Coal Is Supposed To Be Cheap and so will be Nuclear. But the Prices do not Trickle down to Meralco consumers – 3 Reasons why.
David Celestra Tan, MSK
23 December 2020
Coal is the dirtiest power we can have and the number one cause of global warming. The capitalists who don’t mind engulfing us with this dirty power justifies that it is the cheapest. Remember the seven (7) midnight contracts that Meralco tried to sneak into the night in 2016? Its 3,551mw cornering 80% of the energy needs of Meralco. They were all coal!
Now everyone is talking about nuclear power. We agree that the new breed of lower capacity and lower temperature nuclear technologies would be much safer. And arguably it can be the cheapest power we can have.
But none of these, including the introduction of LNG, will bring really cheap power to the Meralco consumers for three (3) reasons:
Reason 1: Lack of Competition
The way Meralco wants to buy power even under the guise of the government’s CSP rules (competitive selection process), is not really open and competitive. After being slapped with a reversal by the Supreme Court, Meralco feigned following the CSP rules by bidding a total of 2,700mw of power in August 2019.
But potential bidders were given just six (6) days to register as an interested bidder and pay P6 million just to get the bid documents. Then bidders were given only 40 days to submit a multi billion dollar bid and tens of millions in bid securities.
Meralco claimed they needed the power badly that was why they could give only that short a period for the bids. The 1,500mw of brownfield power supply that was supposed to start just in a few months as expected went to their partners San Miguel Power. The 1,200mw was a failed bidding as Meralco’s own Atimonan One was the only bidder. San Miguel said they cannot meet the specs. Two of the San Miguel subsidiaries backed out of the bidding. (Surprise?)
Result: the winning bids today are higher than the old coal power contracts. DMCI Calaca power that used to be supplied to Meralco at P3.50 per kwh has now disappeared and probably being sold under the new contracts at P4.04 per kwh.
Reason 2: Lack of Competition
It is now 16 months later and Meralco still has not conducted a bidding for the 1,200mw greenfield project and may be an additional 1,300mw. When they finally call for a bidding it will probably again a tight 90 day bidding process. Who among the truly capable and independent bidders can do an honest to goodness eco-technical study for a 1,200mw project or even 500mw project in that short a period? Again, Meralco will of course say the 90 days is due to the urgent need for power.
If they were really intending to invite true competitors, they could have announced the bidding in February 2020 and give six months for bidders. Yes, the pandemic came, but the point is Meralco does look like they will hold the bidding only if their own subsidiary has a best chance of winning.
Reason 3: Lack of Competition
There are many possible truly independent suppliers who could contribute to a robust competition that will result to genuinely market tested prices. But they are staying away or not doing anything. It should be obvious to them that the Meralco bids are designed to make the desired bidders win. For how do you explain the discouraging terms and the tight impossible time to prepare a bid. The signal is clear and no truly independent bidder will bother.
There are many world class bidders who can bring new technology, efficient costs, and most importantly true market competition that can benefit the consumers. Kepco of Korea, Team of Japan, AES (they have essentially withdrawn from the Philippines) Energy World of Australia, Ayala, and even the Lopez Group.
Is this not clearly anti-competitive behavior? Is this not cartelization?
It is true that coal, nuclear, and LNG can be cheap But none of those economic benefits would trickle down to us the consumers because there is a lack of competition. Do we continue counting the ways?
Let us enjoy Christmas anyway!
Matuwid na Singil sa Kuryente Consumer Alliance Inc
david.mskorg@yahoo.com.ph
matuwid.org
