ERC Now Waivering on CSP?

Matuwid na Singil sa Kuryente

The suspected pro-Aboitiz bias of the new set of Commissioners at the Energy Regulatory Commission will be tested sooner than later on the critical issue of mandating competitive bidding called Competitive Selection Process.

The new rule will effectively outlaw the right of owners of distribution utilities to self-negotiate power supply agreements with sister companies, a practice that in an MSK study of Meralco generation rate purchases resulted to higher pass on generation costs of 23 to 33% to sister generators.

The Department of Energy passed a circular DC2015-06-008 on June 30, 2015 mandating the bidding of power supply contracts. Now it is up to the Energy Regulatory Commission to put in place the enabling regulatory rule to follow the policy set by the DOE, the agency tasked by the Epira Law to set policy in the energy sector including the assurance of true competition and safeguarding of consumers.

It is ominous to consumers that an ERC Commissioner appear to be trying to pre-empt the new ERC Chair Salazar by saying the agency ”will act more prudent” in dealing with the DOE circular on CSP. There could be “far reaching implications”..but if it will compromise certain aspects, then maybe we should revisit it.” We are wondering what those “certain aspects” are that can be compromised. Like the right of the Metro Pacific Group and the Aboitiz group as controlling owners of the two largest distribution utilities supplying 75% of the country electric power market to negotiate among themselves the price that will be passed on to the consumers?

Ironically, the Energy Regulation Commission itself had held public hearings as early as 2013 and 2014 on its own proposed rules for bidding of bilateral power supply contracts under ERC Case No. 2013-005 RM and has in fact a draft rule, albeit with curious loopholes.

It is also reported that an ERC Commissioner attended uninvited a meeting of DOE technical working group that is deliberating on the implementing rules of the CSP to implement DC2015-06-008.

As can be expected those lobbying hard for a “voluntary CSP” are the Metro Pacific group that controls Meralco and has a subsidiary called Meralco PowerGen that has designs on cornering the Meralco market with a 3,000 mw negotiated power supply controls and the Aboitiz group, the 2nd largest distribution utility that controls Davao Light and Visayan Electric in Cebu in addition to some minor DU’s. These two are reported to have made known their threat to challenge in the Supreme Court the legality of such mandated bidding.

It would be a classic legal battle with the two vested groups trying to justify their right to negotiate among themselves the pass on charge to consumers and denying the consumers their right to competitive power. Yeah Yeah we can already hear them argue that they don’t determine the rate, it is the ERC that review and decide on the rate. Very reassuring.
As we have written before, competition beats regulation in assuring electric consumers better rates. The ERC reportedly reduced Meralco’s Mauban Coal plant expansion to P4.26 from P4.30 for the 460mw project after rigorous review. Comparatively, 8 electric coops in the North held a competitive bidding for 120mw and they got P3.78 per kwh. That’s a P0.48 per kwh difference or P1.4 billion a year additional charge to consumers for that contract alone.

Hopefully there will be those who will stand up for the consumers. Dipping into rate payers’ pockets is similar to dipping into taxpayers’ pockets.

People believe that the more influential one is the Aboitiz group with whom two commissioners are reported to be identified with through a powerful supporter in Malacanang. Consumers are lucky that from the looks of it there are two commissioners who have hearts for the consumers and not beholden to the big guys (yet!).

The balancing force is new ERC Chair Salazar, who we hope and pray will find his heart for the consumers. We will soon find out his mettle and whether he will be the answer to the prayers of the long suffering consumers.

Meanwhile, consumers will be holding their breadth to see whether this PNoy ERC will be better than the PGMA ERC starting with the CSP that will be a corner stone of a new “matuwid” ERC.

When will the electric consumers get a break?