Meralco denies costly contracts, opts for least-cost power

MANILA, Philippines — Manila Electric Company (Meralco) has denied allegations that it has been entering into unfavorable power supply contracts that would lead to expensive electric prices, noting that it has been sourcing the least-cost available supply.

In a statement on Tuesday, Meralco vice president and spokesperson Joe Zaldarriaga said that the company has been compliant with the standards set by the government when entering into supply contracts, adding that these were done under a transparent competitive selection process (CSP).

“We strictly observe and follow the requirements and standards set by the government, which includes securing prior approval from the Department of Energy (DOE) of our Power Supply Procurement Plan and the corresponding Terms of Reference (TOR) of the CSPs,” Zaldarriaga said.

“In addition, these TORs also considered suggestions of the Energy Regulatory Commission (ERC) Chairperson before they were published,” he added.

Meralco was referring to the recent claims by consumer group Power for People Coalition (P4P), which said that the company entered into three gigawatts worth of power contracts that “would result in costly electricity for consumers.”

This supposedly goes against the “least-cost” provision of the Electric Power Industry Reform Act (EPIRA).

“It is a disservice to consumers for Meralco to keep granting contracts to expensive fossil fuel companies when there are cheaper and more reliable sources of power.  Majority of the new 3GW are contracts with San Miguel, which has a track record of violating their commitment of delivering reliable supply and passing on charges to consumers,” P4P Convenor Gerry Arances said in a separate statement.

But Zaldarriaga explained that the CSP involving the 1,200 megawatt (MW) power supply agreement was awarded to South Premiere Power Corporation after it submitted the lowest bid of P7.0718 per kilowatt-hour (kWh) — better than the P7.1006 per kWh offer of Limay Power Inc. and San Roque Hydropower Inc. joint venture.

First Natgas Power Corporation’s bid of P8.4489 per kWh also lost because the offer was said to have gone beyond the reserve price set for the bidding.

The Meralco official also noted that for 1,800 MW CSP, Meralco secured the best bids from three generation companies — GNPower Dinginin Co. Ltd., Mariveles Power Generation Corporation, and Excellent Energy Resources Inc. offered P6.8580 per kWh for the 300 MW; P6.9971 per kWh (300MW); and P7.1094 per kWh (1,200MW), respectively.

“The CSPs involve an open and competitive process with the ultimate goal to secure the lowest bid from qualified generation companies, with no preferential treatment. Thus, the allegations that contracts emanating from CSPs are anti-competitive have no basis,” Zaldarriaga said.

“We would like to assure our customers that all power supply contracts resulting from our CSPs undergo a strict review and approval from the ERC before being implemented to ensure that rates are fair and reasonable,” he added.

Meralco recently faced criticisms primarily brought about by proposals to renew its legislative franchise for another 25 years despite the current one expiring in 2028.  At the House of Representatives, lawmakers from the Makabayan bloc have questioned why the franchise is being discussed when there are still three years before the current franchise expires.

However, Meralco supporters like Cagayan de Oro City 2nd District Rep. Rufus Rodriguez urged his fellow lawmakers to heed the advice of major business groups in the country, which have supported calls for a new 25-year franchise.

READ: House urged to support calls for new Meralco franchise

Rodriguez said that letters of support from the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), the Private Electric Power Operators Association (PEPOA), the Makati Business Club (MBC), and the Management Association of the Philippines (MAP) show wide support for Meralco’s continued operations.