ERC, solon call out Meralco on conduct of CSP for 1,800 MW power supply; Company claims it's transparent

The Energy Regulatory Commission (ERC) cautioned the Manila Electric Company (Meralco) from engaging in anti-competitive practices, particularly in the conduct of the ongoing competitive selection process (CSP) for bidders who would provide its 1800-megawatt (MW) power supply.

During the hearing of the House Committee on Legislative Franchises last Wednesday, ERC Chairperson Monalisa Dimalanta said Meralco was told to make sure it is not unduly limiting the number of potential bidders.

She said a letter was already sent to Meralco stating the ERC’s observations on the published bid invite.

There are currently six potential bidders for the upcoming CSP: GNPower Dinginin (GNPD), First NatGas Power, SP New Energy, Mariveles Power Generation, Excellent Energy Resources and Masinloc Power Partners.

“We already raised with Meralco our concerns on the limited number of potential participants that could participate (to the CSP),” Dimalanta told lawmakers.

As the regulator of the power industry, Dimalanta said the ERC is mandated to promote competition, encourage market development, ensure customer choice, and penalize abuse of market power in the industry.

House Representative Dan Fernandez of Santa Rosa, Laguna pointed out during the hearing that the terms of reference of the CSP favors certain power firms since the power plants that could join the auction are those that should be in commercial operation not earlier than January 2020 but no later than May 2025.

"That is also our concern, so we laid it out to Meralco in our letter to them that we will submit to the committee," Dimalanta said.

Lawmakers led by Fernandez urged the ERC to act on what they said were irregular terms set by Meralco for 1,800 MW of electric supply that it was to bid out but apparently to companies tailor-fitted to the utility’s conditions.

In a privilege speech, the Laguna congressman urged ERC to stop Meralco from proceeding with the bidding until a review and study of its terms of reference (TOR) are completed. He said a close examination of the TOR would show that it is anti-competitive and discriminatory. 

He further described Meralco as a “monopsony” benefitting from a "market situation with only one buyer”. 

Meralco “is dictating terms to the suppliers,” Fernandez said. The solon noted that Meralco’s invitation to bid for a 1,800 MW power supply agreement stipulated that only power plants in operation not earlier than January 22, 2020 are qualified to bid. 

"Your invitation to bid was for 1,800 MW, your provision for your power supply agreement calls for 1,800 MW and if I may read, what you also said in that provision of your bidding -- single or portfolio plant provided a power plant should be in commercial operation not earlier than January 22, 2020," Fernandez said. 

"That is trademarking, that is branding. That's tailor fitting, that's illegal in accordance with the PCC (Philippine Competitive Commission) and international agreement which states that trademarking is prohibited, it does not allow ‘tailor-fitting'," he accused. 

"Your responsibility to us (is only as) a distribution utility only. You have to get least cost,” Fernandez said. “How can you get least cost if many power plants are excluded?”

Earlier, Fernandez urged Congress to split the mega-franchise of Meralco into three. 

"It's high time we renew its franchise to pave the way for the split of the mega-franchise we granted Meralco,” said Fernandez in his speech. He suggested three franchises can each handle the three sectors Meralco is overseeing in Luzon— NCR (National Capital Region), South Luzon (Calabarzon) and the North Luzon sector of Pampanga and Bulacan. 

Meralco’s VP and Head of Corporate Communications Joe Zaldarriaga said Meralco is fully compliant with all government regulations and even outperformed the level of service required by the regulator. 

"Further, while Meralco is the largest utility in the country, it has never committed and has no record of any anti-competitive behavior or abuse of market power. On the contrary, we have always managed to supply electricity to our customers in the most transparent and least cost manner,” said Zaldarriaga.

Meralco said its constant efforts to source the least cost available supply dictates how it is conducting “a transparent CSP”.

Before conducting CSP, Meralco said it secured an approval from the Department of Energy (DOE) of its Power Supply Procurement Plan and the Terms of Reference (TOR) of its proposed CSP, to make sure that these are aligned with the requirements and standards set by the government.

“This is contrary to the baseless and malicious claims that Meralco’s TOR is tailor-fitted to favor select generation companies,” said Meralco First Vice President and Regulatory Management Head Ronald Valles said.

“Our past CSPs conducted are proof that no such tailor-fitting is happening, precisely because the TOR and other bidding documents are required to comply with existing policies of DOE and regulations of ERC, and the resulting Power Supply Agreement needs to be approved by regulator,” Valles added.

According to the Meralco executive, the ongoing CSP is “just a rebidding of a valid CSP held in 2020. Unfortunately, the PSAs resulting from the original CSP were terminated by the two winning Power Suppliers due to lack of ERC approval for more than 2 years”.

“The new CSP simply reiterated most of the provisions in the previous TOR that has been approved by DOE and its terms strictly followed the previous guidance of DOE particularly with respect to the requirement to limit the bidding to greenfield power plants to encourage new capacities, thereby ensuring security of supply and lowest cost to consumers,” Valles clarified.

“Based on records, there are already six companies that have expressed interest to participate, proving that there is competition and Meralco could get the least cost supply for its customers through the process. “The CSP is a very transparent process, and the resulting PSAs from this bidding will still be subject to the review and approval of the ERC,” Valles said.—Rhoel Fernandez, GMA Integrated News