THE Department of Energy (DoE) is meeting with Manila Electric Co. (Meralco) and other stakeholders that are expected to be affected by the Supreme Court (SC) decision requiring all power supply agreements (PSAs) forged after June 30, 2015 to undergo a competitive selection process (CSP).
“Magkakaroon kami ng meeting (We will meet) with Meralco, with all the stakeholders this week,” Energy Assistant Secretary Redentor E. Delola told reporters during the two-day Future Energy Show at the Mall of Asia’s SMX Convention Center in Pasay City.
Asked what the DoE will tell Meralco and the others, he said: “I-CSP na nila (They should do a CSP),” he said, referring to the scheme that requires a distribution utility and a power generation company to first subject the cost per kilowatt-hour of their PSA to price challengers.
“Kung ayaw n’yo mag-CSP, gagawa kami ng circular, kami mag-CSP for you (If they don’t want to do a CSP, we will issue a circular for you),” he said.
He said the price challenge should be easy for Meralco and the companies it had forged PSAs with since their power plants have not been built yet. He added that a meeting had been scheduled for both on-grid and off-grid energy stakeholders affected by the court ruling.
On May 6, 2019, the Supreme Court’s public information office said the tribunal ruled that PSA applications submitted by distribution utilities (DUs) on or after June 30, 2015 were to comply with the CSP in accordance with a DoE circular.
The circular mandated all DUs to undergo CSP, a form of competitive public bidding for their purchase of electricity from gencos, in securing PSAs. It became effective on June 30, 2015 after its publication.
The court further ordered that the power purchase cost after compliance with the CSP is to retroact to the date of the PSA’s effectivity, but in no case earlier than June 30, 2015, for purposes of passing the purchase cost to consumers.
The decision affected PSA applications filed by Meralco covering 3,551 megawatts (MW) to meet the expected increase in power demand and number of customers. The contracts were signed on April 29, 2016 or just before the April 30, 2016 extended deadline set by the ERC.
CSP requires these contracts between power generation companies and distribution utilities to be subjected to price challengers, a process that is aimed at lowering electricity costs.
The ERC promulgated CSP in November 2015 but had to restate its effectivity date to April 30, 2016 through a resolution issued in March 2016. It said the move was prompted by letter-inquiries from distribution utilities and generation companies assailing the legal implication of the CSP to existing power supply deals.
Meralco’s PSAs are with two subsidiaries of its unit Meralco Powergen Corp., which is constructing power plants under subsidiaries Redondo Peninsula Energy, Inc. and Atimonan One Energy, Inc. It also has a PSA with St. Raphael Power Generation Corp., its joint venture with Consunji-led Semirara Mining and Power Corp.
The others are Panay Energy Development Corp. and Global Luzon Energy Development Corp.
Two of the PSAs are with units of San Miguel Corp. (SMC): Central Luzon Premiere Power Corp. and Mariveles Power Generation Corp.
Asked to comment, SMC President and Chief Operating Officer Ramon S. Ang said he had expected the projects to face difficulty in getting approval because the cost of power under the contracts is between P5-6 per kilowatt-hour (kWh) before increased supply pushed down prices to P3-5 per kWh.
“Give up na ako doon, last year pa na ’di uubra ’yun (I have given up as early as last year that the PSAs will not be cleared),” he said during a briefing after the annual shareholders’ meeting of SMC unit Petron Corp.
Mr. Ang said the Supreme Court ruling will not have any damaging impact on the company, except for opportunity lost.
“And I think everybody will follow, there’s no question,” he said, adding that the company had received a hard copy of the tribunal’s decision. — Victor V. Saulon