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SC requires bidding for all power supply agreements

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STEAG power plant Mindanao
STEAG

THE SUPREME COURT (SC) has ordered all power supply agreements (PSA) submitted by distribution utilities (DU) to the Energy Regulatory Commission (ERC) on or after June 30, 2015 to undergo competitive selection process (CSP).

In a press release, the SC Public Information Office (PIO) said the Court ruled in an en banc session on May 3 that ERC “committed grave abuse of discretion amounting to lack or excess of jurisdiction” when it “unilaterally postponed” the effectivity of the CSP requirement that was otherwise mandated by the Department of Energy (DoE) in 2015 through DoE Circular No. DC 2015-06-0008.

ERC resolutions 13 in October 2015 and 1 in March 2016 postponed the effectivity of the auction requirement by a total of 305 days from June 30, 2015 to April 29, 2016.

The high court noted that 90 PSAs were submitted for ERC approval from April 16 to 29, 2016, adding that several of the PSAs had terms spanning more than 20 years.

“The ERC’s delegated authority is limited to implementing or executing competitive selection process in accordance with the 2015 DoE circular, not postponing CSP so as to freeze CSP for at least 20 years, effectively suspending CSP for one entire generation of Filipinos,” the statement quoted from the decision, penned by Associate Justice Antonio T. Carpio.

It added that “[a]s a consequence of the ruling by the Supreme Court, all PSA applications submitted by DUs on or after 30 June 2015 were required to comply with the CSP in accordance with 2015 DoE circular.”




“Thereafter, the Supreme Court further ordered that the power purchase cost after compliance with the CSP shall retroact to the date of the effectivity of the PSA, but in no case earlier than 30 June 2015, for purposes of passing the purchase cost to consumers.”

The court acted on the November 2016 petition of consumer group Alyansa Para sa Bagong Pilipinas, Inc. that sought to nullify the ERC resolutions which effectively postponed the CSP requirement for PSAs and halt the approval of PSAs entered into by Manila Electric Co. (Meralco), for failure to comply with CSP requirement.

Bayan Muna Partylist and Makabayan bloc chairperson and senatorial candidate Neri J. Colmenares and Rep. Carlos Isagani T. Zarate, who filed a petition-in-intervention to ABP’s petition last month, welcomed the court’s decision. “This is a very positive development because it spared consumers another burden that we would have to bear for 20 years,” Mr. Colmenares, who also serves as ABP’s legal adviser, was quoted as saying in the statement. “We believe that some ERC officials bent backwards several times to accommodate these Meralco power deals. The ERC should now scrap those sweetheart deals and require Meralco to undergo competitive bidding for its power supply.”

The ERC said on Monday that it would be taking the “necessary steps and measures to preempt and mitigate possible implications” of the Supreme Court decision.

ERC Spokesperson Floresinda B. Digal, quoting the agency’s Chairperson and Chief Executive Officer Agnes VST Devanadera, said although the agency had yet to receive a copy of the decision it had prepared to meet with energy stakeholders.

“Meetings with the DoE and affected entities such as DUs, gencos (power generation companies) and other power industry stakeholders will be carried out this week to jointly address the issues at hand,” she said in a mobile phone message.

Sought for comment, the DoE said the decision would now allow pending power plant projects to proceed.

“We just have to respect and abide the decision of the SC. The project can now move forward,” said Energy Secretary Alfonso G. Cusi in a mobile phone message, when asked to comment on the court decision.

“Definitely, it will be an addition to capacity,” he said, adding that the decision would help get the projects going.

Meralco did not immediately respond when asked to comment on the SC decision.

Semirara Mining and Power Corp. (SMPC) Chairman and Chief Executive Officer Isidro A. Consunji said his company would abide by whatever decision the court issues.

In May 2016, Meralco announced that it had sought regulatory approval for seven PSAs, covering 3,551 megawatts (MW) to meet the expected increase in power demand and number of customers. The company is also preparing for the impending expiration of existing PSAs from 2019 to 2020.

The contracts were forged on April 29, 2016 or just before the April 30, 2016 deadline set by the ERC. After that date, companies are required to first undergo a CSP before forging a PSA.

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.

In deferring effectivity of the CSP requirement, the ERC said the move was prompted by letter-inquiries from distribution utilities and generation companies assailing the legal implication of the CSP on existing power supply deals.

Meralco’s PSA are with two subsidiaries of its unit Meralco Powergen Corp. (MGen), which is building power plants under 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 SMPC. Meralco is also seeking approval for PSAs with Central Luzon Premiere Power Corp., Mariveles Power Generation Corp., Panay Energy Development Corp. and Global Luzon Energy Development Corp.

Mr. Consunji said those that applied for PSAs before issuance of the CSP rules worked hard to forge bilateral contracts. “Ngayon, kung sinabing CSP, wala ka namang magagawa. Sunod ka na lang (Now, if CSP is required, you can’t do anything. You just follow),” he said. “If that is the decision of the ERC, eh di susunod ang lahat (then everyone will follow).” — Vann Marlo M. Villegas and Victor V. Saulon

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