Gov’t urged to enforce competitive selection for least-cost power to reduce electricity rates, charge erring officials

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By Mike Baños, VP for Digital
September 27, 2019

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A THINK tank headed by a former member of the House Energy Committee is urging the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) to enforce the competitive selection process (CSP) in all power distribution utilities (DUs) nationwide to ensure affordable, least-cost power rates for all Filipinos.

 

“The energy department should continue its momentum in implementing the CSP in all electric cooperatives and distribution utilities after the success of the pilot CSP covering Meralco’s concession area,” said Atty. Terry Ridon, Infrawatch PH convenor and former House energy committee member.

 

“A transparent selection process ensures consumer savings in generation costs, which usually constitutes the most expensive component in our monthly electricity bills. Electricity consumers outside the Meralco concession area should also be able to benefit from this process.”  

 

Consumer savings

 

Ridon said the rest of the country should be able to save a significant amount from competitive power rates arising from the CSP.

 

"The P0.28 per kilowatt-hour (kWh) savings under the Meralco CSP translates to ten-year savings of around P6, 720 for the average 200 kWh household. These savings can now be used for other expenses such as a child’s college tuition.”

 

DoE, consumer monitoring ensure transparency

 

Ridon said the pilot Meralco CSP served as a litmus test to determine whether the competitive bidding can be manipulated.

 

“An important component in ensuring the transparency of the Meralco CSP is the close and strict monitoring of the energy department in every step of the process. Another component is the inclusion of independent consumer representatives as part of the third-party bid-and-awards committee (TPBAC) itself. Without these, the transparency of the entire process could have been suspect.”

 

Ridon said the same strict monitoring and public participation should be undertaken in the soonest time in other areas.

 

Monitor ERC approvals

 

“After the Meralco CSP, the resulting power rates will now be subject to the confirmation of the ERC. The public should closely monitor proceedings in the commission to ensure that least-cost of power had in fact been determined, or whether further rate reduction can still be undertaken. But more important, the public should ensure that after exhaustive proceedings in the ERC, there should be no further delay in approving additional power supply.”

 

Ridon said delay in ERC approvals had been a serious concern during the summer months, as the Luzon grid experienced almost-daily red or yellow alerts signaling very significant dips in power supply.

 

“As medium-term power supply continues to be concern, we most certainly hope that the ERC will deliver on its mandate in the soonest time," he added.

 

Charge erring officials in Ombudsman

 

But a Cagayan de Oro-based consumer group wants more drastic action.

“Instead of just urging the DOE and ERC to implement the CSP nationwide, charges should be filed at the Ombudsman vs. DOE officials and ERC commissioners for continuing to refuse to require the distribution utility companies to carry out CSP prior to entering into power supply contracts with generating companies,” said Engr. David A. Tauli, president and spokesman of the Mindanao Coalition of Power Consumers.

“The EPIRA requires all DU’s to carry out least-cost acquisition for their power supply, and to carry out a competitive process in purchasing materials, equipment, and services. The EPIRA is very explicit and clear about the necessity of least-cost acquisition to be done by the DU’s; and both the ERC and DOE have long ago issued resolutions on how the DU’s could comply with this requirement. (CSP, public bidding, and Swiss Challenge have been accepted by the ERC as forms of compliance by the DU’s of the EPIRA requirement for least-cost acquisition of power supplies.)”

Non-Compliant PSAs

However, Tauli alleges that when Zenaida Ducut and Jose Salazar were chairpersons of ERC, they approved Power Supply Agreement (PSA) applications that were submitted to ERC that did not comply with the least-cost acquisition required by EPIRA.

“These PSA applications that were anomalously approved by the ERC include the PSA’s of electric cooperatives with the FDC coal power plant in Villanueva and with the Mt. Apo geothermal power plant that were contracted in the period 2014-2015. They also include the seven PSAs of MERALCO with coal generating companies. These PSA’s violated the EPIRA by NOT carrying out CSP, public bidding, or Swiss Challenge,” Tauli stressed.

The Supreme Court has already ruled with finality in July 2019 that all PSAs that were filed after July 30, 2015 that did not carry out CSP in accordance with the DOE directive are in effect “declared null and void ab initio”.

However, the allegedly anomalous contracts with the FDC coal plant and with Mt. Apo were submitted to the ERC before July 30, 2015. Thus, the PSAs of Mindanao (electric cooperatives) ECs were not among the PSAs that were annulled by the Supreme Court decision.

“But many of the PSA’s of Distribution Utilities (DUs) that were done after July 30, 2015 have been annulled, including four PSA’s of CEPALCO, and one PSA of SOCOTECO 2. There are many other PSAs that were annulled but those are the only ones I know about,” Tauli admitted.

Starting this October, Tauli said the MCPC will again conduct info campaigns among consumers of the electric cooperatives to file petitions with the ERC for the annulment of the anomalous PSAs of the Mindanao electric cooperatives.

“We will start with BUSECO, and move from there to MORESCO 1 & 2, CAMELCO and the other ECs that have continued to cheat their consumers using anomalous PSAs that were approved by the ERC,” Tauli disclosed.  

“Eventually, we should be able to file charges of corruption vs. the ERC commissioners during the time of Ducut and Salazar for their part in approving PSAs of the ECs that did not comply with EPIRA requirements,” he added.

High cost of power rates in the region.

During the 28th Mindanao Business Conference held in Iligan recently, the Philippine Chamber of Commerce and Industry (PCCI) and its affiliate chambers in Mindanao passed recommendations on action required at the national level to address the high power rates in Mindanao.

 

Among these were ensuring a  transparent and fair playing field in the power industry to attract investments in energy, thereby maintaining the grid’s dependable capacity and augmenting existing supply in the region with the entry of new power projects; the full implementation of the Wholesale Electricity Spot Market (WESM) in Mindanao to provide a competitive market for buying and selling of electricity that are not covered by bilateral contracts, including the setting of price cap and floor price; reviewing the National Grid Corporation of the Philippines (NGCP) dispatch protocol to prioritize the cheapest power source in the region (e.g. Agus-Pulangi Power Plants) and amend  the EPIRA Law to exempt Agus-Pulangi Plants from privatization and ensure cheaper power rates.

The MBC also recommended the fast tracking of infrastructure projects to improve power generation such as harmonizing the transmission development plan with renewable energy (RE) targets, and address potential grid reliability concerns with the scaling of variable renewable energy resources and advance RE development efforts, including implementation of Off-Grid RE Development.

Agus-Pulangi Rehab

During the closing plenary of the 28th MBC, Cabinet Secretary Karlo B. Nograles announced that the Agus-Pulangi Hydropower Plant rehab was among the projects lined up for China financing after the President obtained US$9 billion official development assistance (ODA) during his visit to Beijing in October 2016.

Funding for this was firmed up as part of the “second basket” of projects in September 2017, and according to the NEDA, the rehabilitation of the plant is scheduled for 2020, to be completed by 2022

However, media reports have quoted National Power Corp. telling a House Committee recently how the rehabilitation of the Agus-Pulangi hydroelectric complex could take place beyond 2025 with studies on the proposed rehabilitation scheduled for the fourth quarter of 2020, while the rehab itself “could go beyond 2025.”

Napocor president and chief executive officer Pio J. Benavidez, said in March that the cost of rehabilitating the Agus complex would be between P37 billion and P40 billion (BusinessWorld, 2019).


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