Meralco denies ‘midnight deals’ with ERC on 7 coal power plants

Mara Cepeda
Meralco first vice president Ivanna de la Peña says talks for power supply agreements on 7 coal-fired power plants started as early as 2012

'NO MIDNIGHT DEALS.' Meralco first vice president Ivanna de la Peña faces lawmakers in a hearing on July 4, 2017. Photo by Mara Cepeda/Rappler

MANILA, Philippines – The Manila Electric Company (Meralco) maintained there is nothing anomalous about its applications for power supply agreements (PSAs) on 7 coal-fired power plants, which were filed before the Energy Regulatory Commission (ERC).

Meralco first vice president Ivanna de la Peña made the statement as the House committee on good government and public accountability looked into the Meralco-ERC contracts on Tuesday, July 4.

“Meralco’s 7 long-term PSAs filed before the ERC in April 2016 are not midnight deals. Discussions with power project proponents started as far back as 2012,” said De La Peña.

She was referring to the PSA applications for the following:

  • Redondo Peninsula Energy Incorporated (225 MW)
  • Atimonan One Energy Incorporated (1,200 MW)
  • St Raphael Power Generation Corporation (400 MW)
  • Central Luzon Premiere Power Corporation (528 MW)
  • Mariveles Power Generation Corporation (528 MW)
  • Panay Energy Development Corporation (70 MW)
  • Global Luzon Energy Development Corporation (600 MW)

According to De La Peña, the PSAs were executed to “ensure least cost of power for captive customers and to shield such customers from price spikes in the WESM (Wholesale Electricity Spot Market).”

“They represented the least cost among all offers received by Meralco,” she added.

The investigation in aid of legislation was initiated by Bayan Muna Representative Carlos Zarate. Under House Resolution Number 566, Zarate pointed out that the Department of Energy and the ERC previously ordered distribution utilities to conduct a competitive selection process when entering into PSAs.

PSAs should be subjected to competitive bidding in order to stop the practice of self-negotiated generation rates.

The ERC, however, moved the implementation of the competitive bidding process from November 6, 2015 to April 30, 2016, allowing Meralco to apply for the PSAs without having to undergo the competitive selection process.

“The resulting damage to the consumers arising from the said midnight 20-year contracts would easily translate to P12.44 billion a year,” said Zarate.

“Historically, Meralco data showed that it pays its sister generators up to 20% (P1 per kilowatt hour) higher rates compared to unrelated generators and the difference between the rates from competitive bidding and self-negotiated rates [is] at P0.50 per kWh,” he added.

De La Peña argued, however, that there were valid reasons why the competitive selection process’ implementation was moved. She said there were no clear guidelines for the implementation yet in October 2015.

“Distribution utilities and electric cooperatives would have been exposed to questionable or nuisance bids from less or non-qualified parties who would question the entire bidding process,” De La Peña said.

“Numerous distribution utilities would have been wholly dependent on WESM, subjecting them to the vagaries and uncertainties of WESM prices,” she added.

Civil society organizations have urged the ERC to reject the PSA applications for the 7 coal-fired power plants.

Coal-fired power plants account for nearly 34.6% of the country’s 7,419-MW installed capacity, and about 38.6% of the 6,979-MW dependable capacity as of end-2016, data from the Department of Energy showed. – Rappler.com

Mara Cepeda

Mara Cepeda specializes in stories about politics and local governance. She covers the Office of the Vice President, the Senate, and the Philippine opposition. She is a 2021 fellow of the Asia Journalism Fellowship and the Reham al-Farra Memorial Journalism Fellowship of the UN. Got tips? Email her at mara.cepeda@rappler.com or tweet @maracepeda.