ERC in limelight as lawmakers seek pause to power supply bidding
MANILA, Philippines—The Energy Regulatory Commission (ERC) is in the limelight these days as its decision is awaited on a bid for 1,800 megawatts of power supply by Manila Electric Co., which several lawmakers said should be closely examined.
Recently, several members of the House of Representatives asked the regulatory body to pause consideration of the competitive selection process (CSP) for a power supply agreement (PSA) involving 1,800 megawatts of electricity.
Earlier this month, Meralco initiated the CSP to acquire 1,800 megawatts (MW) of power supply to cater to the increasing demand of its customers from next year onwards.
This move was made after the Department of Energy issued a certificate of conformity on the terms of reference (TOR) for a 15-year contract, which involved Meralco’s 1800-MW baseload requirement starting from December 2024.
According to Meralco, six potential bidders have already expressed interest in providing only a fraction of the total required capacity. All bids for the deal must be submitted by Dec. 26.
However, Santa Rosa Rep. Dan Fernandez, along with other lawmakers, pressed the ERC to halt the CSP and act on what the regulatory body has previously described as irregular terms set by Meralco.
Fernandez, who has previously accused Meralco of overcharging, being monopolistic, and engaging in anti-competitive behavior, said that Meralco was to bid out the 1,800 MW of electric supply specifically to companies tailor-fitted to the utility’s conditions.
At a House Committee on Legislative Franchises hearing last Nov. 22, Fernandez pointed out that Meralco’s invitation to bid for a 1,800 MW power supply agreement stipulated that only power plants in operation not earlier than Jan. 22, 2020 are qualified to bid.
The six potential bidders for the upcoming CSP are GNPower Dinginin (GNPD), First NatGas Power, SP New Energy, Mariveles Power Generation, Excellent Energy Resources, and Masinloc Power Partners.
“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,” said Fernandez at the Nov. 22 hearing.
“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 added.
The lawmaker said the “tailor-fitting” by Meralco hindered other interested participants from bidding, which was, in the first place, supposed to be done through CSP.
“Your responsibility to us (is only as) a distribution utility only. You have to get the least cost. How can you get the least cost if many power plants are excluded?”
Pause CSP until TOR is reviewed, complete
Lawmakers led by Fernadez have asked the ERC to pause the bidding until a review and study of its terms of reference (TOR) are completed.
Fernandez noted that a close examination of the TOR would show that the utility provider was being anti-competitive and discriminatory.
“We hope Meralco will be conscientious and not only think of profits,” said Caloocan 3rd District Rep. Dean Asistio.
At the same hearing last week, ERC Chairperson Monalisa Dimalanta said Meralco had already been warned to make sure it is not unduly limiting the number of potential bidders. She added that a letter was also sent to Meralco stating the ERC’s observations on the published bid invite.
“We already raised with Meralco our concerns on the limited number of potential participants that could participate (to the CSP),” Dimanlata told lawmakers at the hearing.
Dimalanta also addressed Fernandez’s concerns that the terms of reference for the CSP allegedly favored certain power firms.
“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.
The ERC is responsible for promoting competition, encouraging market development, ensuring customer choice, and penalizing abuse of market power in the power industry.
Meralco denies accusations
In a statement on Nov. 26, Meralco First Vice President Jose Ronald Valles — who’s in charge of the power distributor’s regulatory management — denied accusations of overcharging its customers, explaining that the company “has no power to unilaterally set its rates.”
“I would like to reiterate that as a highly regulated entity, Meralco strictly adheres to the rules governing its operations and franchise, and the rates we implement always have prior approval from the regulator. A testament to the strict review, these rates are still subject to periodic confirmation process by the ERC,” said Valles.
“The proper venue for discussing the refund claims is the ERC, which has the rate-setting power, and the regulator has already decided on a refund totaling P48 billion, which Meralco implemented in a timely manner.”
Meralco also issued clarifications regarding allegations of market power abuse. It pointed out some “factual errors” in the privilege speech delivered by Fernandez earlier this month, where he accused Meralco of doing the following things, among others:
- refusing to recompute its weighted average cost of capital that was too high and that it passed on to its customers
- maintaining a monopolistic franchise that controls 70 percent of the electricity of Luzon
- exercising anti-competitive behavior
“Records show that Meralco is fully compliant with all government regulations and even outperformed the level of service required by the regulator. This is precisely the reason why some local government units are clamoring for Meralco to take over their service,” said Meralco spokesperson Joe Zaladarriaga.
“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,” he went on.
“On the contrary, we have always managed to supply electricity to our customers in the most transparent and least cost manner, and is the only distribution utility that has complied with an ERC directive to refund distribution charges by refunding more than 48 billion pesos in 2023,” he added.