Recently, an affiliate of San Miguel Global Power Holdings Corp. (SMGP) which uses coal to generate electricity, secured a power supply agreement (PSA) for 200 megawatts, rekindling memories of past schemes equated to gaming the system in the power sector.
The maneuver reminded Nosy Tarsee of an episode in the power sector that not only mocked the laws but also explained why power rates were being kept high — woe to millions of Filipino consumers.
The deal violated the Renewable Energy (RE) law, which requires producers with PSAs to prioritize indigenous and renewable energy sources.
The mandate requires power distributors to issue RE certificates that can be sold or traded in the RE market, similar to the Wholesale Electricity Spot Market, where independent power producers can sell their production.
President Ferdinand Marcos Jr. had stated the goal of transitioning to the full use of RE, making it a cornerstone of his administration’s energy policy aimed at energy security, sustainability and economic growth.
The targets are clear. The Department of Energy has set an objective of raising the RE share in the power mix to 35 percent by 2030 and 50 percent by 2040.
The award of a PSA to a coal power plant showed impunity for the green energy goal and a breach of the laws mandating priority for natural gas and a full RE transition.
The deal was supposedly the product of a recent industry-wide alliance and the flexing of muscles months before the award of the PSA.
The partnership involved a complex ownership structure, with another unit of San Miguel Corp. operating a natural gas facility and a new combined-cycle plant.
Awarding a significant PSA to a coal‑sourced generator, particularly in the presence of complex corporate linkages and explicit franchise obligations to promote RE, treats policy objectives like garbage.
What happened to the competitive tender for the procurement of 200 megawatts of electricity derived from renewable energy sources?
While the bid documents expressly described the requirement as a RE contract, the utility’s contract language includes allowing the successful bidder to outsource the contracted capacity and associated energy, so long as the bidder can deliver the stipulated contract capacity and corresponding energy.
The ambiguity raises questions about the delivered supply that the law indicates must be sourced from renewable energy or may be satisfied by non‑renewable generation.
The deal risks perpetuating dependence on fossil fuels at a time when the country is pursuing an accelerated RE deployment, and it also raises concerns about favoritism and regulatory capture, which can distort market outcomes and contribute to higher electricity costs for consumers.
To protect the integrity of the power sector and safeguard consumer interests, the Department of Energy and the Energy Regulatory Commission (ERC) were urged to review the deal and apply corrective measures.
The coal deal openly disregards the requirement to increase renewable energy in the power mix, reducing compliance in many cases to a paper exercise.
The inappropriate relationship fostered by the deal disregards the consumer welfare and continues to perpetuate what is considered among the world’s most expensive electricity rates.