,200mw greenfield project could eventually be negotiated due to failed biddings, what makes us think it will be lower than the current coal rates of P5.10 per kwh? 

The economic and environmental benefits of “HELE” can be achieved by other proven technologies most notably natural gas, a known cleaner and cheaper fossil fuel than coal and their old combined cycle technologies already beats the HELE of advanced coal technologies.

So if the government (and Meralco) really wants to be faithful to the true competition spirit of the CSP policy and now mandated by the Supreme Court in the Alyansa para saBagongPilipinas case, Meralco should not be allowed to restrict the bid specifications to this ultra super critical coal HELE but instead open the CSP to all technologies that achieve a certain level of low emissions.  The “high efficiency” can be specified but its advantages would already be reflected in the bid price of fuel consumption and costs. Hence it should not be a restrictively “super critical coal HELE”.

Why is Meralco trying to force upon the Filipino consumers this advanced and expensive “BMW that can run 150 kilometers an hour in luxury”when all they want is “fair and reasonable” rates from an electric vehicle that go 80 kms per hour to get from point A to point B? 

With the Meralco CSP being really opened and not restrictive, there will be more honest to goodness competitors, especially if they are really given sufficient time to prepare for a bid and, more importantly, signal to them that the CSP will truly be fair. Why are the established Japanese, Korean, and Chinese generators and local players Ayala, Lopez, and Alsons Group not really active in possibly bidding? And maybe we will see if San Miguel Power will truly compete for Atimonan One, knowing that he had two prior agreements for greenfield projects with MeralcoPowerGen for a 628mw Mariveles Power and a 628mw Central Luzon Power. Will San Miguel et all really compete with its customer Meralco?

Is Meralco’s CSP HELE HELE for ultra super critical coal technology not really about the noble intention of introducing advanced technology, not about high efficiency and low emissions, not about global warming but more about controlling the CSP process and negotiating the price that will be passed on to the consumers?As DOE Secretary Alfonso Cusi rightly asked, why does it have to be 1,200mw? Why not allow 600mw?

When will things ever change for the Meralco consumers?

 

Matuwid na Singil sa Kuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph

Meralco Style CSP Only Complying with the Ritual of CSP but Betraying the Spirit of the Supreme Court Decision

David Celestra Tan, MSK
22 September 2019

Everyday since last week we, the Meralco consumers, are being bombarded with Meralco’s mind-conditioning proclamations that its CSP have been successful. That the public will save P13 billion in the next 10 years. And that their “Third Party Bid and Award Committee” did a great job.

After the first avalanche of news reports on Meralco’s “successful CSP” came the Second wave of columnists articles singing the same tune of successful CSPs and P14 billion in savings, complete with accolades to DOE for its CSP guideline DC2018-02-0003. (wink, wink!)

Meralco and their drumbeaters claim in the 1,700 total contracts to start in December 2019, a P14 billion savings over the 10 year term at 0.41 per kwh based on its average generation rate as of September of P5.88 per kwh VAT inclusive. This is quite impressive if true since Meralco had already been claiming that in the last 5 months its rate had been reduced a total of P1.52 per kwh.

In a press release titled “Partnership for power consumers gain” new Meralco President Ray Espinosa boasted “the resulting prices from the CSP (500mw) are significantly lower than the average generation cost today and are expected to save consumers Php 4.4 billion a year for the next 5 years. (that’s P22 billion according to my P400 Casio calculator!) In the article, they quoted DOE EPIMB Director Mario Marasigan saying “indeed the winners for the activity are actually the Meralco consumers”. Marasigan also expressed optimism that the success of the Meralco CSPs will be replicated to subsequent biddings”.

Should we pray that they both turn prophetic?

Badges of Rigged Biddings 

We would like to believe you sirs! But there are badges of rigged biddings all over these CSP exercises.  And no amount of high decibel positive noise can truly drown out the truth.

Let us look at what are evident.

Meralco’s supposedly successful CSP’s were undertaken by a TPBAC composed of Meralco employees and a couple of handpicked outsiders. (How can that be impartial?).  It is no wonder they allowed only one week for bidders to buy documents and 40 days to do due diligence and prepare a bid. Yes even for the 1,200mw greenfield project that will not be due for delivery until 2024. Potential bidders composed of companies owned by the same groups were publicized to be interested only to back out eventually.

Meralco appear to be exploiting the exigency of immediate power supplies (aggregates of 1,200mw baseload for 10 years and 500mw mid-merit)  that can come only from existing (or brownfield) power plants to evidently camouflage the jewel of the charade which is a negotiated bid for their 1,200mw Atimonan One project.  By conditioning the mind of the consumers that the Meralco style CSP were successful, we would subliminally accept the eventual negotiation of the Atimonan One contract under the same DC2018-02-0003 rules that provided for failed biddings. Strategically let us not be surprised if Atimonan would also set the precedent or guide their game plan for the six remaining midnight PSA’s.

Revisiting the Spirit of the Supreme Court decision G.R. No. 227670 Promulgated May 3, 2019.

The Supreme Court said “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 “(page 2)

“Going through competitive public bidding as prescribed in the 2015 DOE Circular is the only way to ensure a transparent and reasonable cost of electricity to consumers”

“Obviously, the rationale behind CSP -to ensure transparency in the purchase by DUs of bulk power supply so as to provide the consuming public affordable electricity rates –acquires greater force and urgency when the DU or its parent company holds a significant equity interest in the bulk power supplierSuch a parent-subsidiary relationship, or even a significant equity interest in the bulk power supplier, does not lend itself to fair and arms length transactions between the DU and the bulk power supplier. “(page 29)

The 2015 DOE Circular mandated that DUs, including electric cooperatives, obtain their PSAs through CSP. Section 1 of the 2015 DOE Circular states the principles behind CSP:

Section 1. General Principles. Consistent with its mandate, the DOE recognizes that Competitive Selection Process (CSP) in the procurement of PSAs by the DUs ensures security and certainty of electricity prices of electric power to end-users in the long-term. Towards this end, all CSPs undertaken by the DUs shall be guided by the following principles:

(a) Increase the transparency needed in the procurement process to reduce risks;

(b) Promote and instill competition in the procurement and supply of electric power to all end-users;

(c) Ascertain least-cost outcomes that are unlikely to be challenged in the future as the political and institutional scenarios should change; and

( d) Protect the interest of the general public. (Boldfacing added)

In sum, the raison d’etre of CSP is to ensure transparency and competition in the procurement of power supply by DUs so as to provide the least-cost

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 (page 2)

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 x x to intervene when the common good so demands. ” (Page 3)

Meralco Style CSP

As a ritual Meralco’s CSP show is a success complete with the competitive pageantry. There were 23 “interested” bidders. And claims of consumers savings of anywhere from P9.64 billion to P14 billion for the two packages totaling 1,700mw and now P22 billion only for the 500mw mid-merit contracts over 5 years. Meralco could not make up their mind in how much they would claim to be the consumer savings.

It is hard to grant them the benefit of the doubt that Meralco’s CSP’s are truly complying with the spirit and actual exhortations of the Supreme Court.

1. The CSP must be transparent and truly competitive “to effectively guarantee that there will be no price gouging of consumers”.

How can it be when the bidding is being administered by a misnomered Third Party Bid and Award Committee (TPBAC) that is composed of majority Meralco officials and handpicked outsiders. The TPBAC Technical Working groups who presumably wrote the specifications and TOR are all Meralco people. You need to pay P6 million just to see the complete bid documents.

2. Promote and Instill Competition

a. How can true competition be promoted when the TPBAC allowed bidders only 7 days to decide whether to take a look at the bid documents and spend a non-refundable P6 million? How will it encourage other bidders if you are allowed only 40 days to prepare a bid? I mean even if you have an existing power plant, it will take you more than 7 days to spend millions in corporate funds just to see the details? And it will take you more than 40 days to prepare an honest to goodness competitive bid.

b. Even if such short days can be justified for the 1,700mw that is for delivery in December 2019, how can such short 47 days be justified for a 1,200mw greenfield project that is not due for delivery until 2024 be justified? I mean it takes only 2.5 to 3 years to build a 1,200mw coal power plant. They easily could have allowed 120 to 150 days to prepare a bid if they really meant to comply with the Supreme Court’s order for a truly transparent and competitive bidding.

c. As we can expect, in the 3rd package for 1,200mw of greenfield base-load contract that specified “super critical high efficiency, low emission” coal plant technology, out of the four (4) potential bidders, 2 were San Miguel companies, 1 is Meralco PowerGen’s Atimonan One, and 1 is First Gen. The two San Miguel companies withdrew from the bidding and First Gen did not show up. And is it a surprise that only Atimonan One submitted the lone bid and the bidding is declared a failure.  As provided for in DOE CSP Guideline DC2018-02-0003, one more such failure and the contract will automatically be negotiated (legally this time!) with the lone bidder.  Exactly what the Supreme Court admonish against.

3. No Combinations in restraint of trade or unfair competition shall be allowed “Obviously, the rationale behind CSP -to ensure transparency in the purchase by DUs of bulk power supply so as to provide the consuming public affordable electricity rates –acquires greater force and urgency when the DU or its parent company holds a significant equity interest in the bulk power supplierSuch a parent-subsidiary relationship, or even a significant equity interest in the bulk power supplier, does not lend itself to fair and arms length transactions between the DU and the bulk power supplier. “(page 29)

Have the ERC and DOE allowed the evident combination in restraint of trade and unfair competition? Could they have done anything to protect the public interest given that DC2018-02-0003 under Section 7 relegated them to be “Observers” who cannot participate in deliberations. (In kanto chess community, they are called “miron”)

4. Are the Meralco Consumers really saving? Let us look at the numbers.

a. For the 1,200mw power supplies to start in December 2019, (Why could not have been March 2020 to give time for more bidders?) the winning bids were Phinma of Ayala for 200mw at P4.8849 per kwh, San Miguel Energy for 330mw at P4.9299 per kwh, and South Premiere (Ilijan) of San Miguel for 670mw at P4.93 per kwh (p0.0001 higher than sister company SMEC). It is reported that the reserve price set by Meralco’s TPBAC was P5.3694 per kwh.

b. For the 500mw mid-merit supply for 5 years, First Gen won with 5.3989 per kwh for 100mw, Phinma of Ayala with P5.5858 per kwh for 110mw, and South Premiere of San Miguel with P5.7527 per kwh for 290mw.

(Pwede pong magtanong, bakit po kaya alam ni San Miguel na 290mw ang balansya at si First Gen at Phinma together will be only 210mw? At the 1,200mw bid, na 670mw na lang a balansya?)

c. Meralco, in their publicity, has been claiming a total of P35 billion (P22 billion from the 500mw and P13 billion from the 1,200mw). These they said are based on its average generation rate of P5.88 per kwh.

a. This we believe is misleading. Meralco’s average of P5.88 per kwh apparently includes the high WESM rates for the period of May to July.

b. Meralco’s true average from bilateral contracts, as they should be comparing on apples to apples, are only P4.75 in July, P4.82 in June, and P4.94 in May.

d. It appears from these numbers on record that the winning bid prices in the highly heralded successful CSP of Meralco were about the same or even higher than the current prices of the same suppliers. Let us remember that the current prices were a result of negotiated prices and not CSP. Now in a supposed CSP, the prices were the same or higher?

e. South Premiere’s prices were 4.7842 in May, 4.8682 in June, and 4.8489 in July and 5.3256 in August. Those were significantly lower than its winning bid of P5.7527. SMEC Sual had been 5.1555 in May, 5.0718 in June, and 5.0377 in July. It curiously jumped to P5.8245 per kwh in August. Their winning bid was P4.9299 per kwh.

f. How much are the consumers really saving?

We will not know for sure until we see the full details in the pricing indices and fuel base rates used and other terms like minimum off-take, guaranteed capacity payments, and downtime with pay allowances.For now we are not convinced about Meralco’s grandiose claim of a P35 billion savings for the consumers. We cannot see it in the numbers.

5. Betrayal of the Supreme Court Lessons

So far while Meralco seems to be only complying with the ritual of CSP as prescribed by the Supreme Court, they appear to be betraying the spirit of the Supreme Court’s exhortation for true and transparent CSP to prevent consumers from being gouged.

Tayo talagang mga Pinoy. Ito talagang Meralco.

 

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 1)

part 1 of 2

David Celestra Tan, MSK
11 April 2019

Everyone is again scrambling on what to do in the face of the power shortage alerts. It is yellow, it is red, WESM prices spike, and the always inevitable fears of collusion. Of course there is the predictable, which is “we told you so, we need our new power projects”despite the legal and negotiated rate and terms issues. A supposed “group of consumer welfare advocates” are even incongruously chiming in by blaming ERC for its “indecisiveness” evidently on approval of Meralco’s 7 midnight contracts.

Anyway, let us ponder some aspects of this yellow and red alerts.

1. Whose Power Plants are down now?

According to newspaper reports, the following power plants have been mentioned. Sual Unit 1, SW Luzon Masinloc Unit 2 344mw, Pagbilao Unit 3 382mw, SLTEC Unit 1 150mw, Calaca 2 of DMCI 100mw, Malaya 2 350mw. A total of approximately 1,500mw.

a. Things to Ponder No. 1
The power plants in question (except Malaya) are owned by Aboitiz Group, San Miguel, EGAT of Thailand, DMCI, all members of the Meralco chosen 5 and partners of MeralcoPowerGen that controlled all the project companies in the seven (7) midnight contracts that the Meralco power oligopoly is trying to ram through the system.

b. Things to Ponder No. 2
Meralco’s power suppliers using coal have mind boggling rates from September to December 2018. AES in Masinloc charged P16.4591 per kwh in September, P13.7889 in October, P10.3589 in November, P8.7697 in December, and 6.9598 in January. It is now partly owned by Meralco Mauban partner EGAT of Thailand.

The Aboitiz owned Pagbilao charged P7.0179 per kwh in September, P7.04 in October, P6.7847 in November, and P7.5231 in December.

San Miguel Sual charged P7.8325 per kwh in September, P9.7960 in October, P8.0332 in December, and 7.4205 in January.

For February 2019, Masinloc rate was 11.51, Quezon Mauban of EGAT 7.76, SMEC Sual 6.91, and Aboitiz Pagbilao 6.33.

Comparatively, other coal generator rates were only P5.50 per kwh and natural gas plants approximately P5.28 per kwh during these periods.

(see matuwid.org website)

The reasons for these high coal generators rates were not because of high coal rates but evidently due to the guaranteed capacity payments to these power generators even if they were not generating full power. That means they have been down for maintenance for those months of September to December 2018 and some in January and February. So why are they still down for maintenance now that consumers needed their power during these summer months of March to May 2019?

(By the way, your organization MSK had filed a petition with ERC asking that these high rates from September to December 2018 be investigated. We have yet to hear from them).

2. Collusion

There could be collusion but it is unlikely that the government can pin anyone down. Power plant operators know what they are doing…and they are sisters with one of the supposed victims, Meralco. (Other one is the consumers)

Even when there are market evidence, our regulatory and justice system will be such that anyone found guilty will not even pay the penalty. Remember the market failure of 2013 when WESM went up to P62 per kwh and resulted to a P4.15 per kwh jump of 80% in generation costs? And even if they pay, it is only a total of P500 million compared to the damage to the consumers of P9 billion.

It is the motuproprio job of the ERC to investigate and penalize but so far they have been quiet.

We cannot expect too much from the Philippine Competition Commission who by their young lawyers’ mindsets will not call harmful “cartel” or “oligopoly” and “collusion” even if they are staring them in the eyes, unless they get the perpetrators to sign a document of admission. (good luck with that!) The young PCC seems have yet to find itself as a watchdog for the consumers and an institution to install preventive and preemptive rules against collusion, market monopoly, and etc. Too early to expect much consumer protection from them.

3. DOE’s Decisive Action

A shining armor in this dark times is the decisive action of the Department of Energy in containing further damage to the community and consumers. Beyond the predictable call for extensive investigation, per media reports they have been actively meeting with electric power industry participants for a concerted remedial solutions. They activated the “interruptible load program” that mobilizes the self-generators. It may only be 200mw but it helps in rotating brownouts.

The terms and conditions of the power supply agreements between these Genco’s and Meralco are being looked into specially their outage allowances, replacement power. Secretary Alfonso G. Cusi is quoted to say “the DOE recognizes that short-term answers are not enough. We are taking a holistic approach that focuses on the establishment of institutional solutions that would benefit consumers in the long term. The DOE fully intends to pursue policy directions to create permanent solutions to the otherwise temporary yet recurring challenge of red alerts.”

These are good take charge responses to avert a possibly disastrous power situation. However, the country needs a permanent monitoring of the plant availability performance of these IPP’s and a proactive management and coordination of power plant maintenance schedules specially during critical seasons like summer and Christmas holidays. The Department of Energy can make this maintenance scheduling part of the tasks of its Electric Power Industry Monitoring Board, instead of just passively tallying the power generation projects being pursued by the private sector.

The Senate Energy Committee under Sen Sherwin Gatchalian is expected to similarly try to conduct an investigation and let us hope they do and get to the bottom of these power shortages. More importantly, let us hope those investigations will result to change in rules for permanent solutions.

Actually it should be the job of Meralco if they are truly looking after the interest of their customers to manage and synchronize the scheduling of the downtimes of their contracted power suppliers. We don’t hear them doing this proactive scheduling that not only can avoid surprise brownouts but also to protect their customers from the price spikes that are consequences of power shortages.

Next: The Onerous Power Supply Contract Provisions and Permanent Solutions

 

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org

For private Comments send to david.mskorg@yahoo.com.ph

Elephants in the ERC Room…And a Flying Dumbo (Part 3)

David Celestra Tan, MSK
14 March 2019

Part 3 of 3

In addition to the skeletons in the ERC closets, there are elephants in their regulatory room, including a flying dumbo.

These are the seven (7) Meralco midnight contracts totaling 3,551mw that it negotiated under the name of project companies that turned out are all controlled by its sister company Meralco PowerGen. They are all waiting for ERC approval who in turn is waiting for the Supreme Court Decision on the issue of whether ERC had the legal right to postpone the effectivity date of the Competition Selection Policy from November 6, 2015 to April 30, 2016.

While the former ERC Commissioners were claiming that the extension (that they are calling “clarification”) were only intended to respond to the numerous requests from distribution utilities and power generators for their power supply contracts that were left hanging and could not make the November 6, 2015 ERC filing deadline, and that Meralco was not a consideration, it cannot be denied that the main beneficiary of the extension was Meralco, who just happened to be able to finalize 3,551mw of power supply with 5 partners within 40 days of extension announcement on March 15, 2016 on April 26, 2016 and was able to beat the new ERC filing deadline three days later or April 29, 2016. Neither can it be denied that Meralco’s 7 midnight contracts were not signed as of November 6, 2015.

Not convinced, consumer group Alyansa Para Sa Bagong Pilipinas (ABP), a group inspired by President Duterte’s call for changes for a new Philippines specially corruption, filed a complaint with the Office of the Ombudsman against the Commissioners for abuse of discretion and with the Supreme Court challenging the legality of the extension.

The Ombudsman suspended the ERC Commissioners for 90 days on the administrative case and filed a criminal case in the Pasig Court.  The Supreme Court we understand had decided that this is a matter that will be elevated to an enbanc decision.

Meanwhile, the development of new power projects to meet future demand is at a standstill. The seven (7) midnight contracts are veritable elephants in the ERC room that will have to be decided soon.

1. The major power generators who have become part of the Meralco 6 (Meralco PowerGen, Aboitiz, EGAT of Thailand, San Miguel, Global Business, DMCI-Semirara) will not develop new projects in Luzon until these seven contracts are resolved. Who will be the off-takers anyway? And who would buy from them at the same negotiated prices without undergoing a CSP?

2. The other major power generators who have similarly established track records but did not get invited to the Meralco party, could not develop major projects because they are shut out of the Meralco market which is 70% of Luzon Grid. Now outsiders looking in are the Lopez Group, Ayala Power, KEPCO of Korea, Team of Japan, AES of USA. Seeing their lack of access to the Meralco market, AES had sold a significant share to Meralco partner EGAT of Thailand and expected to Exit from the Philippines, Ayala sold its shares in GNPower to Meralco partner Aboitiz Group, Global Business sold its majority to the MVP Group that controls Meralco. Energy World of Australia is still cooling their heels waiting for a PSA.  The Philippines is not ripe for merchant plants given that the WESM is now artificially depressed by subsidized Renewable Energy resources.

3. Let us hope the Supreme Court decides soon one way or the other and not wait until there is a power crisis and a decision unfavorable to the consumers would meet less resistance from a power starving public. We predict anyway that the highest court of the land will rule that the ERC is within its authority to extend the CSP deadline legally but will not rule on whether it abused its authority. Having the legal authority is one thing. Abusing that authority is another.

4. Nonetheless, we can expect the ERC to move ahead and approve the seven contracts under the cloak of legality that the Supreme Court will provide. Whether it abused that authority the new commissioners might recognize and mitigate or the Ombudsman might determine and continue the criminal case.

5. Several things are working against the credibility of the old ERC’s contention that the extension was not intended to Benefit Meralco but to respond to those numerous generators and distribution utilities who needed more time to file the ERC application for their signed contracts.

a) The Ombudsman found out that as late as January 2016 Meralco was still petitioning to be allowed to hold a ‘swiss challenge” type bidding as their form of CSP clearly to give them procedural room to maneuver for the intended winners. The ERC denied the request but what happened in February and early March that motivated the ERC to extend the CSP deadline?

b) While there were 90 applicants who filed before the new April 30, 2016 deadline for approximately 4,000mw of power contracts, 3,551mw were from Meralco which is 88.75% of the total. And 350mw were between unrelated DU and power generators.

c) On the same day and session on March 15, 2016 that the ERC passed the resolution “clarifying” the deadline for CSP compliance, the ERC also “held in abeyance” a new rule in determining concentration of capacity limits as required by the EPIRA law to 30% of a regional grid and 25% of the national grid.

Why is suspending that rule significant and according to consumer group ABP a clear evidence that the ERC knew that Meralco would try to meet the new deadline with significant amount of contracts? The new rule adds an “ownership test” and an “operating tests” to the “control test” effectively closing the loophole that investors in “multi-owner” plants have been exploiting to avoid the ownership concentration limits of power generating capacity. The very rule that Meralco is evidently counting on in their unmitigated foray into power generation.

Under the old ERC formula, owners and operators of power plants can avoid the concentration limits as long as they don’t “control” the capacity which means appointing someone else to market or price the output as defined by Rule 11 of the Epira IRR.

Without removing this new formula that adds ownership and operating tests to the capacity concentration limits, Meralco would not have been able to consolidate their initial 4,011mw generating business under its sister company Meralco PowerGen.  I am one of those who wanted to give the Commissioners the benefit of the doubt but the two resolutions passed on the same day and session both point to a Meralco benefit.

The MVP group as owners of Meralco is theoretically allowed under Section 45 of the EPIRA to own, operate, and control up to 50% of the demand and energy needs of Meralco. That means about 3,000mw by 2022. Clearly their ambitions are beyond that. By partnering with those who are willing to be their minority partners in exchange for access to the huge 6,000mw Meralco market, their power generating portfolio can be unlimited as long as they don’t “control” the capacity.

Notice that no one builds a major power project without either Meralco or Aboitiz as a partner?

6. Having said all these, it is one thing for the ERC to approve the Meralco seven (7) midnight contracts and another to assure that the rates are fair and reasonable. The ERC could only base their assessment on table and WACC evaluation and for political reasons can shave off a token reduction of P0.25 per kwh “to protect the public”, which can go the other way and be unfair to those with truly fair and reasonable applied for rates.

That is the problem with negotiated contracts. There is just no way to know what is fair and reasonable. Only a truly competitive bidding can determine that with benchmarking safeguards.

In the past we had compared a negotiated contract and a competitive one and the difference was anywhere from P0.50 to P1.00 per kwh. A Coop Group in the Visayas said the difference was P1.00 per kwh.

At the contracted 28 billion kwh a year, that is an overprice of anywhere from P14 billion to P28 billion a year to the Meralco consumers.

7. The new ERC Commissioners are caught between a rock and a hard place.

Lawyers we asked said that the new for Commissioners can be liable for abuse of discretion if they go ahead and approve the questionable contracts even if they were not the ones who extended the CSP deadline. There needs to be a legal mitigation, a compromise where the interest of the public is served and the violation of the law is addressed. Perhaps a curative CSP can be undertaken for 50% of the 3,551mw and the other half given up and tendered for Natural Gas plants. To be fair, each of the Meralco partners can give up half of what was allotted to them and they can still participate in a new open CSP that would be administered by a Third Party.

The ERC went out of the box by “clarifying” the date of the CSP. Meralco went out of the box for their doggoned determination to use their market power and secure negotiated contracts for Meralco PowerGen. The two had resulted to an impasse in power development that never happened before.  We need an out of the Box solution.

The Department of Energy had issued to 1,200mw Atimonan One a Certificate of project of national significance in recognition of the need for more power in the future. Those they qualified were for permitting purposes. The evaluation of the fair and reasonableness of the rate is up to the ERC.

8. Power Crisis Gambit

Are we seeing a power crisis gambit in play here? The Supreme Court, Meralco, and ERC will just stand still and wait until there is a power crisis that can come as early as 2021. Then the power- starved consumers will be on their knees begging to be saved from brownouts and will not be able to care whether the CSP law was violated and their rates are high.  Just give me power please!

These are the seven (7) elephants in the ERC’s room. Do they wait until the right power crisis time and perpetuate what Meralco wanted? Or do they proactively act now and engineer a compromise agreement that serves the public interest? How do they make sure the rates are fair and reasonable?

The Supreme Court is not doing anyone a favor by taking time on the decision. We hope they can decide one way or the other.  The waiting is now part of the problem instead of the solution.

Meanwhile, one of the seven, a little Dumbo of 70mw had already flown away and been approved for a coal power plant in far away Iloilo that turned out is owned by the MVP Group through their acquisition of the Business Power Group of the Metrobank group. Ahh the power of self-dealing.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph

WE APPEAL TO THE ERC TO LIFT THE SUSPENSION OF ITS NEW GUIDELINES CORRECTING THE METHOD OF DETERMINING CONCENTRATION OF OWNERSHIP, OPERATION, AND CONTROL OF INSTALLED GENERATION CAPACITY.

David Celestra Tan, MSK
11 December 2018

In the waning days of the former ERC Chair Zenaida Ducut in 2015, the ERC surprisingly made an effort to correct one of the great illegalities in the implementation of the EPIRA Law (RA 9136 of 2001) which was Rule 11 of the EPIRA. This Rule watered down the restriction of concentration of power generation facilities to only “control” instead of “ownership, operation, or control” as required under Section 45 of the EPIRA Law. This punched a mammoth loophole that had led to the monopolization of power generation and hence avoided true competition that was expected to lower the rates.

The EPIRA Law under Section 45 tried to promote competition in power generation and avoid concentration of ownership of the power plants by limiting the ownership, operation, or control of power plants that can be owned by an entity and their affiliated companies to only 30% of the regional grid and 25% of the national grid.  Mathematically it means there would be at least four (4) generating companies that will compete in each area, thought to be sufficient to create beneficial competition for consumers.

Using Rule 11 as guideline, the ERC had been determining and announcing every year the maximum limits of installed power generating capacities and no one had been in danger of breaching the limit. We believe that at some point they also realized that by using only “control” they are not implementing the requirements of the EPIRA Law itself which clearly included three criteria which are “ownership, operation, or control”. They also noticed that power generation groups were just forming partnerships and joint ventures to circumvent the “concentration” limits.

After months of staff work, on October 13, 2015 the ERC posted its draft new guideline inviting public comments as ERC Case No. 2015-005 RM.

“GUIDELINES FOR THE DETERMINATION OF INSTALLED GENERATING CAPACITY AND ENFORCEMENT, OF THE LIMITS ON CONCENTRATION OF OWNERSHIP, OPERATION OR CONTROL OF INSTALLED GENERATING CAPACITY UNDER SECTION 45 OF REPUBLIC ACT NO. 9136″. 

“The proposed amended Guidelines, on the other hand, provides that in the determination of the Generation Companies’ market shares and potential breach of the 30% and 25% market share limitation, it shall be separately determined based on three (3) separate tests, as follows:

a. Ownership test;
b. Operation test; and
c. Control test.

The generation company and its related group, if any, should comply with all the above mentioned tests. In the event that the generation company exceeds the limits in either of the tests required, the ERC shall consider the same as a breach of any of the market share limitation. If a generation company and its related group exceed the limits as periodically determined and set by the ERC in accordance with the Guidelines, it is obligated to inform and report such breach and the reason therefor to the ERC within the prescribed period from the occurrence thereof.

Thus, the Commission seeks the comments from the various industry stakeholders on the proposed amended Guidelines pursuant to Section 4s(a) of RA 9136.”

The draft revision does not go far enough but it would have been a big step forward towards correcting the legal infirmity of Rule 11 but also the control of market concentration and domination.

The Salazar ERC’s Step Backward on that fateful day of March 15, 2016

The ERC then quietly “held in abeyance” the rules on the determination of market concentration by passing Resolution 3 of 2016 on March 15, 2016 the same day and session that they famously “extended” the CSP policy by 6 months from November 6, 2015 to April 30, 2016.  According to the Alyansa para sa Bagong Pilipinas, the two actions were interrelated because the new contracts that will result from the CSP extension will run counter to the limits of the new rules on concentration of installed capacity.

And the rest is history. Meralco took advantage of the extension that in 41 days it was able to hammer 3,551mw of PSA with 5 strategic partners who are willing to be the minority partners (and plant operators) of MeralcoPowerGen.

Freed from the market concentration limits “held in abeyance” by the ERC, they also proceeded to acquire the 1,000mw Global Business Power of the George Ty group and Aboitiz Group, for its part, acquired controlling interests in erstwhile competitor 1,200mw GN Power.  Meralco partner EGAT of Thailand also bought 45% of the 800mw AES Masinloc coal plants in Zambales. GBP in turn bought controlling interest in the Alsons coal projects in Mindanao.

All these things happened before the new ERC Chair Agnes Devanadera was appointed on November 22, 2017 and new Commissioners Alexis Lumbatan and Catherine Maceda were recently appointed.

We realize that they have a lot to study and catch up on. Among the most epochal cases pending in the ERC that they have to deal with are the seven (7) midnight contracts of Meralco totaling 3,551mw and involving 80% of the energy needs of the largest distribution utility in the country covering the national capital region, the industrial and commercial nerve center of the Philippines.

In Meralco’s evident strategy to hoodwink even the Supreme Court, where ABP is questioning the legality of ERC’s extension of the CSP policy that turned out allowed the circumvention of the CSP policy, Meralco lawyers are trying to argue that the ERC had approved 30 power supply contracts that also did not undergo bidding, ergo ERC’s extension of the CSP cannot be illegal.  Hence their 3,551 mw can be legally approved.

Is the argument valid? According to our sources, of the 25 PSA’s they were able to determine, 24 or 96% were between two unrelated generator and Distribution utility, hence in theory the negotiations were at least arms-length. Only 1 or 4% was between two sister companies, Meralco and Global Business. All the 25 PSA’s check were for small contracts of less than 50% of the DU’s demand. Meralco’s 3,551mw was for 80% of its energy requirement. 14 of the claimed contracts were signed before November 6, 2015 the original deadline of the CSP. 11 were signed after March 15, 2016 when ERC extended the CSP deadline. None of the 25 PSA’s checked resulted to a cartelization of power.  The impact on the public cannot be compared.

We would like to appeal to the new ERC Chair Devanadera and the new Commissioners to activate this new formula for determining market concentration of power generation capacity under ERC Case No. 2015-005 RM and apply them to the current applications of the Meralco cartel.  The six members for Meralco’s 3,551mw also own, operate, or control more than 10,000mw of the country’s installed generating capacity. That would give the cartel more than 75% of the nations installed generating capacity in 2022.

We pray that the new ERC will not allow this to happen.

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