Legislators Incessantly Pressuring ERC for Meralco Must Equally Show Concern for Electric Consumers

David Celestra Tan, MSK

16 October 2017

Almost everyday Legislators have been bombarding the ERC with press releases to pressure them to expedite the approval of Meralco’s seven (7) midnight power supply contracts. They subject the ERC Commissioners to hearings that are supposed to be “in aid of legislation” with distinct intent to pressure the ERC to “take action and resolve” the Meralco power supply agreements. A clear lobby for approval of the PSA’s not only of Atimonan One (1,200mw), Redondo Power, and the 700mw St. Raphael but the rest of the seven(7) midnight power supply contracts totaling 3,551mw. Never mind that the PSA’s were negotiated and denied the consumers their right to competitive least cost power. Never mind that the contracts effectively created a cartel, something harmful to the consumers and clearly prohibited by the Epira law that the Congress passed in 2001.

The pressure is borderline inappropriate because the ERC has the sole discretion on whether to approve or disapprove applications and should not be interfered by the Legislature. It is inappropriate because Congressmen are clearly lobbying for approval of these projects.

One of the most vocal lobbyists is Rep. Danilo E. Suarez of the 3rd District of Quezon where the 1200mw Atimonan One project will be located. He is reported to have claimed that the ERC had failed to act on this project’s application since 2012 and he is asking the ERC to explain the delay in the approval. Someone clearly misinformed the good congressman.

The ERC only accepts applications for approval of signed power supply agreements. The Atimonan One contract was signed only on April 26, 2016 and applied with the ERC a couple of day later on April 29, 2016. In fact it is assigned the ERC Case No. 2016-092. There is no way Atimonan One had been applied for in 2012. It may not even have been incorporated in 2012.

The Meralco applications have incited the vehement objections of consumer groups requiring ERC to address them and observe due process. Who is to blame for the longer time it will take to properly evaluate them and rule on the contracts “fair and reasonableness”? Meralco is trying to ram through the throats of consumers these 3,551mw of 20 year contracts it negotiated with its sister company Meralco PowerGen. Had they gone through arms-length truly competitive bidding then the ERC approval process probably would be been cut and dried and consumer groups would not be opposing.  In these anomalous midnight contracts, the Legislators are practically asking the ERC to short circuit due process and approve the contracts. This borders on the blatant.

Equally Important Concerns of Consumers

Nonetheless, Legislators have rights to use their legislative prerogatives the way they choose. It is up to their voters to judge them. We just wish that if they truly are concerned about power needs of the country, that they should equally show concern for electric consumers. And consumers equally have serious concerns.

1. Meralco Cartel

The 3,551mw of power supply contracts effectively creates a Meralco Cartel of six companies that combined will control almost 15,000mw of the country’s 20,000mw by 2022. ERC is specifically mandated by the EPIRA law to guard against cartelization. So it seems Legislators should have reasons to ask ERC to explain why it is not investigating the possible violation of cartelization by Meralco.This issue threatens the long term growth and competitiveness of the power generation sector.  And in fact It deserves legislative attention.

2. CSP Vs Negotiated Contracts

Perhaps it will also be a productive use of legislative time and resources if they look into whether CSP would really result to much lower rates than negotiated contracts. Just to settle the issue once and for all.  Meralco signed a solar power supply with Solar Philippines at only P2.99 per kwh after a CSP. Just a few months before they negotiated with the same Solar Philippines at P5.39 for 50mw. This after Solar Philippines announced a few months before in June 2016 that it can sell solar at P4.00 per kwh.

The difference in the negotiated and the bidded contract with the same Solar company is a whopping P2.40 per kwh or P200 million a year for the 50mw.

Should this not raise legislative eyebrows and warrant Congressional hearings.

3. Violation of Congressional Franchise

One area that is unquestionably right up the alley of Congress is Meralco’s violation of its Congress granted franchise and a lot of things Meralco under the MVP Group had been doing should raise logical concerns among Congressmen if due attention is being paid.

Meralco’s public service franchise granted to it on July 21, 2002 under Republic Act 9209, (called then as mega franchise bill) more succinctly defined their customer service obligations as it provided under Section 4 that “the grantee shall supply electricity to its captive market in the least cost manner….the grantee shall charge reasonable, just, and competitive rates for its services to all types of consumers located in its franchise area.”

“The grantee shall not engage in any activity that will constitute an abuse of market power such as but not limited to, unfair trade practices, monopolistic schemes and any other activities that will hinder competitiveness of businesses and industries.
Those are necessary conditions of the Meralco franchise.

The negotiation of the 3,551mw of power supply contracts and the resulting cartelization of the power generation sector seemed obvious violations of public service franchise. If these negotiated contracts with a chosen few who are willing to be minority partners of sister company Meralco PowerGen are not abuse of market power.., unfair trade practices, monopolistic schemes and …activities that will hinder competitiveness of businesses and industries” we don’t know what is.

In the least, Congress should be looking into it.  Lets hope they finally take notice.

We wish Congressmen will equally show concern for the interest of electric consumers instead of pressuring ERC for approval of questionable and anti-consumer contracts.

MatuwidnaSingilsaKuryente Consumer Alliance Inc.

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