Meralco reiterates least-cost mandate

Besieged by consumer groups and members of Congress, dominant power distributor Manila Electric Co. (Meralco) defended the integrity of the auctions held for supply contracts to meet the rising electricity demand.

Power Supply Agreements (PSA) were bid out through the government-mandated Competitive Selection Process (CSP).

“CSP ensures that only power suppliers that offer the least cost supply will be undertaken by a distribution utility to protect consumers against high power rates,” Meralco vice president and head of corporate communications Joe Zaldarriaga said.

Zaldarriaga added that the CSP, as approved by the DoE and ERC, is an open and transparent bid, where consumers of electricity are allowed to observe.

“Meralco strictly follows the requirements of CSP prescribed 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) for every CSP. In the case of our 1,800 megawatts (MW) and 1,200 MW CSPs, the ToR also considered suggestions of the Energy Regulatory Commission chairperson (Monalisa Dimalanta) before they were published,” Zaldarriaga explained.

To further ensure transparency and fairness, CSP observers, including the DoE and consumer groups, witness the submission and opening of bids. The proceedings are also streamed live.

Zaldarriaga added that the ToR ensures a level playing field for all generation companies participating in the bidding because all the rules apply to all bidders without exception, and all bidders are required to include all their costs in their bid offers for purposes of determining the lowest and winning bid.

Zaldarriaga’s comments were in response to senators’ call for a temporary halt in bidding for an additional 600 MW of electricity by Meralco to review whether the ToR for its CSP was fair.

The Energy Regulatory Commission (ERC) was urged to order the suspension of the auction during the hearing of the Senate committees on energy and committee and ways and means on the supply deals.

A member of the panel said there is a pressing need to address the lingering issue of the high cost of power affecting both investors and consumers.

“The past administrations have addressed many issues (of investors) but the issue of the high cost of power lingers,” one senator said.

“This is not only about the high cost of power but it’s also about energy security,” he added.

According to another senator, he found a phrase in Meralco’s ToR to be discriminatory because it effectively disqualified Malampaya-fueled power plants.

He was referring to the phrase “if the plant is more than 10 years old” as indicating that older power plants were automatically disqualified from taking part in the CSP.

Nothing hidden

Zaldarriaga pointed out that no hidden costs are allowed to be charged to consumers under Meralco CSPs.

Since the ToR require the prior approval of the DoE, tailor-fitting to favor a particular generation company is prohibited.

Meralco’s ToR promote competition by ensuring that more generation companies are able to participate and offer competitive rates, while at the same time encouraging the entry of new or greenfield power plants to replace old and unreliable power plants.

“Any generation company can submit offers for these CSPs. While we prioritize power plants using indigenous fuels as required by DoE, we ensure that it will not violate our least-cost mandate under the law. There is no preferential treatment and Meralco always awards the contracts to the lowest compliant bidder,” Zaldarriaga reiterated.

In its recently completed CSP for its 1,200-MW baseload requirement, Meralco awarded the power supply agreement to South Premiere Power Corporation after it submitted the lowest offer of P7.0718 per kWh.